Journal of Common Market Studies Vol. 34, No.

1
March 1996

The European Union and Forms of State:

Westphalian, Regulatory or Post-Modern?

JAMES A CAPORASO
Department of Political Science,
University of Washington, Seattle, WA 98195, USA

Abstract
This article sets out to chart the evolving institutional structure of the EU, in the
context of theories about forms of state. ‘Forms of state’ are taken to be
conceptually possible expressions of political authority organized at the
national and transnational levels, here dealt with as emphases and qualities to
be accented rather than phenomena to be sorted into categories. The EU is
examined in the light of three stylized state forms -the Westphalian state, the
regulatory state and the post-modem state. Each of these captures important
elements of the evolution of the EU, and provides support for analysis of its
development as a form of ‘international state’. Such an analysis implies
attention not only to forms of state, but also to related concepts such as
government and governance which give leverage on the exploration of ‘inter-
national state forms’. Conclusions are drawn about the power of the three
‘metaphors’ used, and the relationship to possible empirical studies.

I. Introduction
Since the passing of the Single EuropeanAct (SEA) in 1986, the European Union
(EU) has been marked by acceleration in both its legislative activity and its
institutional developments. At a minimum the approaching Intergovernmental

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30 JAMES A. CAPORASO

Conference in 1996holds forth the promise of intensive discussion of institution-

al issues. Issues of representation, voting rules, proper jurisdictions of govern-
ments at different levels, and the efficiency of European institutions may all be
taken up. Nevertheless, viewed from a long-term perspective, the 1996 confer-
ence is likely to be but one punctuation mark in a long, meandering, often messy
process of political change.
The observation that European integration charts an incoherent path, is
disjointed, moves forward (and backward) in fits and starts, and generates
intense disagreement over the nature of EU institutions will surprise few people
familiar with the EU or the historical process of state-building with which it is
often compared. The work of Bulmer (1994), Skowronek (1982), and Deudney
(1995), all serve as useful contemporary reminders that the American state, at
least between 1789and the end of the Civil War, had similar characteristics. The
acquisition by the Supreme Court of the powers of judicial review, the right of
the federal government to regulate inter-state commerce, and the growth of
extensive police powers at the federal level came gradually. In addition, even
today, the constitutional right of citizens to bear arms contradicts the monopoly
of legitimate violence which we usually take as the hallmark of the Weberian
state (Deudney, 1995, p. 208)
My main task in this article is to analyse the evolving institutional structure
of the EU. This effort requires some preliminary comments. During the 1960s
and 1970s, scholars of European integration spent considerable effort in classi-
fying and creating taxonomies of integration as process and outcome. The EU
was treated as a supranational state, a confederation, an emerging federal union,
a concordance system, and a multi-level polity, among other things. This helped
to focus our attention on important relationships (e.g. the categories federal-
confederal pointed to the balance of powers between central institutions and the
Member States) and to identify classes of cases which could be grouped together.
Today, the study of European integration is moving into a post-ontological stage;
scholars are less concerned with how to categorize than how to explain process
and outcome, paying less attention to ’the nature of the beast’ (see Risse-Kappen,
pp. 53-80 this volume). Indeed, in some literature, the EU is simply assumed to
be a polity, and analysis of policy-making within specific issue areas proceeds
much as it would within domestic polities (Hix, 1994).
In this article, I maintain a focus on macro institutions and ask how best to
describe the EU. I argue that the concept ‘forms of state’ provides useful
leverage. In what follows, I attempt to clarify what I mean by ‘forms of state’.
I then link this concept to governance and government and explore three highly
stylized state forms - the Westphalian state, the regulatory state, and the post-
modern state. One aim of an exercise of this type is to understand better if we are
on the right track. By probing the theoretical properties of these three ideal types
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in light of European integration experience, I hope to illuminate to some extent
the question of whether integration theory has placed the important problems at
the centre of analysis. The spirit of this article is very much that of a comparative
exploration of three metaphors rather than a test of three theories.

