The strangling of European democracy

The term ‘representative democracy’ does not capture the nature of the system of governance that has evolved across most of Europe over the past century. A more accurate term would be ‘constrained democracy’. This term captures well how the public and sometimes even parliamentarians are kept at a distance from decision-making.

Of course, as the Brexit vote showed, a large section of the British public has come to recognise that the EU acts as an important constraint on democracy. But the story of constrained democracy is more complicated and long-running than many realise. For example, the way in which ‘independent’ central banks curb democratic accountability is rarely examined. They are seen as part of an economic story rather than a political one. Yet their ‘independence’ means precisely that powerful economic institutions are shielded from democratic control. This applies at a national level (think of the Bank of England), and even more so at a supra-national level, with the European Central Bank (ECB).

Paul Tucker, a former deputy governor of the Bank of England, is one of the few to raise concerns over central banks’ independence. In Unelected Power (2018), he shows how central banks have become a huge part of what he calls the administrative state. They can even be viewed as a fourth branch of government, after the legislature, executive and judiciary. The problems this poses are manifold: decisions on economic values and objectives are delegated to an unaccountable body; debate is restricted to an in-crowd; and the electorate finds it difficult to register discontent in elections (1).

So, while the EU might well be the apogee of constrained democracy, constrained democracy has many facets. Moreover, the model of constrained democracy existed on a national level before the EU was created. Indeed, the EU can be seen as the grotesque extension of a flawed system that was first developed within nation states after the First World War. For instance, the model of independent central banking was pioneered in Germany before being transposed to the EU much later on. Still fewer realise that the key role of constitutional courts – bodies that can in many cases override democratically elected parliaments – dates back to Austria in 1920.

Admittedly, Britain has its own indigenous system of checks and balances designed to curb democratic power. The monarchy and the House of Lords act to restrict the power of the elected House of Commons. But Britain’s membership of the EU has grafted on additional ways of breaking the link between the public and political institutions. This is a point that could also be justly made about the adoption of human rights in Europe – a movement which in many respects parallels the rise of the EU, although it is technically distinct.

In this essay, I will focus on some of the lesser known elements of the phenomenon of constrained democracy, beginning with its emergence in the maelstrom following the First World War.

The retreat from empire

In the aftermath of the First World War, old empires collapsed, new nations emerged, and a revolutionary surge gripped large parts of the world. In retrospect, it can also be seen as the birthplace for key elements of constrained democracy.

No fewer than four empires disappeared at the war’s end: the Russian, Ottoman, Austro-Hungarian and German. Although they were all different, they did share several features. They were authoritarian institutions, led by monarchs and associated nobility, with little or no scope for public involvement in politics; and they were also multinational institutions in which many different nations were subsumed under the rule of a larger empire.

The massive dislocation caused by the war changed the political face of Europe. It swept away the old monarchs and opened the way for the creation of republics and the mass participation of the public in politics. It also created the conditions for the emergence of many more nation states, including Austria, Czechoslovakia, Hungary, Poland and Romania. Although the forms of some of these nation states changed subsequently, they were central to the realisation of national self-determination in Europe.

It was a time, as Frank Furedi argues in First World War: Still No End In Sight (2014), when Western societies faced a key question — ‘how to maintain order – in war and peace – when it required the consent of the masses’ (2). The masses had become politically conscious on a large scale. The challenge facing the elites was how to maintain legitimacy in a situation where the old order had collapsed.

In 1917, the Russian Empire was the first of the great empires to go. Although the focus of this essay is not Russia, it is important to recognise that the October Revolution inspired a radical upsurge in Europe, from the Munich Soviet Republic to the Hungarian Soviet Republic, which were both brutally put down in 1919.

These and other outbreaks of militancy across Europe provided a backdrop to the emergence of constrained democracy. Ruling elites across Europe felt under enormous pressure from an ascendant working class. Europe’s rulers were not averse to using extreme physical violence to curb this militancy. However, on its own physical force was not enough. The European elite was under intense pressure to make reforms – including widening the franchise and granting a greater role for parliaments – while at the same time looking for ways to constrain the popular will.

