VICTORY OF THE ECONOMY OVER DEMOCRACY AND THE CONSTITUTIONAL STATE
The Trans-Atlantic Free Trade Agreement TTIP and the International Arbitration Courts of the World Bank
By Martin Kutscha
[This article published October 21, 2014 is translated from the German on the Internet, http://www.rechtprogressiv.de/sieg-der-okonomie-uber-demokratie-und-rechtsstaat/
. Martin Kutscha, b. 1948, is a professor for public and administrative law in Berlin and a member of the board of directors of the Humanist Union.]
“Free trade” sounds good. Who could be against more freedom, the removal of bureaucratic trade barriers and the ease of the worldwide exchange of goods? For the export nation Germany, the planned Trans-Atlantic Free Trade agreement TTIP (=Trans-Atlantic Trade and Investment Partnership) only brings advantages. More investments should occur and 160,000 new jobs created in Germany, the Bertelsmann foundation promises.
Doubt toward such predictions is appropriate. The removal of trade barriers often only benefits the economically powerful while the weak fall by the wayside. The fate of small farmers in African states should be recalled. These farmers could not keep up with the heavily subsidized imports of cheap beef from EU states and therefore lost their vocational basis of existence. This is one of the reasons for the refugee emergency at the southern borders of “Fortress Europe.” “Free trade” frequently means the dismantling of regional or state consumer protection standards. The “chlorinated chicken” produced in the US that should make consumers happy in Europe in the future is only one example. Import of meat products from animals fed with genetic corn or hormones is another example. Data protection rules that are in force in Germany have long been regarded as annoying hindrances in producing comprehensive personality profiles by US Internet giants like Google and Facebook [cf. Wallach, TAFTA the Great Subjugation,” Le Monde diplomatique, November 2013, p.16]. The planned data protection regulation of the EU broke down in the resistance of powerful lobby groups like the “Digital Trade Coalition.”
What happens when a state insists on observance of its strict standards by powerful global players in consumer-, environmental- or industrial safety laws? In this case, the affected business could sue the involved state because these laws narrow its profit prospects or put its investments in question. Such lawsuits would occur before an international court of arbitration composed of “proven” economic attorneys of big international law offices, not before a regular state court.
PROBLEMATIC ARBITRATION COURTS
Such courts of arbitration already act under the term ICSID (=International Centre for Settlement of Investment Disputes), an arrangement of the World Bank. In 2012 alone, 172 lawsuits were filed against different states under exclusion of the general public. Thus the state of Ecuador was ordered to pay the highest compensation up to them of $1.76 billion because the country had unilaterally cancelled oil production contracts with the US company Occidental.
The tobacco company Philip Morris is now suing Australia on account of the strict advertising restrictions for cigarettes. The lawsuit of the Vattenfall conglomerate against the Federal Republic of Germany for 3.7 billion Euros compensation because of the 2011 closing of the Krummel and Brunsbuttel nuclear power plants was publicized in media reports. This lawsuit is now used as a lever to delay the decommissioning of nuclear power plants in Germany. After these companies pulled in billions of profits for many years with nuclear power, the immense costs for demolishing the nuclear power plants and the final disposal of nuclear waste should not be socialized or borne by the citizens.
First of all, the question is raised whether this special “investment protection” for big businesses and the decisions of international arbitration courts generally deserve the name “law.” With good reasons, the legal theoretician Friedrich Mueller disputes the legal character of such a “de facto world law.” It is “not a legal system in the past sense or in the sense that generations of the human rights-, constitutional state-, democracy-, workers- or women’s movements fought for with casualties. These arbitration courts function without the state, without central legislation and jurisdiction below the level of standardized institutions and positive democratic law – in part as transnational private justice, the transnational “right of the stronger.”
In addition, the non-transparent arbitral jurisdiction to protect entrepreneurial profit interests negates the authority of elementary constitutional principles of democratic constitutional states. Popular sovereignty also includes the right of elected constitutional organs to intervene in a regulatory way in the economic structure of the respective country. Neither the European Human Rights commission nor the Basic Law of the Federal Republic of Germany knows an absolute protection of property. Rather it is incumbent on the democratically-legitimated legislator according to Art 14 sec 1 paragraph 2 of the German Basic Law to define the “limits” if property according to public interest criteria as for example the supply of needs for the socially weak (social state principle), averting dangers and protecting consumers and the natural environment. The German Constitutional Court emphasized this in its “Nassau resolution” of July 15, 1981… Mere profit expectations do not invalidate (unterfallen) the constitutional protection of property.
