Corportate Capture and the EU‘s Democratic Deficit – A Conversation between Kenneth Haar and Özlem Demirel

On 17 April 2024, the Brussels office of the Rosa-Luxemburg-Stiftung launched the English-language edition of the book “A Europe of Capital” by Kenneth Haar, researcher and campaigner at Corporate Europe Observatory, with a panel discussion between the author and the German MEP for DIE LINKE, Özlem Demirel. Hosted by David Lundy (THE LEFT), the discussion delved into matters of corporate lobbyism of EU decision-making and its impact on social rights and democracy in the European Union.

David Lundy (DL): Kenneth, why did you decide to write this book?

Kenneth Haar (KH): There is a straight line from the work we do at Corporate Europe Observatory, where I have worked for 15 years, to the book. We scrutinize the European institutions on a daily basis, we get to places where no one else goes. I often say, the only faction that is present in every step of EU decision-making is the lobby groups, but that is not quite true, because we are there as well. It would be a pity not to use this insider expertise and immense body of work to shed light on the EU more fundamentally.

As a result, the book is about how corporate lobby groups have influenced the development of the EU since its inception, not primarily with regard to individual laws, but in the sense that they have shaped how the institutions work. They have even helped shape the treaty in many ways. And they have helped to built a “European competition state”. This denotes a new model of the capitalist state, which replaces the welfare state setting competitiveness of industry on the global market place as its key task.

The story begins just after the Maastricht treaty of 1993, where the European Round Table of Industrialists (ERT), one of the most powerful business lobby groups, presented a long list of demands to the Commission. These demands resembled on almost all accounts what the theoretical literature defined as features of a “competition state”, such as trade run by businesses, flexible labour markets etc. This interesting resemblance provided the leitmotif for the book. The not-so-happy ending is that, with the EU’s establishment, practically on all points the ERT had it their way.

DL: Özlem, for you as an elected representative – is corporate power an issue that comes up frequently? What is the fundamental political or democratic problem here?

Özlem Demirel (ÖD): I think the lobbyism directed by multinationals is a direct attack on the European Union, as their interest lies in making more profit and that is rarely in the interest of the 450 million people in the European Union. People should certainly read this book to learn about this.

For us as the Left, it is very important to talk about lobbyism. If you talk to the people in the street, who are not familiar with the “Brussels bubble”, there is the perception that Brussels is full of lobbyists and technocrats. This might, to an extent, be a prejudice, but that is also one of the realities in the EU.

What concerns me more than the 30,000 lobbyists though is that there are arms lobbyists right inside the Commission – the Commissioner for Industry, Thierry Breton, is the former CEO of Atos [French multinational specialising i.a. in defence technology]. Breton is responsible for the defence fund whose role it is to give new incentives to the arms industry to develop new technology and weapons. So, these lobbyists are very much present, which constitutes a huge problem, especially when it comes to labour or social issues.

DL: Kenneth, in your book you focus heavily on the Commission rather than on MEPs. Just to put to you a sentence from the book: “This is precisely the arrangement that big business lobbyists have been able to find with the Commission for decades and which can be described as a kind of symbiosis between powerful business organisations and the Commission.” (p.308). What does this look like in practice? We know the caricature of the big sleazy executive walking into the Berlaymont calling the shots. But how does this work?

KH: I think that phenomenon is best described by what the Commission calls its expert groups. These are set up by to provide advise on new EU laws the Commission would like to table, and are usually filled with representatives from the very industry that a new law should be about. This is deeply problematic and dangerous.

I give you an example from the time of the financial crisis, when one of the places most hit was the EU. Whose advice had the Commission followed when presenting laws on financial regulation in the preceding decade? Well, whenever the Commission wanted advice on banks, they would invite representatives of the biggest banks in Europe. Whenever they wanted advice on investment or hedge funds, they invited hedge fund managers to provide them with input. And sometimes the advice would be not to take any legislative action. There are no European rules at all on hedge funds before 2010/2011, well after the European financial crisis.

The Commission’s response to criticism of this approach? “Well, if you want advice on banks, you don’t ask a baker.” This thinking is deeply entrenched in many parts of the Commission, the risk being that the advice they will get reflects very much the interest of big banks.

Through very hard work over the years, we managed to get a sentence into the Commission’s Code of Conduct. It reads something like: “it would be good to have several actors representing different interests in society in the expert groups, when practical”. And apparently, it is only on rare occasions that the Commission finds it practical to have expert groups not dominated by corporate interest.