But it is not with the collapse of the Russian Empire that our story begins – it is with the fall of both the German Empire (1871-1918) and the Austro-Hungarian empire (1867-1918). In both imperial territories, the nobility was swept aside to be replaced by several nation-state regimes that were, nominally at least, democratic.

It was in post-war central Europe, then, that constrained democracy was born. The key point to grasp is that two parallel but, in some respects, contradictory forces were at work. On one hand it was widely accepted that the public should have a significant say in how their nations were run. So parliaments became the means through which the public, to a greater or lesser extent, could influence political affairs, and the franchise was extended, albeit very slowly, to include women and men who were not property owners.

On the other hand, it was widely accepted among the post-war elites that parliaments needed to be subject to new sets of constraints, in order to limit popular sovereignty. In the German-speaking lands, there was an extensive intellectual debate on the nature of democracy, with Hans Kelsen and Carl Schmitt the leading protagonists. For Kelsen, democracy ought to be constrained by constitutional courts; for Schmitt it could be limited by the creation of a supreme president. Both accepted, however, that democracy needed to be institutionally restrained.

The 1919 constitution of Germany’s Weimar Republic exemplifies the contradictory trends underpinning the emergence of constrained democracy. Its first article defined Germany as a republic, asserting that ‘state authority derives from the people’. There were free elections for the first time, and a nominally free judiciary and a free press. It was also one of the first countries to introduce a universal franchise for all men and women over the age of 20.

But the constitution’s numerous declarations of important rights are typically followed by caveats. For example, Article 114 states that ‘the rights of the individual are inviolable’ before adding that ‘limitation or deprivation of individual liberty is admissible only if based on laws’. Article 118 states that every German is entitled to ‘express his opinion freely in word, writing, print, image or otherwise’, before adding, ‘within the bounds set by general law’. So every right given with one hand is limited by the other.

Most famously, Article 48 gave the president extensive powers to rule by decree and declare laws and civil rights void, in ‘the state of an emergency’. So while promising extensive liberties – including private communication, free speech and freedom of assembly – the Weimar constitution simultaneously created a framework in which they could be overruled. This deep ambivalence towards democratic rights had important consequences for the Weimar Republic, which were carried over into the Federal Republic after the Nazi period.

At the same time, in neighbouring Austria the emergence of a constitutional court was to provide a model for constrained democracy that was later emulated in Germany and elsewhere across Europe.

The ‘guardians’ of the constitution

Constitutional courts play a central role in constrained democracy. They have the power to overturn or declare inapplicable the decisions of democratically elected parliaments. In that sense, they are sometimes referred to as ‘guardians’ of the constitution. From this perspective, constitutions and the courts treat popular sovereignty as subordinate. In some respects, a constitutional court’s role is similar to that of a monarch, insofar as both wield ultimate power.

It is often simply assumed, particularly in the English-speaking world, that constitutional courts are based on the model of the US Supreme Court. And it is true the US Supreme Court has the power to declare laws unconstitutional. But the first courts with a specific constitutional remit were in Europe rather than America. Yes, the US Supreme Court has evolved to take on a constitutional role, but, as its name suggests, it has always had a more general remit as the highest court in the American judicial system.

In contrast, a system of courts with specific constitutional remits emerged in Europe after the First World War. The first constitutional court is widely attributed to Austria in 1920 – although some argue one was founded slightly earlier in Czechoslovakia. Nevertheless, it was the Austrian constitutional court that was certainly the most influential.

Hans Kelsen was a key intellectual and practical force behind the Austrian constitution. In 1918, he was asked by Karl Renner, a Social Democrat and the first chancellor of the Austrian Republic, to play a central role in drafting the country’s constitution. Kelsen also sat on the constitutional court (Verfassungsgerichtshof) from 1921 until 1930. Crucially, Kelsen was responsible for the section of the Austrian constitution that gave the constitutional court the power to declare legislation unconstitutional.