The condemnation of states to compensations to international corporations whose profit chances were denied on the basis of investment protection agreements represents a questioning of democratic rule and not only a turning away from the traditional dogmatics of property protection. Such a considerable strain of state budgets obviously limits the possibilities of constitutional organs for creative interventions in the economy. Even the threat with this instrument can have a “salutary effect” from the view of interested businesses.
But isn’t the German chancellor urging a “market-conforming” organization of democracy? The Frankfurter Allgemeine Zeitung newspaper editor Schirrmacher used the sarcastic formula “democracy is junk” (11/2/2011) in paraphrasing the attitude of influential financial market actors given the political problems in enforcing austerity programs in the heavily-indebted EU state Greece.
In political science, a far-reaching debate arose around the question whether the parliamentary-democratic decision-making system in states of the West is not displaced by structures of “post-democracy.” Colin Crouch who coined this term identifies a continuing survival of the traditional institutions of parliamentary democracy. “Real politics occurs behind closed doors by elected governments and elites that represent above all the interests of the economy” (Crouch, Post-democracy, 2008, p.10) – in the shadows of political staging of election campaigns, parliamentary debates etc. The argument of “no alternatives,” as in Frank Nullmeier’s criticism has a boom season. “A democracy without elective possibilities arises because the economically-relevant decisions are made in international negotiation processes between the governments, central banks and the global and national financial sector.”
The attempt to overcome the continuing financial crisis of parts of the Euro zone is a graphic example. Far-reaching decision-making authorities were transferred to authorities like the European Central Bank and the “European Financial Stabilization Facility” that are hardly subject to democratic control. The judgment of the Tubingen constitutional lawyer Nettesheim on these financial-political practices may sound shrill in the ears of some EU euphorics but cannot be dismissed: “Central characteristics of democratic constitutional rule of law are evaded and endangered.”
FROM HOMO SAPIENS TO HOMO OECONOMICUS – WHAT IS LEFT OF HUMAN DIGNITY?
The role model of homo oeconomicus has long encountered us in the universities and not only on the executive floors of the economy or in politics. Entrepreneurship is cultivated as an ideal personality and is not only increasingly carried out according to the model of a stock corporation that must push its “products” in competition with other public and private rivals (“universal marketing”). Every academically trained person should be an entrepreneur of him or herself, successfully prevail over other market actors and gain prosperity in this way. For many, this may be a spur to achievement, engagement and creativity. Friedrich A. von Hayek, an advocate of the free market, knew that this by no means follows the achievement principle. Only market success is rewarding in the market economy. This is now reflected in a very different income- and wealth development in Germany which is simply owed to “enforcement of power decisions,” not to differences in performance of the involved circle.
For many, even the well-trained, the seamy side of economization appears in nearly all areas of life, not only in the world of work. From the perspective of the economy, persons are ultimately only seen as a “human resource,” as consumers or the most flexible workers. “The value and efficiency of persons,” the former German constitutional judge Ernst-Wolfgang Bockenfoerde said, “is tied to their usefulness, their contribution to productivity, profitability and competitiveness. As human capital, they must be cheap, flexible, contemporary and recyclable and not appear as persons.” These sobering statements read like a description of the working conditions in the mail-order department of the Internet retailer Amazon but may also be true for many other businesses exposed to the pressure of profit maximization in the global competition.