11. Forms of State

To guide analysis of emerging European institutions, I rely on the concept ‘forms
of state’ as developed by Robert Cox (1983,1986; see also Rupert, 1995, pp. 39-
42). ‘Forms of state’ is an umbrella concept that encompasses many historically
specific state structures, e.g. the pluralist state, night-watchman state, predatory
state and welfare state. Each of these forms is a conceptually possible expression
of political authority organized at the national and transnational levels. In my
analysis, I treat each state form less as a discrete category and more as an
emphasis, something to be accented rather than something to sort into a category.
The idea ‘forms of state’ suggests that there is no such thing as ‘a state,’ or
even a ‘modem state’ or ‘nation-state’, with trans-historical and cross-societal
significance. Our simplified concept of the modem state is based on a very
selective reading of the histories of a few countries (France, England, Germany),
histories with differences as important as the similarities. At best, we can speak
of different state forms, thought of as clusters of institutions embedded in
specific social formations which are in turn embedded within distinctive histor-
ical periods. These state structures should not be reified and thought of as eternal
fixtures of politics.
A related advantage of the concept ‘forms of state’ is that it points us more
directly to the necessary auxiliary concepts, in particular government and
society. This focus leads us to emphasize the differences in the social constitu-
encies of state structures. Particular state forms are emanations of social
formations that rest on specific clusters of social interests, e.g. labour and capital,
different interest and professional groups, and different portions (organized or
not) of the mass public.

111. Government, Governance and the International State

In ‘Governance, Order, and Change in World Politics’ (1992), James Rosenau
raises an interesting question. How can a decentralized system of political
authority, one in which governments reside in the constituent units, govern the
relations between them? Decentralization does not imply the absence of interde-
pendence and conflict among the units (states). Yet, without Hobbe’sLeviathan
and Durkheim’s conscience collectif, the usual mechanisms of conflict resolu-
tion and social control are wanting. There is only so much that Smith’s ‘unseen
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hand’ can do. Even a simple international division of labour depends upon secure
property rights (for goods in transit, foreign investment), an agreeable system of
payments, secure and respected credit institutions, etc. Both the Single European
Act and attempts to create markets in the former Soviet Union demonstrate that
markets are not self-instituting.
Rosenau’s answer is roughly that international government, thought of as
public agents holding positions of political authority, making and administering
laws at the international level, is the usual but not necessary condition for
governance - thought of as collective problem-solving capacities among states.
In this formulation, international governance becomes possible by recreating a
hierarchy at the international level in the image of domestic politics. It is possible
that presently constituted nation-states could, without creating an international
hierarchy of political authority mirroring domestic governments, nevertheless
manage their relations to solve common problems.
This discussion calls for distinctions between governance, government and
the state. Governance refers to collective problem-solving in the public realm.
It directs attention to the problems to be solved and to the processes associated
with solving them, rather than to the relevant agents or to the nature of the
political institutions associated with these processes. Government, by contrast,
refers us to the institutions and to the agents (personnel) who occupy key
institutional roles and positions. In the EU, key elements of the government
structure include the Commission, the Council of Ministers, the European
Council, the Committee of Permanent Representatives, the European Court of
Justice and the European Parliament. Each is an institution which survives the
tenure of any office-holder. But each institution also defines a location occupied
by specific government agents, who can act.
The third term, the state, hopefully clarifies the significance of the prior two
concepts. The state refers, b la Benjamin and Duvall, to ‘... the enduring
structure of governance and rule in society’ (1985, p. 25). The term ‘structure’
implies an ongoing, reproductive set of processes, the patterns of which are
stable across different agents. The state considered as a political structure
includes not just formal rules guiding inter-state interactions (e.g. voting rules,
agenda-setting rules) but also norms, understandings, standard operating proce-
dures, and accepted, ongoing ‘ways of doing things,’ that may or may not result
from formal legislation. In the EU, ‘soft law’ (Wellens and Borchardt, 1989),
acceptance of national methods of achieving Community objectives, and infor-
mal networks of interest groups, policy experts, national bureaucrats and
Commission experts, all point to important political structures that are not
captured by the label ‘government’.
The significance of this view of the state is best captured in contrast to its
conceptualization in neorealist theory. In the neorealist formulation, the state (or
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nation-state) is a pure agent, an actor with the ultimate right to decide within a
given territory. Reading its security interest directly off its position within the
international structure, it sends diplomats, mobilizes troops, decides on defence
budgets, etc. At issue here is not the unitary character of the state, but whether
the meaning of statehood is exhausted by focusing on public agents and their
activities. By contrast, Duvall and Wendt conceptualize the state as ‘... a
structure of political authority in which governmental agents are embedded’
(1987, p. 32). Rethinking the relationships between government, governance
and state has a consequence of immediate significance for this article. Focusing
on the EU, it is easy to obscure the distinction between absence of international
government and absence of an international state. There is no shortage of
scholars who argue that the EU lacks an international government, in the sense
of a centralized, hierarchical political structure, independent of the governments
of the Member States, and capable of acting (authoritatively) on a broad range
of issues. But this argument, even if true, is not ips0 fact0 a denial of an
international structure of governance, i.e. an international state. One thesis of
this article is that the EU already has, indeed has had for some time, an
international structure of governance based on the extrusion of certain political
activities of its constituent units. In short, the EU, or more accurately the ongoing
economic and political relations between the Member States mediated by the
institutions of the EU, is already an international state.
Recognition of the regional international state is obscured by our habit of
looking for discrete islands of hierarchy, centralization, autonomy and authority
at the international level, created in the mould of domestic structures, and at the
same time partially replacing them. Miniature state-like structures, situated in
Brussels, enjoying considerably autonomy from the nation-states, mimicking
their functions and competing for political influence, constitute evidence of an
emerging regional state. Thus, disproportionate attention is focused on the tug-
of-war between Member States and EU institutions, on the assumption that the
emergence of European authority structures comes at the expense of national
ones.
The question of who has the power (resources, autonomy, legitimacy, the
‘right’ to decide) is of course critically important, but power issues are normally
pitched at the level of agents and, as a result, attention is deflected from the EU’s
more strictly performative activities, those off the agenda, because they are
‘solved’, bureaucratized, unproblematic, or co-ordinated quietly by the actions
of public and private actors in an ‘apolitical’ fashion. In sum, a focus on agents
turns us to government and governmental machinery. A focus on the ongoing
structure of political authority and governance turns us toward the international
state.