Although constitutional courts took time to catch on, they eventually became the prevailing model of constrained democracy in Europe. The model was emulated in Liechtenstein in 1921, and Spain in 1931, before being widely adopted across Europe after the Second World War. For example, a constitutional court was established under Italy’s constitution in 1948, and France established its court under the Fifth Republic in 1958.

However, the most important post-Second World War example of a constitutional court is that of the Federal Republic of Germany, known as the Bundesverfassungsgericht. Established in 1951, and operating under the auspices of the 1949 Basic Law (Grundgesetz), it is based in the relatively small city of Karlsruhe in a deliberate attempt to put some geographical distance between it and Germany’s political capital, first in Bonn and then in Berlin.

Although the German constitutional court is little discussed in the English-speaking world, it has had considerable international influence. As the German federal parliament (Deutscher Bundestag) boasted in 2019: ‘Not just in Europe, but also in Asian countries such as Japan, South Korea and Taiwan, especially in South Africa, and in Latin American countries, the Basic Law’s articles, structures and principles have served as a model.’

Today’s German constitutional court has a far wider set of powers than the highest court under the Weimar Republic, the Staatsgerichthof. It can enforce fundamental rights and declare statutes void. But despite important institutional differences, there are strong elements of political continuity between constrained democracy now and its earlier form in the Weimar Republic.

Against freedom of expression

A key feature of constrained democracy is the assumption that there must be curbs on freedom of speech. Sometimes this assumption acquires the title of ‘militant democracy’ (rendered in German as streitbare Demokratie or sometimes wehrhafte Demokratie, (defensive democracy)). But the idea is a simple one: democracies must be prepared to take militant, undemocratic measures to defend themselves.

It is important to recognise that the curbs on free speech here do not solely target those who want to overthrow the government by armed force. They also target some ideas deemed so extreme in their own right that their expression must be prohibited. It is possible to ban political organisations on the grounds that their outlook is hostile to the constitution.

Much of this is understood in terms of the opposition of liberalism to democracy. This is to assert that individual rights have to be protected from the potentially malevolent actions of the public. Democracy therefore sometimes has to be sacrificed, so the argument goes, to protect liberty.

Of course, there is the theoretical possibility of an authoritarian public riding roughshod over individual rights. But while this possibility is played up, too many downplay the use of liberal values to curtail freedom.

Sometimes the problem runs even deeper. When self-proclaimed liberals emphasise the importance of defending minority rights, their concern all too often seems to be the right of a technocratic elite to rule over the majority. Democracy, deemed to lack any intrinsic value, is presented as a political problem to be managed.

Militant democracy has acquired its most institutional form in Germany. Numerous political organisations have been banned, including the German Communist Party (KPF) in 1956. More recent bans include the far-right Altermedia Deutschland, banned in 2016, and the far-left Indymedia Linksunten site, banned in 2017. In fact, according to an interior ministry study in 2017, there have been 17 bans for right-wing extremism, one for left-wing extremism and 21 for Islamist or foreign extremism since 1990. The underlying assumption in such cases is that the public must be shielded from the strong expression of certain views.

Militant democracy is acknowledged, but often misunderstood. Many believe it is necessary because of the failure of the Weimar Republic to curb extremism. If only Weimar had been less liberal, less respectful of democratic rights, so the argument goes, then it might have prevented the rise of the Nazis. An influential version of this argument was put forward by Karl Loewenstein, a German-Jewish refugee, in the 1930s. In ‘Militant democracy and fundamental rights’, published in the American Political Science Review in June 1937, he argued:

‘The lack of militancy of the Weimar Republic against subversive movements, even though clearly recognised as such, stands out in the post-war predicament of democracy both as an illustration and as a warning… It must be admitted frankly that National Socialism knew how to benefit from the calamitous experience of the Weimar Republic. The one-party system was the logical answer to the democratic tolerance of the crushed Republic.’

