Differences Between Economic And Political Integration Politics Essay

Before going deeper to discuss the future of the European Union and whether a political union is achievable in the long run, it is important to define the concept of political union itself. Some authors have attempted to come up with a definition of what a deeper political union in the EU would look like. For J.P. Rodrigue, a political union is “represents the potentially most advanced form of integration with a common government where the sovereignty of the member country is significantly reduced” (J.P Rodrigue, 2003). In addition he ascertains that this could only be found in nation state that embraces federalism. Federalism itself refers to a system of governance where a country is ruled by two levels of authorities. One at the national level that would govern the whole nation while another at local level which can be comprised of various local government with certain degree of autonomy to exercise their authority within their own geographical division and would deal mainly with local issues (Cornel University Law School, 1992). Examples of federal form of governance could be seen in the United States of America, Mexico, Brazil, Germany and many other countries across the globe.

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In relation to the EU, there could be choices between two levels of political union where one is deeper than the other. The first option is some sort of “limited federalism” that focuses more on strengthen the existing economic and monetary union by adopting common policies and legislations to achieve a full banking and fiscal union that allow EU to solve its existing economic and financial problem. The second option sees a political union in its full length or a federal Europe where more sovereignty would be transferred to the European institutions to be able to allow not only a full banking union, strong monetary and fiscal union but also common social policies and even a common foreign, security and defense policy. This second option is certainly more ambitious. Having said that, due to so many conflicting interests among members states and a need for treaty change to achieve all of this, putting all the above mentioned elements together as the requirements for a political union seems now to be an utopian vision but let us not forget that a lot has been done towards that direction with different degree of success.

From economic standpoint, achieving European Single Market and common currency required a lot of sacrifice in terms of transfer of sovereignty from member states to Brussels, however more political compromise still need to be done on sensitive issues that touch the very fabric of national sovereignty. Currently with the financial crisis that hit the EU economy, some sees it as a drawback for the EU integration while others envision it as an opportunity for a deeper integration with a Federal Europe as the target in the horizon. In fact, the President of the EU Commission, Mr Baroso emphasized it clearly during his 2012 State of the Union speech about the need for what he calls a “federation of nation states”(Europa Press Release, 2012). The coming chapters would try to examine in detail the likelihood of achieving the two mentioned options while taking into close consideration the impact of EU economic and financial crisis on the EU integration project.

In order to understand the EU political Union and be able to determine to some extend the future of the EU, it is really important to understand first the dynamics of integration process in the EU in general. This chapter is mainly divided into 3 parts. The first part is describing the differences between Economic and political Integration. The second part is examining the stages of the EU integration and finally the main theories that tried to illustrate why and how further integration develops.

Many theories have tried to explain the European integration. They try to clarify how and why the European Union came about further integration develops. Theories are important to understand how the European Union works and how does it look like today and how might it be in the future. The following are some of the major theories about the European integration.


This theory was developed between 1950s and 1960s, which focuses on the supranational institutions of the EU. The main driving forces of integration according to the Neo- Functionalism theory are interest group activity at the European and national levels, political party activity, and the role of governments and supranational institutions. The European integration is mostly seen as an upper class- driven process- driven by national and international political and economic upper crusts. The key question asked by neo-functionalists is whether and how economic integration leads to political integration, and if it does so, what kind of political unity will result?

“The question is answered with the concept of spillover, which takes three forms. Firstly, functional spillover is used to explain the way in which integration in one policy area creates pressure for integration in another related area. For example, the original aim may be the free movement of workers across EU borders. But it may soon become obvious that each state has its own national professional certificate which may prevent workers to be employed in another EU state. As a consequence new political goal in the field of education policy may be formulated so as to overcome this obstacle to the free movement of labor. Secondly, political spillover is used to explain the importance of supranational and subnational actors in the integration process, as they create further pressure for more integration to pursue their interests. For example, actors (national, or supranational, political or private) may find it more useful to argue for European rather than for national solutions. Thirdly, cultivated spillover is used where supranational actors such as the European commission push the process of integration forward during the intergovernmental negotiation process. The commission acts not only as mediator but also as political entrepreneur during these negotiations.

It is really worth mentioning that Neo- functionalism could not explain the European integration process probably and was criticized on experimental and theoretical basis: from the experimental basis it was argued that neo-functionalism did not fit with the reality of EC in the 1970s; and from the theoretical basis, critics argued that elite socialization does not exist and they stressed the importance of the international dimension of integration, and sought to reposition the nation state at the heart of the study of the European integration process. [1]


Intergovernmentalism is another theory which provides a conceptual explanation of the European integration process. The main concept of the Intergovernmentalism is emphasizing on the role of national states in the European integration; in another words it argues that “European integration is driven by the interest and actions of nation states” ( Hix 1999:15) According to Alan Milward, an Intergovernmentalist writer, it is been argued that the national governments of the member states were the main actors in the process of European integration. [2] Actually some of their sovereignty was delegated to the EU which logically may lead to become weakened, however they believe that it become strengthened by the process. Itergovernmentalists argue that they are able to explain periods of fundamental change in the EU as when the interests of the member states governments meet and they have shared goals, and periods of slower integration as when the governments’ preferences diverge and they cannot agree. [3]

