EUROPE

Spring 2007

by Stefan Schepers

Brussels’ mandarins have declared that European regulation is to be simplified. Stefan Schepers explains that before red tape can be cut, the EU’s consensus-building tools must be sharpened, and that in turn means a revolution inside the European institutions

The European Commission wants to simplify EU regulation, saying its cost has become a serious obstacle to European competitiveness. But is excessive regulation the only issue, or is there a deeper problem of flawed consensus building?

Regulation is social consensus that is imposed by a public authority on everyone within a defined jurisdiction. Throughout history, societies have found different ways of developing a common view on issues of general interest. In pre-modern times, social consensus was seldom a matter for controversy, even though it covered issues that today belong in the private realm. Consensus was in the past determined by a ruling elite, often with strong religious backing, and then after consultation with key social groups. When it changed, that was mostly the result of some revolutionary upheaval or the implosion of the ruling elite. Sometimes consensus was destroyed from outside, such as when the governance systems of Africa and the Americas fell victim to colonialisation.

In Europe, and then elsewhere in the world, contemporary market economies coincided with the emergence of new thinking about social consensus. This thinking was partly based on older philosophical currents, but also responded well to the needs of the new merchant and industrial elites. Liberal democracy was originally an elitist system, but the emergence of a consumption-based economy together with social inequalities that were in contradiction to its underlying ideology, led it to become a system for developing public consensus. And because democracy is a system in which all citizens can take part, consensus became indissolubly linked to compromise.

In much the same way that feudal governance corresponded to agricultural economies, and the centralised state served the needs of early industrial economies, so it is that new structures like the EU are the answer to today’s technology-based, capital intensive and globalised post-industrial economies.

In Europe’s liberal democracies, however, social consensus emerges through a variety of processes, depending on different cultures and circumstances. Legal and technical aspects may be broadly comparable, but their application is often quite different. There are, appearances to the contrary, no two identical processes for building social consensus in EU member states. Yet the process of consensus building is key to acceptance of regulation and the credibility of the authority issuing it.

The emergence of a highly educated, well informed, well-off and conscious citizenry in Europe has made this more important than ever. Imposing consensus is impossible, and imposing regulation without carefully building social consensus beforehand would be doomed. Thus heavily regulated countries that have an extensive national consensus-building process suffer less from the widespread flouting of regulations than those with a more top-down approach.

The European Commission’s simplification attempts therefore need to focus first on the process of consensus-building. Without a well organised, transparent and rational system of dialogue between the authorities and relevant stakeholders, it’s hard to achieve social consensus. And without that consensus, however cleverly a regulation is steered through the mechanics of rule making – and even if backed up by a more or less populist campaign – it will lack a solid basis of acceptance. That in turn will lead to evasive behaviour by the civic actors to whom it is addressed, and so will weaken the credibility of the European institutions involved.

Co-decision procedures between Council and Parliament must therefore follow the process of consensus-building, because they are not a replacement for it. So the key question is how to build consensus, and this needs to be answered before there can be any discussion about how to simplify regulation.

At this point there arises a conceptual problem. The Commission is the body responsible for initiating regulation, which means that it has been given the role of determining what the European public interest is. This was itself based on the early 19th century concept that the state, and only the state, can determine the public interest. This concept followed the rationalist ideology of the time, which assumed that progress was the result of setting clear goals, of scientific analysis and selecting the right methods.

Rationalism leaves aside all issues that do not fit its models of problem construction and solution determination. It has great merits for scientific, technological or economic progress, but applied in the political field it leads to a legalistic and procedural approach by our public institutions. Societal processes have in any case become much more complex, and cannot be managed as if government were a sort of public laboratory where the largely invisible web of real world causes and effects are reduced to a politically feasible model. This is why policies of all kinds increasingly do not deliver their intended effects, or do more harm than good. It also helps explain the decline of public confidence, even though the public often harbour unrealistic expectations based on the same rationalist vision.

The EU’s controversial chemicals safety strategy REACH is an example of how a policymaking concept within one national system was transported to the European level without the consensus-building and economic checks and balances that national governments can introduce, but which the Commission cannot because of the division of competences between the EU and its member states. The original draft has been improved on, but the fact remains that a different methodology could have led to a better outcome without increasing the regulatory burdens and costs to industry.

Such a rationalist concept of the role and functioning of the state does not recognise, or at least sidesteps, the role of civic actors. They are in fact a disturbance in the imagined political-societal laboratory. However, it has become unavoidable because of the deficiencies of the system itself. To reduce the negative effects, all national systems have had to include “bon gré, mal gré” societal actors coming from outside the system. No welfare state can any longer function without them.

This traditional top-down culture has long been nurtured in the EU and has served the European public interest well. Yet its very success is now the cause of its demise. Europe’s social paradigms have changed in the half-century since it took its first steps towards integration. Citizens increasingly see public authorities as providers of services and of regulatory frameworks for their own activities. This process can be observed at different stages in different countries, which makes a new European conceptual consensus difficult to achieve. Europe’s single market, together with EMU and the euro, have given the EU a more important steering role, but without the consensus-building traditions and methods employed by the member states. At the same time, these successes have also made management of the European market economy more complex.

The old deference towards public authority has withered away; kings no longer rule by divine right and the ideology of the state as the sole source of the public interest has been lost in the post-World War II turmoil of economic and social change. Today, the EU cannot maintain social acceptance by using an outdated concept to define itself as the sole issuer of a presumed European public interest. The EU must learn anew to first build social consensus around its proposals, and to accept alternative ideas as having equal value until proven otherwise. This would still allow EU Commissioners to make rousing declarations, but the translation into regulatory proposals would be of a higher quality with fewer negative side-effects.