Such arguments are one-sided. The Weimar Republic was, from the start, more than willing to curb democratic rights. It may not have had a constitutional court, but that simply meant the curbs on democracy took a different form than in the later Federal Republic.

So in Weimar Germany it was the president, rather than a constitutional court, which played the role of guardian of the constitution. It is true that the president was directly elected, but he could rule by decree and dismiss governments at will. This is, in practice, what happened during much of the Weimar period, as the president, much like the Kaiser of old, intervened in the name of the higher interests of the nation as a whole.

Friedrich Ebert, a member of the Social Democratic Party and the first president of the republic, was certainly guilty of gross intrusions on democracy. In The Coming of the Third Reich, Richard Evans describes how Ebert used his power to rule by decree on 136 occasions (3), including deposing the legitimately elected governments of Saxony and Thuringia. During the 1920 civil war in the Ruhr, he also back-dated a decree allowing the death penalty for public-order offences.

Censorship provides a good example of how the Weimar constitution’s supposedly lofty principles were easily circumvented. Article 118 declared baldly that ‘there is no censorship’ except ‘in case of the cinema, [in relation to which] other regulations may be established by law’. Unsurprisingly, film censorship was introduced in 1920.

The role of the president as the guardian of the constitution was theorised by Carl Schmitt, a conservative jurist and political theorist, before and during the Weimar period. For him, a key part of the president’s role was to stand above day-to-day politics, represent the German people as a whole, and, during a state of exception or emergency, directly intervene at will. Schmitt is relatively well-known today because he decided to join the Nazi party. But his contributions to the idea of ‘militant democracy’, although he himself never used the term, should not be underestimated, given his belief that democratic rights could be suspended in the name of a higher good.

With the benefit of hindsight it is clear that Kelsen won out over Schmitt in historical terms. Schmitt’s notion of a president playing the role of guardian of the constitution was discredited both by the horror of the Third Reich and his personal association with Nazism. Kelsen’s notion of the constitutional court, by contrast, has been adopted by many European nations. Nevertheless, Schmitt and Kelsen were united in their conviction that the political system needed to be insulated from public influence.

Independent banks

Central banks play an important role in contemporary societies, setting interest rates, issuing currency, and maintaining and regulating the financial system – and yet they are rarely discussed in political terms. Indeed, it is seldom recognised outside of specialist circles just how powerful central banks have become. As Tucker argues:

‘In a massive development for modern governance, their newly fortified powers to oversee and set the terms of trade for banking and other parts of finance unambiguously makes them part of the “regulatory state” – a distinctive part of the modern state apparatus that developed during the 20th century.’ (4)

It is easy to see why the political implications of the increasing economic power of central banks are generally neglected. Political commentators tend to feel uncomfortable probing into such a technical area, while economic experts tend not to concern themselves with broader questions of democracy. Yet any consideration of contemporary democracy needs at least to be aware of the immense power of central banks.

It should also be remembered that the Bank of England was subject to control by elected politicians until the incoming Labour government declared it independent in 1997. Until then, interest rates were set by the chancellor of the exchequer, who was an elected politician. No doubt the chancellor would take advice from the Bank of England, but until the late 1990s the call was a political one.

Defenders of the Bank of England often argue that its independence is operational rather than complete. For example, it sets rates but the inflation-rate target is set by the government. The appointment of the governor of the Bank of England is also a political one.

But such claims are disingenuous. The real direction of travel, if anything, is in the opposite direction. Central-bank governors have become high-profile figures who now make pronouncements not just on monetary matters, but also on issues as political as Brexit and climate change. They are the archetype of the unelected technocrat, who wields enormous power but is never subject to an election.

The notion of independent central banking goes back at least as far as the mid-1920s. According to the League of Nations, which was then drawing up plans for economic reconstruction after the First World War, central banking ‘should be free from political pressure, and should be conducted solely on the lines of prudent finance. In countries where there is no central bank of issue, one should be established.’ (5)

However, as Tucker points out, banks’ power and status were diminished by a series of events, from the 1929 stock-market crash, to the unravelling of the gold standard and the Great Depression of the 1930s. It was only in the 1990s that the idea of central banks operating independently of political pressure came to the fore again.