Liberal- Intergovernmentalism

Liberal intergovernmentalism is a development on the intergovernmental theory of European integration, established by Andrew Moravcsik in his 1998 book ‘The Choice for Europe’. Like intergovernmentalism, liberal intergovernmentalism emphasises that national governments are the key actors in the process of integration. Liberal- Intergovernmentalism rests on the assumption that the states achieve their goals through intergovernmental negotiation and barging instead of a centralized authority making decisions. Liberal intergovernmentalists see institutions as a means of creating credible commitments for member governments, that is, as a way of making sure that other governments that they make deals with will stick to their side of the bargain. [4] Liberal intergovernmentalists consider supranational institutions to be of limited importance in the integration process, in contrast to neo-functionalists. [5]

The Libral-Intergovernmental was also criticized for focusing only on “history making decisions” and for ignoring day to day polices and the multi-level character of the European union. [6]

New Theories of European Integration

Many academics tend to criticize the classic theories: neo-functionalism and intergovernmentalism as theories which failed to capture effectively what is going on in the current European Union; in addition those theories asking the wrong sort. Bassed on Michelli chini on “European Union Politics, the classics theories of integration on at least three major grounds: incapability to capture the reality of integration and the Eurpean Union, and its supposed entrapment in the disciplinary wilderness of International Relations and its so called ‘scientific limitations’. [7] Newer theoretical prospective had developed strong explanations of how and why the single market and subsequent progress to monetary union came about.

(New) Institutionalism

New institutionalism developed between 1980s and 1990. Institutionalism emphasizes on the importance of institutions in the process of European integration. As Cini mention in his book “European Union politics” there are three types of institutionalism: Rational Choice, Historical institutionalism, Sociological Institutionalism. Rational Choice Institutionalism: it emphasizes on the way in which relative power of actors shifts in accordance with changes in institutional rules. An example of an institutional rule that constrains actors’ behavior is the ordinary legislative procedure, which affects how European actors can pursue their preferred policy outcomes. [8] Historical institutionalism: it emphasizes on the long term effects of the institutional choices. A key feature of historical institutionalism is path dependency, whereby decisions made about institutions in the past impact significantly on the outcomes of the future and are difficult to reverse. [9] Sociological Institutionalism: it pays a lot of attention to the culture of the institution, and considers the patterns of communication and persuasion that occur during policy making and in the pursuit of integration.

Multi-level Governance

Multi-level governance (MLG) is a much newer theory of European integration. MLG argues that policy making and integration in the EU is much too complicated to be explained by static integration theories. Key writers Liesbet Hooghe and Gary Marks defined MLG as the dispersion of authority across multiple levels of political governance. That is, they argue that over the last fifty years, authority and sovereignty has moved away from national governments in Europe, not just to the supranational level with the EU, but also to subnational levels such as regional assemblies and local authorities. They see policy making in the EU as uneven and frequently changing, and as such they highlight the limitations of other theories of European integration which disregard the significant numbers of different actors from all of the different levels of governance in Europe.

Can any theory fully explain the process of European Integration? If not, why not?

Differences between Economic and Political Integration
Economic/ Market Integration

Based on the institutional economy, most integration schemes start with market/ economic integration. This is because of the fact that market integration can proceed without too much demand on institutions and policy making. Moreover, once laid on treaties it connects governments, companies, and private persons and there is a little need for the parliamentary regulator or decision making machinery. According to (the Economics of European integration), the economic integration is mainly based on the welfare economics. This allows a free exchange of goods and it gives the chance to consumers to choose the cheapest and best good. “Free movement of products factors permits optimum allocation of labor and capital.” To illustrate, sometimes some production factors are missing however in other places those production factors are very cheap. Hence the entrepreneurs tend to shift their capital from places of low return to other places where they can get promising results. The same apply on the Labor factor. To exemplify, employees will migrate to places where their job is more needed and accordingly better rewarded.

Political Integration

According to the Institutional economics, “The aim of the policy integration is the creation of a common policy frame work that creates equal conditions for the functions of the integrated parts of the economy. According to (the Economics of European integration), the political integration is mainly based on welfare increasing effects of integrated policy making. Nobody can ignore the negative side of political integration since under the political Union; the policy of one country has effects in another. To illustrate, if the objectives of two countries are inconsistent, the policy of one country will frustrate the policy of the other. However there is no doubt that still the political integration may still bring economic benefits as it leads to recovery of effectiveness in policy making.

Common policy requires common institutions. These need to be stronger: the larger the competences of the union and the higher the complications of the various packages of common policies.

Stages of EU integration.

The stages approach dates back to Balassa (1961) and it is used worldwide. This approach is giving us an idea to understand the key issues in policy making in the EU and also illustrate what the European economic integration has gone through since the early 1960s. Table 1.1 is describes the five Balassa stages and describes a few of their characteristics.


Free Trade Area (FTA): All trade barriers such import duties and quantative restrictions are cancelled among the partners. Hence, internal goods tariff is free, but still each country can apply its own custom tariff with all respect to third countries.

Customs Union (CU): All obstacles to internal free movement are cancelled without any exception and a common external tariff is implemented.

Common Market (CM): it is a CU fully free internal movement of products (goods and services) and production factors (labor and capital) with a common external regulation for both products and production factors. [10]

Economic Union: The common market is complemented with a higher degree of coordination or even unification of the most important areas of economic policy. It also requires the coordination of various social, fiscal, and monetary policies among participating nations [11]

Total Economic Union:

Political Union: Integration is extended beyond the realm of economics to ecompass such fiels as anti-crime policy (police) and foreign policy, eventually including security policy. [12]

Different approaches/ Theories which tried to answer the question of why and how further integration develops.