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In the rest of the article, I focus on three particular forms of state: the
Westphalian state, the regulatory state and the post-modern state. Each concept
is an ideal type. The result of my analysis will not be that the EU belongs in one
of these three categories. I chose these three state forms because I think that each
captures certain tendencies represented in the EU. The Westphalian state is the
Weberian ideal in which monopolies of legitimate violence, rational bureaucra-
cies and centralized policy-making authority correspond to territorially exclu-
sive political orders. The regulatory state corresponds to the transnational
political structures associated with attempts to control imperfections of interna-
tional economic exchange, including failures of exchange to occur. It owes
much to neoclassical economics, especially the theory of externalities and public
goods. The post-modem state corresponds to emerging forms of governance that
are fractured, decentred, and often lacking in clear spatial (geographical) as well
as functional (issue area) lines of authority. As will become clear, the regulatory
state owes more to Ronald Coase than to Bodin or Hobbes; the post-modern state
more to Frederic Jameson and David Harvey than to Machiavelli or Weber.

IV. The Westphalian State as Conceptual Template

An idealized model of the Westphalian state has dominated our thinking about
possibilities for institutional change in the EU. This model has been important
even when it is being rejected since for the most part it has provided the terms
of reference for the debate. Thus, even when attention is directed to the
shortcomings of the model, as for example when it is pointed out that real states
often have multiple competing centres of authority (Tilly, 1975), fractious
populations (Jackson and Rosberg, 1982), and alternate purveyors of violence
(Thomson, 1994), these facts only emphasize the extent to which the ideal model
is not realized in practice. This is very different from identifying alternative ways
to conceptualize the organization of political authority.
In this section I advance two points which, together, are paradoxical. The first
is that, in many ways, the Westphalian model of the state leads us astray. But if
this were all there were to it, we could simply direct our attention elsewhere, and
not look for theoretical inspiration from this form of state. The second point is
that, in other ways, we (political scientists - not legal scholars) have failed to
exploit fully the power of the Westphalian model. In what follows, clarification
is needed regarding the ‘misleading’ and ‘relevant’ (but under-exploited) as-
pects of this model.
What is the Westphalian system and what consequences does it have for
understanding regional integration in western Europe? The Westphalian system
refers to the organization of the world into territorially exclusive, sovereign
nation-states, each with an internal monopoly of legitimate violence. Its defining
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properties include political institutions with (1) a monopoly of legitimate
violence; (2) a continuous centralized staff capable of extracting taxes and
administering; and (3) authoritative institutions and personnel who make policy
over a range of issues. States have varied historically in numerous ways but they
are alike in that they are juridical equals and are sovereign over their territories.
Sovereignty needs precise definition. It has been used almost interchangeably
with autonomy and control. But few states would qualify as sovereign using
these criteria. At the bottom line, sovereignty is a right, a socially recognized
capacity to decide on matters within a state’s domestic jurisdiction. As Thomson
puts it, ‘[slovereignty is the recognition by internal and external actors that the
state has the exclusive authority to intervene coercively in activities within its
territory’ (Thomson, 1995, p. 219). There is no legal superior to the state in its
internal or external affairs. Internally sovereignty implies non-intervention by
‘outside’ powers, non-interference in domestic affairs. Externally the interac-
tions of multiple sovereignties imply anarchy.
If the Westphalian state system is composed of sovereign states within
anarchy, the EU can integrate politically only by transcending the sovereignties
of individual states, by cajoling them into accepting the status of subordinate
units, and by reconstituting state sovereignty at a higher level. This requires that
we see the EU as an embryonic political structure in the process of acquiring its
distinctive sovereign status and surreptitiously draining these ‘powers’ from the
Member States. Though some have escaped this tendency (Wessels, 1992;
Marks, 1994; Leibfried and Pierson, 1995), the polarities with which we work-
interstate system v. federal state, intergovernmentalism v. supranationalism -
suggest that the state system, and its alternatives, are defined by reference to the
Westphalian model.
The model of the Westphalian state system has a double significance. It
fosters a divide between domestic and international politics and at the same time
provides the exclusive terms of reference for bridging this divide. Change in the
international system is conceived as movement in the direction of domestic
politics, as the taming of anarchy; as the progressive replacement of power-based
methods of conflict-resolution with rule and norm-based methods. Regional
integration results in the reconstituting of state functions at a ‘higher’ level; it
involves the domestification of interstate relations. The accretion of rules, formal
laws, fragments of authority, habits, norms and political institutions, all makes
the international system a bit less like an anarchy, a bit more like a constitution-
alized domestic polity.
The Westphalian model encourages us to see regional integration centring on
the EU as a re-enactment of the traditional processes of state-building from the
seventeenth through to the twentieth centuries. Yet huge differences exist. Wars,
religious conflict and taxation were critical for the construction of nation-states,