Given these daily conditions, the first sentence of the German Basic Law that the dignity of the person is “inalienable” may seem as wishful thinking from long past times. The strong rejection of the Basic Law in the practices of the NS regime culminates in this formula with its subdued pathos. The conscious withdrawal from unjust rule, the German Constitutional Court noted in its “Wunsiedel resolution” of November 4, 2009, was a “central historical desire of all the powers involved in the genesis and enactment of the Basic Law.” The roots of the term human dignity in the history of ideas extend far back in the past, to Giovanni Pico della Mirandola, a thinker of the Italian Renaissance and especially to the enlightened Immanuel Kant. In 1786 Kant wrote in his “Treatise on the Metaphysics of Morals”: “The person and every rational being exists as an end-in-himself and must always be seen as an end in all actions toward himself and toward other rational beings and not merely as a means for any uses for this or that will.” – On the other hand, the principle of the worldwide market economy is based on treating persons and their needs as means to the end of profit realization. For Mark Zuckerberg, for example, revenue through selling personal data left by the billions of users of “social” networks is the focus of attention, not the social aspect of Facebook. Presumably only a small part of them see through the underlying “business model” but often see no alternative to participation in Facebook if one does not want to be excluded from communication with his (physical or electronic) friends.
In her study on “greedy institutions,” the Berlin sociologist Marianne Egger de Campo compares such social networks with a religious sect “that tolerates no separation between the private and the public spheres and total submission of individuals under the community is ultimately symbolized by permanent public exposure.” She criticizes the “forced socialization” of users “whose only relevant role for Internet businesses is that of consumers or unsuspecting data suppliers. We are commodified by the greedy institutions of the commercialized Web 2.0 since every social expression in the “social” media is used to recommend and sell goods.”
THE STRUGGLE FOR JUSTICE
The text of the Basic Law obligates the public authority “to protect” and not only “to respect” human dignity (Art 1 Sec 1 Par 2). The ambivalence of state action is clear from these formulations. The state authority can act as a casualty of human dignity and of other basic rights and also as their guardian over against powerful private actors or spying by foreign secret services like the NSA. In basic rights dogmatics, the protective duty of the state is naturalized. The three experts Papier, Hoffman-Riem and Baecker emphasized this before the NSA investigating committee of the Bundestag.
This ambivalence is certainly characteristic for the whole law. The law can be applied as an instrument for safeguarding rule and also as a medium for protecting weaker persons in society. The fiscal law privileging businesses, the criminal law and the far-reaching surveillance powers for security forces are examples for the first function while labor law, laws governing tenancy and data protection law fulfill the second function. The “deregulation” pursued especially in the 1990s weakened this protection character and strengthened the rule-securing elements. Thus the “sleek state” is not trimmed evenly but only as a social state.
In the current debates around a greater control of the international financial markets or an “Internet-just” organization of the data protection law, the difficulty of setting legal limits to an unfettered global economy is clear. Can this goal only be reached by strengthening the European Union through deepened integration to better stand up to worldwide Big Business? Or is the demand for “rebuilding the monetary union as a socially ruthless technocratic modernization project” and preserving social heterogeneity in Europe the right answer? The belief in the “self-healing powers of the market” has greatly lost persuasiveness and the reputation of an effective regulating central authority, whether of the nation state or the EU, is only legitimate from the view of the socially weaker. To quote Bockenfoerde again, “A state authority capable of acting and decision-making must go beyond a mere guaranteeing function for developing the economic system, establishing the parallelogram of power and effectively fulfilling the public interest responsibility through limiting economic power” and through constant relativization of social inequality. Such a demand of the “strong state” may appear to some as conservative and budgetary. As a real “instrument of people’s rule,” such a state would correspond to the social state postulate of the German Basic Law and not only the command of democracy.
On this background, it is important to recall what function was intended for the law by the forerunners of the European Enlightenment. We could read with both Kant and Rousseau that laws should be the medium for realizing the people’s rule. However the “rule of the law” in most of the later doctrines of the constitutional state in Germany has been degraded to a mere formal ordering principle without substantive relation to the democracy command. In this way, the progressive ideas of the Enlightenment were buried alive. Still we can go back to them as a starting point. Renewed enlightenment and engagement are certainly necessary to prevent democracy and law perishing in the wake of a disinhibited world economy or degenerating to a mere legitimation husk.
“Stop the TTIP!” November 2014 http://portland.indymedia.org/en/2014/11/428540.shtml
“Trading Away Democracy,” November 2014 http://power-shift.de/wordpress/wp-content/uploads/2014/11/Study-CETA_November-2014_trading-away-democracy.pdf