Too little attention was paid in the early decades of European integration to the EU’s role in developing social consensus within and between so many different societies and systems of governance. The more European regulation was extended to every sphere of public life, the more this oversight could be felt, not least by civic bodies trying to cope with more and more complex EU rules. And the rule-making process is too much of a negotiation between European and national public officials, leaving civic actors trying to be heard. It focuses on building compromise between national rules, but it overlooks the need for a Europe-wide social consensus.

The stakeholder conferences the Commission is so fond of make a mockery of real consultation, as anyone knows who has had a student experience of the people’s assembly method. The hearings the parliament organises can be a bit more substantial, but both still fail to deliver real consensus-building. The new approach of regulatory impact assessments may bring improvement, because if done properly it requires a scientific methodology in its analysis, and extensive consultation with stakeholders on the conclusions.

The Commission is certainly not solely responsible for this state of affairs, but it’s fair to say its governance culture has yet to evolve in a way in tune with the EU’s own deepening and widening. Many officials may individually have moved on, but a substantial minority has not, and they see the outside world as “those to be ruled”. Some officials barely hide their preference for one stakeholder or another, and they are seldom a civic actor making a real contribution to the European GDP. In many of the Commission’s directorates-general a clear line can be drawn between those officials with a genuine interest in better, modern regulation and those who adhere to the old methods. Eliminating a few early drafts of a regulation is not a systemic improvement, so perhaps more power needs to be given to the Secretariat-General to promote, and if necessary impose, cultural and methodological change.

The European Parliament has no real track record when it comes to regulatory simplification. In a normal liberal democracy, parliaments have the right of initiative in the setting of desirable public objectives, and that is the real purpose of democratic debate. In the EU, that right formally belongs to the Commission, which forces the parliament to seek to influence it after a series of compromises have already been made, mostly with national officials. This of course increases the chances that a regulatory proposal will become still more cumbersome after the various political groups have had their say and negotiated their trade-offs. Given that the parliament is still searching for ways to put its roots down among Europe’s citizens, it is unfortunately more prone to populism than to hard economic argument.

Social consensus emerges only through the long-winded process of exchanges between civic actors that can best be witnessed in the EU’s member countries, some of which by accident or design are also the most competitive. In addition to a new culture that is less hierarchical and more open and inclusive, consensus-building requires appropriate mechanisms before the formal process of rule-making starts.

The present systems of stakeholder conferences and of written questions and answers do not allow real social consensus. Two monologues do not make a dialogue. The increasing complexities of Europe’s societies and economies require the sort of exchanges of knowledge, expertise and networks that the formalistic rule-making processes of yesteryear cannot provide. New methods and a new culture of cooperation are needed between public authorities and private actors to overcome the outdated dichotomy between them. This in turn requires change by everyone involved.

For example, the genuinely forward-looking concept of sustainable development can never be put into practice without a meaningful public-private sharing of know-how. Such a new policy concept demands new ways of consensus-building and regulating that will much more take into account such externalities as impact assessment and collective learning processes. If not, the adverse effects on competitiveness will be significant, so the goals may never be reached.

European regulation in practically all policy areas except anti-trust could benefit from better consensus-building. Ideally, the European Parliament should determine the desired outcomes and then leave it to the Commission and national administrations to work out ways to achieve them. In the present system, the Commission should seek to build consensus with stakeholders on realistically achievable goals, and then on the methods. The parliament should then judge whether the draft fits the supposed European public interest.

The Prodi Commission initiated from on high thematic strategies to address a number of environmental concerns. The objectives were laudable but the methods were questionable. The Barroso Commission, which is supposed to balance sustainability with competitiveness, still has a unique opportunity to experiment with new methods by bringing industrial stakeholders into the solution-building process.

In such a cooperation-based approach, it seems essential to develop new criteria for stakeholders. The first criterion must be a stakeholder’s potential contribution to solution finding and implementation. Business has more to contribute than officials sometimes imagine. Civic actors have to adapt if they are to build social consensus leading to effective regulation with less collateral damage. Economic civic society bodies like industry organisations or companies often find it hard to overcome an antagonistic approach; their structures for dealing with public (non-market) issues are not always fine-tuned to the European realities, or alternatively they are poorly equipped to develop the sort of holistic vision that can match market solutions to public concerns.

NGOs have to be considered too. In their eagerness to re-connect with societal developments, some EU officials seem to give disproportionate attention to organisations that would not merit it if key criteria like societal representativity and accountability were properly applied. They thus contribute to the deficit instead of remedying it, because they choose to deal with organisations that are by no means representative. When citizens everywhere are confronted with the fall-out, they blame it on the public institutions, so more objective criteria are needed to assess the true representativeness of civic bodies, whatever their objectives may be.

Even if such improvements can be made in the EU’s consensus-building process, better regulation will still not be achieved without an equal effort by member states. The principal cause of the bureaucratisation of EU policies and regulations is as much to be found in national capitals as in Brussels. The priority of many a national official is to avoid making changes that will affect national practices, whatever the new economic realities, just as it is to reject the notion that best practice may be found in some other EU country.

A better European consensus-building process, ahead of the formal rule-making one, could therefore help national politicians to see more clearly which are the real as distinct from imagined problems. This assumes, of course, that they really do share the better regulation objectives of European decision-makers. Improved consensus-building requires change not only from the EU institutions but from those dealing with them. The result would be better, that is to say more cost-effective, regulation that allows for public-private interaction, and that seeks improvements in market functioning. This would almost automatically lead to simplified regulations.