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much less so for the EU. Class conflict was important in the emergence of nation-
states and continues to be important in international integration, though in
strikingly different ways. The emerging capitalist class from the sixteenth
through to the nineteenth centuries hired armies and privateers to do its bidding.
Capitalism today secures its ends through its flexibility, ease of movement, and
ability to outmanoeuvre labour. Similarly, the expansion of citizenship, growth
of state powers in the provision of welfare, and spread of democracy were all
thought of as state achievements in the sense that they all gravitated toward a
single place’ a national executive, legislature, political party, or symbolic
document, such as a constitution. By contrast, European integration is polycen-
tric and lacking in a single, centralized, political location. This is not fertile
ground in which political responsibility and legitimacy can take root.
If the Westphalian model encourages us to see the EU in terms of the same
historical project as nation-building and state-building, the consequence has
been predictable. The portfolio of functions performed by France, Germany and
England is not duplicated by the evolving EU. Similarly, the historical processes
which led to the accumulation of state power are substantially different from
those occurring in Europe today. These discrepancies have been interpreted as
a shortfall (the EU is not a ‘real’ state), rather than as a qualitative difference in
state-building patterns.
The appropriation of the Westphalian model by political science emphasizes
the ways in which historical state and nation-building processes correspond to
or differ from integration in Europe today. The analogy has not proven fruitful
- not just because the EU falls short, but because activities go off in directions
not captured by the Westphalian state. Yet I indicated previously that the
Westphalian model had some unrealized potential.
Moving from political science to legal studies provides a different prism
though which to view regional integration. In part, this is because lawyers have
a different vocabulary and analytical toolkit; in part because their focus is on law
and legal integration - not on economic transactions and patterns of political
decision-making per se. But should not legal and political integration move
together? If law codifies and gives direction to political behaviour, should not the
two proceed (forwards or backwards) in step?
Joseph Weiler (1982) has cautioned us against making such an assumption.
Because the process of integration is multidimensional, we should not infer that
all the parts move together. The components of the integration process may
themselves not be integrated. Simon Bulmer has noted the disjunction between
I By ‘place’, I do not mean an exact location, a geographical headquarters where central authoriy resides. But
the establishment and development of the democratic state brought along with it the idea that political
authority, no mater how diffuse it was geographically (among territorial governments) or functionally
(among branches of government), was nevertheless ‘located’ somewhere (in a constitution, set of shared
understandings, etc.). This idea seems central to the related notions of accountability and responsibility.
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‘a highly developed governance structure’ and the ‘absence of a clearly fixed
state identity to which it is attached’ (1994, p. 353). Weiler argues a different
disjunction, between legal and political-decisional supranationalism (Weiler,
1982).
Legal analysts have tended to see the process of European integration in rule-
like terms, as a system of evolving rules and norms, not qualitatively different
from the domestic polity. Explanations of political behaviour have tended to be
rule-bound, appealing to obligations, norms, and legal sanctions, rather than
based on power and interest (though these variables are far from irrelevant).
In pressing their agenda legal scholars have relied without apology on ‘the
domestic analogy’, especially the concepts of federalism and constitutionaliza-
tion. The concept of federalism has deep roots in political and legal analysis. It
refers to both a specific type of polity (federal) in which power is legally
distributed between central and local entities, and to a general organizing
principle for governing relations among spatially differentiated units (Elazar,
1987, pp. 11-12).
Constitutionalization is a less familiar concept. The ending of this lengthy
word suggests a process, in this case a process of change from a state where
countries are governed by treaties into one in which they are bound by constitu-
tional principles, more akin to municipal than international law. Federalism and
constitutionalization have affinities for one another but they are not identical, as
the discussion below shows.
In ‘The Community System: The Dual Character of Supranationalism’,
Joseph Weiler shows that there is still life in the concept of legal federalism.
Weiler argues that there have been important changes in the EU since 1958,
changes involving the relationship between the Community centre and the
Member States, as well as changes in the way international treaties and laws
affect citizens within these states.
These changes have come about through a series of landmark decisions that
established direct effect (Van Gend en Loos), supremacy of EU law (Costa v.
Enel), and pre-emption (for relevant cases, see Weiler, 1982, p. 277). The Van
Gend case established the direct applicability of Community law (including the
Treaties and Regulations) on individuals, without mediation by national govern-
ments. The Costa case established the supremacy of EU law when conflicts with
national laws exist. And the pre-emption principle established that where the
European Court of Justice has legal competence, Member States are pre-empted
from taking action (Weiler, 1982, p. 277). There are powerful decisions that
parallel in importance the establishment of judicial review (1803), federal
supremacy (1819), and federal regulation of interstate commerce (1824) by the
Supreme Court of the United States.

