The Double-Edged Sword of EU-Induced State Building

April 7, 2020

EU-induced state building in the pre-accession period had a positive developmental effect in the CEE countries. However, after accession the EU continues to transfer huge amounts of developmental aid to CEE governments, which are busy in undermining the developmental capacities of their states. This is the conclusion of a new paper, “Collateral benefit: the developmental effects of EU-induced state building in Central and Eastern Europe”, a joint work by CEU Professor Laszlo Bruszt, Ludvig Lundstedt and Zsuzsa Munkacsi.

Published in a special issue of the Review of International Political Economy, the article addresses the findings of extensive research into the effects of various EU policies in the three economic peripheries of Europe: the Southern and Eastern member states plus the Eastern neighbors. The EU is seen by many as a primarily market making transnational institution. This article is particularly significant because very few scholars explore the question how and to what effects does the EU alter domestic state building in its member states. The article was produced by Laszlo Bruszt, professor of sociology at CEU, Ludvig Lundstedt a political scientist currently working for the Swedish Municipal Workers’ Union, and Zsuzsa Munkacsi a former CEU student and an applied macroeconomist working for the International Monetary Fund.

Integration strategies with questionable effects

“The key findings of our article were twofold. First, we found that while in the new member states there was a considerable improvement both in the capacities and the autonomy of core state institutions like the judiciary or public administration, in the Western Balkans up until now, EU interventions did not yield considerable change. Our second finding was that the economic developmental effects of the EU-induced state building were considerable. Reaching the EU-required minimum level in autonomy and capacity of the judiciary helped these countries to increase export and improve its quality. The later refers to the higher complexity and skill content of exported goods. Similar are the effects of increasing the professionalization of the civil service or of upgrading the capacities of state organs controlling market competition” Bruszt explained.

 These findings proved those economists right who claimed that the liberalization of the markets, on its own, will not yield economic development unless it is accompanied by considerable upgrading of state institutions. “Countries can get stuck at a low level of development if they do not have a state bureaucracy that can design and implement industrial policies helping to upgrade the position of domestic economic actors, and, if they cannot improve the conditions of innovation, or prevent the misuse of economic or political power asymmetries in the domestic economy. The independence and professionalism of core state institutions is the key from this perspective.” Bruszt added. 

Ambiguous EU position

The article’s key message is especially relevant in the life of the EU today. “In the post-accession period, the European Commission has only a weak capacity and willingness to enforce EU-wide norms to guarantee the quality of core state institutions. Recent attacks against the independence of the judiciary and civil service in Hungary and Poland endanger the political and economic benefits of the institutional upgrading undertaken during the time of the enlargement process and undermine the effectiveness of EU policies aimed at achieving economic convergence. The subverting of the autonomy and the professionalism of these core state institutions could put these countries on a developmental path in which, instead of innovation, loyalty to state incumbents is the criteria of economic success. 

The weak reactions of Brussels to attacks against the core state institutions puts the EU in an ambiguous position. By its owns rules, the EU is obliged to transfer significant resources to the lesser-developed member states to support economic convergence between the more and the less developed parts of Europe. Until the Commission introduces effective measures to control the quality of state institutions in the member countries, it will have to transfer EU money to member states busy with undermining the very same state institutions that could support convergence with the more developed parts of Europe,” says Bruszt.

The paper finds that the EU uses dramatically different integration strategies in its various peripheries with effects ranging from economic and political disaster to considerable economic upgrading. “The would-be Eastern member states of the EU were lucky, because it was only in the short pre-accession period during the Eastern enlargement when the EU treated the economic developmental consequences of market integration in an encompassing way. When researching this topic we were curious to find out what were the developmental effects of the externally induced upgrading of the core state institutions in these countries,” Bruszt concluded.