DL: I would like to stay with the topic of expert groups for now. Özlem, you mentioned the arms lobby. Can you shed light on how the arms industry wields their influence in this kind of groups?

ÖD: During this mandate, the EU has funded numerous military-related instruments. But there is a history behind it. With Brexit, when the first EU military project PESCO started, the so-called Group of Personalities, which included representatives of the EU defence committee but also the arms lobby, drafted a law. It dealt with research at the time, but it was developed further, eventually creating the defence fund. In other words, the arms lobby basically wrote itself its own law.

What you have to realise: normally, the treaties do not allow for EU budget to be spent on military projects, that is forbidden under the treaties! To get around this problem, arms production is now labelled industrial policy. Breton even speaks of the need to take things further in order for the EU to be ready for war, leading the Commission to say that, if needed, arms production should be given priority over civil production.

DL: Let’s talk about the implications of the extreme focus on industry demands for social policy. And I put another quote from the book to you here: “While there are big differences between the EU’s handling of the euro crisis and the COVID crisis, much remains the same, and the social pillar has not changed that. The EU’s attacks on social rights are set to continue, and their subordination to competitiveness remains firmly in place.” (p.259). So, Özlem, what does this mean in the daily lives of working people?

ÖD: Well, it means what we currently see: the divide between rich and poor is widening, poverty levels are growing, people have difficulties paying their bills, their rents, even their food, fewer families can afford going on vacation. It is a consequence of policies, which favour the interest of Capital, and we have to reject that. We do need a stricter social agenda in the EU, one that respects and protects social rights vis-à-vis the single market. The Left, alongside other progressive forces, demands the adoption of a ‘social progressive protocol’. I think this is one of the most important issues.

During this legislative period, we managed to get some points taken up, for example, to strengthen labour rights. However, we have not managed to replace the Stability and Growth Pact with a different kind of policy. In light of the ongoing investments into the arms industry at the cost of other sectors, if we do not manage to create a countermovement together with trade unions and social organisations, we might have another wave of austerity coming in Europe.

DL: Kenneth, on that issues, the gap between the rich and poor, between the powerful and the common people – you speak of the “systemic democratic deficit” in the EU. Can you explain what you mean by that, and whether you think it is a result or a driver of corporate capture in Europe?

KH: The classic definition of the democratic deficit refers to the ‘right to initiative’ of the European Commission, meaning that only the Commission can table proposals for new laws, and the Parliament, for example, cannot. Looking at how corporate lobbyists manoeuvre in the European institutions, the original democratic deficit has expanded over time. The number of decisions taking by procedures outside of reach of elected assemblies is rising.

I give you an example from the beginning of the Covid-19 pandemic. One of the big questions at the time was, if all countries would eventually have access to the recipes for vaccines once developed. In April 2020, the president of the Commission proclaimed that we needed to develop a vaccine that was to become a common public good. Nonetheless, when in October 2020 India and South Africa tabled a proposal for technology sharing at the World Trade Organisation, the Commission was firmly against it. Who took that decision that was the opposite position of what the Commission had proclaimed six months earlier? You would think this was an easy thing to trace. But it wasn’t. It took us three months to discover who was in charge.

It was a trade policy committee of the Council, chaired by the Commission. These trade bureaucrats from member state ministries and representatives of the Commission were deaf to the demands for technology sharing. Meanwhile, the very trade bureaucrats and the Commission had been in close contact with the pharmaceutical industry. Industry representatives were practically the only partners for dialogue here. What was the biggest issue in the world at the time, was handled discretely and bureaucratically by civil servants, the Commission and corporate lobbyists.

DL: Following up on that, in your book you put forward four key proposals of how to tackle corporate power, the competition state and the democratic deficit. For example, you suggest shifting the rules on how the single market works. Could you tell us how the current rules hold progressive rule making back?

KH: They do it in so many ways, but let me give you an example. One of the big issues in the area of climate policy is the airline industry, where the EU should impose rules in support of more “sustainable flying”. After 10-15 years of campaigning, some months ago, the airlines that run flights in the EU became part of the Emissions Trading System (ETS), which basically means that they have to pay a small levy in order to keep on doing what they are used to do.

However, and here we come to the single market, in parallel, while they were bragging about their achievements, the Commission stopped two initiatives at the national level that may have had a much bigger effect than the small levy that they imposed. For one, they made sure that a French initiative to ban domestic flights was reduced to something much smaller than what the French government had suggested. And second, when word came out that the Dutch government contemplated that Schipol airport should shrink a little, the airline industry and the airports successfully demanded that the Commission discipline the Dutch government. In both cases it was about the basic principles of the single market, so we had a feeble initiative that was highly praised by the Commission in parallel to steps that probably annulled the small achievements they had gained with their initiative.