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The importance of the Court's jurisprudence is not limited to a rearrangement

of powers and competences among courts in a federal system. The centralization
of powers at the federal (Community) level at the expense of the component parts
(Member States) is only part of the story. The Treaty of Rome and now the Treaty
on European Union have been constitutionalized, i.e. converted from an agree-
ment among sovereign states into a set of rules binding those states and at the
same time conferring on EU citizens rights that are enforceable in national courts
(Stone, 1994, p. 4).
The mechanism by which bindingness and enforceability are accomplished
is even more telling. In principle, two routes are possible: the first relies on
centralized enforcement by the ECJ, while the second relies on decentralized
enforcement. It is the second mechanism that has become dominant. As Stone
puts it:
When a case before a national court turns on a question of interpretation of a
Community norm, national courts may - and supreme courts must - refer the
question to the ECJ. The reference suspends the proceedings at the national
level, pending a decision by the ECJ. Once rendered, the ECJ's ruling is then
applied by the national court to settle the case before it. The system is
considered to be far more effective than direct action before the ECJ since
national governments regularly obey their own national courts. (Stone, 1994,
P- 3)
Legal scholarship has breathed new life into the study of European integration.
Scholars working within a federalism paradigm have usefully explored the
changing relationships between different levels of government, supranational,
national, and subnational (Weiler, 1982, 1991; Shapiro, 1992). Others (e.g.
Burley and Mattli, 1993; Stone, 1994) have not limited their focus to intergov-
ernmental relations, but have examined the growing links between law and
citizens, links that are not mediated in the traditional way by national govern-
ments.
If the term 'constitutionalization' is foreign, the general process of which it
is part should not be. International relations scholars often speak of the domes-
tification of international politics. If the international system is a competitive
anarchy, an arena in which states interact on the basis of power and interest, then
domestification describes the process by which that system becomes less
anarchic and more rule-governed. Studies of the development of European law
help to provide the legal foundations for the broader tradition that attempts to
bridge domestic and international politics.