This was not the case in Germany. There, the independence of banks was being advocated after the Second World War, where it was decided that Germany needed a social-market economy (soziale Marktwirtschaft). This could be seen as a ‘third way’ between free-market capitalism and socialism. Germany would still have a competitive market economy but it would operate within a strong but limited framework of state institutions.

The social market’s roots can be traced back to the Weimar period, as a reaction to the financial and political turmoil of the early 1920s. Alexander Rüstow, a prominent economist and a so-called Ordoliberal, was to play a key role in the formation of the social market. In 1932, he gave a seminal speech tellingly entitled ‘Free Economy, Strong State’.

Although the German Federal Bank was not founded until 1957, the concept of central-bank independence was already embodied in its immediate predecessor, the Bank of German States. Wilhelm Vocke, the first president of its directorate, declared on 1 June 1948 that: ‘The independence of the bank and its leadership is an absolute necessity. Only when independence is guaranteed on all sides will the central bank be able to earn that asset which is more important than popularity and applause, yes, even more important than gold and foreign exchange – trust at home and abroad.’ (6)

This conception of independence was subsequently embodied in the German Federal Bank (the Bundesbank). It was deemed central to providing not just monetary but also social order from the early days of the Federal Republic onwards. As Konrad Adenauer, West Germany’s first chancellor, said in 1957 when the Bundesbank law was promulgated: ‘Safeguarding the currency forms the prime condition for maintaining a market economy and, ultimately, a free constitution for society and state.’ (7)

Sometimes, the Bundesbank law was expressed in terms of stability policy (Stabilitätspolitik). Ludwig Erhard, Adenaeur’s economics minister and the architect of Germany’s economic miracle (Wirtschaftswunder) of the 1950s and 1960s, said monetary stability deserved a place as one of the ‘basic human rights’. For Karl Schiller, the Social Democrat economics minister between 1966 and 1972, ‘Stability is not everything, but without stability, everything is nothing’ (8).

As argued by David Marsh, in his authoritative 1992 study of the Bundesbank, the roots of this preoccupation with stability go back to the Germanic conception of order as the foundation of state power (9). Maintaining stability is certainly given priority over democratic control in this conception of central banking.

Marsh explains how both politicians and central banks had a mutual interest in playing down the anti-democratic nature of independent central banking: ‘Both sides have a common interest in playing back the Bundesbank’s potency. The central banks want to avoid creating an exaggerated impression of dominance, while the politicians have no wish to express their vulnerability.’ (10)

Over a quarter of a century later, politicians still play down the power of central banks. However, central bankers have become more open about publicly expressing their opinions on a broad range of issues, while politicians more frequently emphasise the limits of their power.

The reconstitution of empire

Constrained democracy would be a problem even if the EU did not exist. Laws passed by democratic parliaments could still be declared void or inapplicable by unelected constitutional courts. Free speech could still be curbed in the name of defending the constitution. And powerful economic institutions could become even more democratically unaccountable. But the EU does compound all of this. It ensures the public is yet more distant from political power by establishing a new set of constraints on democracy at a pan-European level.

In some respects, the EU is a revival of the old multinational European empires. Nations still exist, as ‘member states’, but they are increasingly subsumed under a supranational set of institutions. In effect, these institutions provide a kind of imperial overlay, sitting above national ones, and further strangling democratic accountability. As James Heartfield argues in The European Union and the End of Politics (2013), this was not the product of an EU power grab; rather, ‘the dynamic towards European integration is driven by the decline of nation states and in particular the decline of the political life of popular democracy in those nation states’ (10).