DL: The other area where the EU is incredibly effective in imposing rules is austerity – what are you proposing on this issue?

KH: Well, I heard Özlem say not so long ago that the basics will need to change. The Stability and Growth Pact from 1997 will have to be fundamentally reviewed. As it stands, it is a straight route to austerity policy in many EU member states.

We should be aware of another, under-debated issue. The rules underlying the Economic and Monetary union have become a powerful tool for the Commission and the Council to impose very specific austerity policies in member states and attack labour rights. My favourite example is when France, in 2016-17, weakened its labour legislation significantly. I would not say it was all down to Brussels, but a big step in the way was something that the French government had been under pressure to do for years. This stifled the power of French trade unions until today. What is fascinating, the ones that are in on the project, other member states and the Commission, are in no way accountable to the French population. In other words, in addition to directly leading to austerity, the EMU is showing very unhealthy and very dangerous, undemocratic sides.

DL: On this issue of democratic accountability, Özlem, Kenneth’s book goes through how the institutions here in Brussels facilitate corporate capture – do you feel like the EP has enough power to hold the Commission and other institutions to account?

ÖD: No, we are dealing with a relatively weak parliament, and I admit that I lose sight of how procedures and processes are working, and who decides what and how these directives come about. No matter what an EU politician is telling you that he or she knows – they don’t! It is hard work to find out what is happening, and then to know enough in order to make sound decisions.

However, there is currently something else going on. Mrs von der Leyen keeps reminding us that we are a “geopolitical Commission”. This is in contrast to the classic neoliberalism, which used to be the Commission’s policy, and which simply said open the markets and please the industry. Now the Commission is trying to exert a certain amount of control, they are trying to select the industries that they want to favour in order to become internationally more competitive.

Now the reason for the EU not sharing the recipes for mRNA-vaccines was the fact that we were dealing with a new technology and Mrs von der Leyen said no to renouncing the patent protection, not to lose the advantage held by the European pharma industry. It is important to analyse the lobbyism going on, but we need to bear in mind that Monsieur Breton also says that we want to have a say on who is going to do what and when. This is a new phase in EU policy-making. Yet it does not mean that the state will be able to take over in the interest of the public, no. What it means is that we are trying to defend our competitive place in the global world and that is what Mrs von der Leyen means when she says that we are a geopolitical Commission.

I think the situation is pretty dire. There are some who feel that there is an opportunity of getting some social projects accepted, for instance, based on the social pillar. But even if this is the case, the fact is that the Parliament is weak and the Commission is strong, and even if we can push a few projects, the fact is that the Commission is not going to prefer the interest of 450 million inhabitants, but the interests of capital – this is something the Parliament cannot control. The question is to what extent we manage, together with the population, to build up a movement, which can be used to defend common interests. If politicians think they can do it alone, they are wrong.

DL: Talking about resistance and the strategies to fight back – what gives you hope that this current state of affairs is not inevitable and what gives you hope that it is something we can change?

KH: Well, I guess, this comes from the experience with small and medium-sized, and even big victories in the past, during my time with CEO – we have had all of them. For example, in the context of lobbying regulation, there are fingerprints not just of our organisation, but us working with many others. Just 10 years ago, the transparency register was a joke. Now it is still very flawed, but you can learn about lobbying in Brussels by looking at the register. There are plenty of other examples about revolving doors and the Commission’s use of consultancies… I forget to say this at the end of my talks, but you can make headway, if you’re good at it. What you need is to take political discussions out of the institutions and out of Brussels, and create movements of resistance.

In my time at CEO, I have been a small cog in the wheel of some pretty amazing victories. The one that comes to mind first is that we defeated the trade agreement between the US and the EU, TTIP. It was gone, and it was due to a huge popular mobilisation in many European countries. Admittedly, though, many of these victories tend to be defensive. So the real steps forward and real progress will require more massive popular movements than any that we have seen in the past decade. We have to revive the discussion about how the European Union is working. We need to be bold enough to put demands on the table for treaty change. Looking at what we have seen in the past couple of decades, the four proposals that I have put forward in the concluding chapter for instance can be seen as a starting point. I think there is a big public appetite for proposals like that.

DL: Thank you, Kenneth, thank you, Özlem, for this insightful discussion!

Note: The transcript of Özlem Demirel’s contributions is based on an edited version of the recorded German-to-English interpretation provided during the event.