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V. The Regulatory State
Students of European integration, especially during the early stage, could
perhaps be forgiven for expecting the EU to take shape along the same lines as
national governments. While the EU was seen as falling short of a mature state,
reflecting its early stages of development, its basic template was the same as that
of the nation-state. In the face of this approach, students of the EU confront a
striking empirical fact. The EU’s institutions and policies are systematically
different from those of national governments, not only in the areas mentioned,
but also in the basic profile of activities and competences. The EU’s portfolio of
functions and responsibilities differs radically, and is not explicable by its less
advanced position on the continuum of development. According to this view, the
EU is not a primitive national political system waiting to blossom.
The EU is weak in terms of the traditional tax and spend functions of
government. The extractive capacity of EU institutions is nearly zero, reflecting
a stalemate going back to Hallstein’s failed ‘own resources’ initiative in 1965,
one of the factors precipitating the ‘empty chair crisis’. The Union spends about
1.3 per cent of the combined Gross Domestic Product (GDP) of its Member
States and accounts for about 4 per cent of government spending (Majone,
1994b, p. 35). The Commission, Europe’s chief administrative and regulatory
apparatus, is modestly staffed by approximately 20,000 people of whom about
one-third are translators. Despite occasional pre-dawn raids by the Commission,
the EU is hardly a well-heeled Leviathan.
Yet the EU is generally recognized as an important institution. Why? One
answer to the paradox of ‘marginal spending cum recognized importance’ lies in
conceiving the EU as a regulatory state. The regulatory state is (in this case)
essentially an international and arguably supranational state specializing in the
control and management of international externalities. Because this state does
not engage substantially in the redistributive, stabilization and symbolic func-
tions of government, and because it relies on the administrative structures of
states already in place to carry out its own policies, rather than on independent
ones created at the supranational level, the international state can ‘get by’ with
a very small revenue base.
Theorization of the EU as a regulatory state owes a great debt to the work of
Giandomenico Majone (Majone, 1992, 1993, 1994a, b, c, d, 1996). Majone’s
starting point is the empirical observation that the EU shows little progress in
some areas (social policy, labour policy, energy policy and foreign security
policy), while substantial advances in others (single market, competition,
technical standards and environment). Understanding this differential progress
implies examining the microeconomic incentives associated with the sector in
question. Redistributive policies are by definition costly and are therefore
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electorally divisive. Of course, policies dealing with externalities and public