Many aspects of the EU’s anti-democratic character, from the unaccountable nature of the European Commission to the democratic sham of the European Parliament, are well-known. However, less well known, at least in the English-speaking world, is the Germanic character of the EU (see spiked’s useful interview with a former British ambassador to Germany). But Germanic it is, given the EU is to a large extent based on the model of constrained democracy that emerged in Germany and Austria a century ago.

There is also insufficient attention paid to the anti-democratic character of the European Central Bank (ECB). The ECB provides an archetypal example of how EU institutions compound constrained democracy. Not only are the central banks of member states independent of national politics, so, too, is the ECB. That means it makes important decisions about the economy of Europe with no real democratic accountability.

Indeed, the creation of the ECB was itself an important component of the Maastricht Treaty, which founded the EU in 1992. Its primary objective, like that of the Bundesbank, is defined as ensuring price stability. Mario Draghi, president of the ECB, acknowledged in a speech in 2013 that the ECB was based on the German ordoliberal model. The ECB also has objectives in relation to ensuring financial stability and financial regulation.

Its separation from democratic accountability is clearly stated in the Maastricht Treaty, wherein, in accordance with Article 107, ‘neither the ECB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body’, and ‘the Community institutions and bodies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the ECB or of the national central banks in the performance of their tasks’.

As problematic as central-banking independence is on a national level, it is more so on a supranational level. As Tucker notes, the ECB’s ‘independence [is] enshrined in a treaty that can be changed only with unanimity among the EU’s member states’. Tucker further notes that given the ECB’s resources are used to shore up the Eurozone, the ECB ought to be grasped as ‘a guardian of the EU project itself’ (11).

Furthermore, the ECB has a sister institution, the European Investment Bank. This acts as the EU’s lending arm, but it is completely unaccountable to the public. According to the Financial Times, the EIB is ‘a huge, unsupervised leverage machine for Europe’s politicians’, with a balance sheet twice that of the World Bank, and yet it ‘has largely steered clear of scrutiny’.

Although the EU does not have a codified constitution or constitutional court, many of the elements are in place. The European Court of Justice (ECJ) acts, to all intents and purposes, like a constitutional court. And the key treaties of the European Union and its predecessor formations – such as the Treaty of Rome (1957), the Treaty of Maastricht (1992) and the Treaty of Lisbon (2007) – play the role of constitutional documents.

This combination gives the ECJ immense power. It more or less acts as a constitutional court on a Kelsenian model. For example, it has the power to ensure that member states comply with their obligations under the treaties, even if a national electorate, or elected government, wants to pursue a different course of action. The primacy of the law of the EU (and its forerunners) is a long-established principle of European law. It can be traced back as far as Costa v ENEL (1964), whereby European law was held to prevail over national law.

The EU is probably, then, the most developed form of constrained democracy. A system of constraints that began to emerge at a national level after the First World War now underpins a multinational empire. Achieving genuine democracy in Europe means breaking the shackles on democracy on both a national and EU level.

Daniel Ben-Ami is a writer. An expanded version of Ferraris for All: In Defence of Economic Progress is available in paperback. (Buy this book from Amazon (UK).)

(1) Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State, by Paul Tucker, Princeton University Press 2018, p219

(2) First World War: Still No End in Sight, by Frank Furedi, A&C black, 2014, p41

(3) The Coming of the Third Reich: How the Nazis Destroyed Democracy, by Richard Evans, Penguin, 2004, p80

(4) Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State, by Paul Tucker, Princeton University Press 2018, p8

(5) Quoted in Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State, by Paul Tucker, Princeton University Press 2018, p4

(6) Quoted in The Bundesbank: The Bank That Rules Europe, by David Marsh, Heineman, 1992, p49

(7) The Bundesbank: The Bank That Rules Europe, by David Marsh, p30

(8) The Bundesbank: The Bank That Rules Europe, by David Marsh, p30

(9) The Bundesbank: The Bank That Rules Europe, by David Marsh, p29

(10) The Bundesbank: The Bank That Rules Europe, by David Marsh, p169

(11) Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State, by Paul Tucker, Princeton University Press 2018, p19

Picture by: Getty Images.