goods can have distributional implications too, but these distributional effects
are of a different order, taking place against a backdrop of common benefits. The
first-order problem is to find the Pareto frontier, the second-order problem
concerns distribution of benefits and costs. There are no such Pareto-efficient
implications for distributional policies. There may be more or less efficient ways
of achieving a redistributional outcome, but clear winners and losers cannot be
avoided.
Majone’s analysis of the emergence of the EU regulatory state rests on both
supply and demand-side analysis. The Commission is modelled as a bureaucracy
that wishes to expand its powers, defined for the most part as the scope of its
competences. Revenues and fiscal powers are treated as constraints, as givens.
While this assumption may conflict with the early Commission of Hallstein,
especially with his attempt to provide an independent budgetary base for the
Community, it serves as a useful approximation of the Commission’s activities
today.
Given this assumption, the Commission specializes in that which it is
permitted to do: the elaboration of its regulatory powers and the policies and
structures that go along with these powers. It should be emphasized, as Majone
does, that ‘... the costs of regulation are borne directly by the firms and
individuals who have to comply with them. Compared with these costs, the
resources needed to produce the regulations are negligible’ (Majone, 1994a, p.
8). In other words, the regulatory framework created by EU institutions creates
costs related to rule-making per se - not to the administration of these rules.
The demand side is also important. The mere existence of low costs does not
imply EU regulations, for two reasons. Aside from the obvious point that some
sort of problem must exist (even if socially constructed) before rules are devised,
regulatory policies could easily be formulated within the domestic political
arena. Indeed, for institutional and power-political reasons, formally implied by
the subsidiarity principle, the domestic ‘solution’ should provide the presump-
tion to be rebutted. This is especially the case if the externalities are local, i.e. do
not cause substantial transborder effects. In this case, we expect the scope of the
regulations to be coterminous with the scope of the externalities.
A second reason that European regulatory policy is not an automatic response
to a transborder problem is that externalities do not necessarily imply the need
for regulation. Self-interested agents (state leaders) may be able to co-ordinate
their policies, or bargain over the conflicts, in such a way as to control these
externalities ‘privately’. This is the pure intergovernmental solution, fully
implied by Coase’s theorem, that private agents can reach efficient agreements
without third-party intervention (Coase, 1960). When state-to-state co-ordina-
tion fails to provide a response, Majone speaks of regulatory failure. When such
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failures involve international problems, an international political response is
called for. As he argues:
... international regulatory failure, rather than market failure, explains the
willingness of Member States to delegate regulatory powers to the EC.
(Majone, 1994c, p. 37)
The above analysis leaves open the determinants of international regulatory
failure. When do we expect such regulatory failures to occur? Among the reasons
offered by Majone are strategic use of regulatory policy, lack of information and
credibility. Each condition implies a perverse incentive structure. Firms in one
country have an incentive to design domestic regulations so as to disadvantage
firms in other countries. The possibilities for opportunism with respect to self-
serving regulations regarding everything from labelling of food goods, control
of hazardous substances, special requirements for making pasta and brewing
beer are too real to be only suggestive. Informational problems arise when
regulators do not have adequate knowledge of the behaviour of those being
monitored. Credibility problems are associated with the possibility that agree-
ments among countries will not be enforced, or that national regulation will be
lax in enforcement. Strict enforcement by national authorities may disadvantage
a national firm operating in a competitive international environment. Once
again, the incentives are not ‘right’. To regulate faithfully in compliance with
national standardsmay drive national firms out of existence. Only an internation-
al regulatory body can overcome these unco-operative incentives, partly by
being removed and hence more insulated from pressure groups, partly by
applying the same regulatory standards to firms in all countries.
Acceptance of the regulatory state as a useful description of the EU has broad
implications.The first implication is that we should not expect the EU to look like
a traditional nation-state at all, nor its future development to follow the beaten
path from intergovernmentalrelations to confederation to federation. Instead we
should expect a political division of labour between Member States, focusing on
social and redistributional policy, and the EU, focusing on regulatory policy.
From this angle, it would be theoretically misplaced to judge the developmentof
the EU in terms of the growth of its taxing and spending powers. Its weakness
in terms of extraction and broad spending powers is not due to an ‘early stage of
development’, nor are these functions likely to be supplied by the dynamics of
functional linkages (spillover). The regulatory state is not the Westphalian state,
the extractive state, or the social democratic state. Its future contours are not
likely to resemble these state forms more than at present.
A second implication relates to the connection between regulatory structures
and democracy, an issue all the more salient because of the debate over the
democratic deficit. Given the weakness of European parties, the strength of

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42 JAMES A. CAPORASO

specialized interest groups, the under-representation of large unconcentrated

groups, the secrecy of the Council, and the unpopular nature of the Commission
and the Court, we should ask what effect the increase of international regulatory
structures will have.
In the US, regulatory structures were created in part to avoid the swings of
public opinion, and to insulate agencies from factions. Agencies were even
placed outside the hierarchy of presidential control (Majone, 1994a, p. 17). The
proliferation of agencies in the US has been attacked on the grounds that agencies
constitute a non-representative fourth branch of government, undermining the
separation of powers, and placing government further beyond the reach of
private citizens. While Majone’s work attempts to reconcile independence and
accountability - as they can be in principle - I believe he understates the anti-
democratic possibilities of independent regulatory agencies. Even Majone,
whose treatment of regulation policy is sympathetic, sees dangers resulting from
a lack of transparency in regulatory structures (1994c, p. 41).
While provisions of transparency would be a step in the right direction, they
would have only a limited effect. Adeeper problem is that the EU is only a partial,
one might even say ‘truncated’ political system. It lacks a broad, representative
parliament with real capacity for law-making. It lacks a European dimension to
its party system, with the result that group interests are not assembled into broad
and coherent programmes. The consequence is a weakening of public discussion
and a failure of the EU to take on popular meaning in terms of our most significant
ideological dimensions (left-right, populist-elitist, activist-limited role for
state). If the EU is a limited, market-perfection project, this would seem to be
borne out by limited mass public engagement in European issues.
Majone’s work helps us to understand ‘why [there is] so little progress on
social policy’ in the EU. His microeconomic orientation, and finely-honed
instincts for relative incentives, provide explanatory leverage in responding to
the question of where integration is most likely to occur. Functionalism also had
a theory about where integration would commence. Functionalism got part of the
answer right by pointing to the technical nature of some sectors, their inherent
complexity, and the difference between ‘high’ and ‘low’ politics. Only because
of the limited (and accidental) congruence between these sectors and the ones
specified by Majone as having the right incentives (e.g. they yield joint gains,
they respond to market-correction attempts), did functionalism make accurate
predictions. And neither orientation explains agriculture very well.
Nevertheless, despite the success of the regulatory state framework, I believe
that it does not adequately understand the politics of redistribution in the EU.
This is not because Majone does not understand the nature of redistributive and
regulatory policy-making. This distinction runs throughout his entire work (see,
e.g., 1996, p. 3). His economic approach to policy-making is not argued in the
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 THE EUROPEAN UNION AND FORMS OF STATE 43
abstract, but is interpreted via concrete legislation and treaty provisions. With
only partial overstatement, one can say that Majone comes closer than anyone
else to doing for the Treaty of Rome, the Single European Act, and the Maastricht
Treaty what Charles Beard did for the US Constitution in An Economic
Interpretation of the Constitution of the United States (1935), namely, to link
provisions of this constitution to the interests of particular groups and classes.
Needless to say, the ideological perspectives are very different. Yet, Majone
identifies the pervasive economic liberalism (1993, p. 156) of the three treaties
and argues that these provisions, backed by the ongoing preferences of state
actors, provide the main reason behind the efficiency orientation of the EU.
While I do not disagree with this analysis, there are two shortcomings. The
first is due to the failure to ask the cui bono question. The second shortcoming
results from limiting political analysis to policy-making, i.e. to politics within the
state. Regarding cui bono, the failure to highlight this issue perhaps stems from
the efficiency orientation. To the extent that policy-making is the search for a
Pareto frontier, it involves striving either for a first-order social optimum (in
which there are no losers) or a second-order optimum (where losers are
compensated out of the joint gains). All gains and losses can be respecified as
second-order effects by tying them to a larger ‘game’. Yet, even within Majone’s
neoclassical framework, there are conceptual opportunities for a broader under-
standing of distributional questions.
Take for example the work of Stigler (1971), an economist working in the
field of regulation. Stigler has strongly emphasized the distributional conse-
quences of regulation. Regulation requires policy-making, and this in turn
implies pressure group activity subject to the normal Olsonian biases in favour
of large producer interests as opposed to consumer interests (Olson, 1965). To
self-seeking agents in society or the state, aggregate societal welfare does not
matter, at least not directly. What counts is the size (absolute) of the pay-off, and
this can be affected by redistributional struggle (rent-seeking), as well as by
wealth-creation efforts. And the ‘principle’ that guides politicians is almost
certainly not Pareto efficiency but the provision of apolitically optimal distribu-
tion of rents across groups seeking to influence government policy. If the
economic theory of regulation is read with a liberal dose of capture theory,
Olsonian interest-group theory, and Schattschneider’s emphasis on the partial
(and highly biased) nature of interest-group politics (1960), it is easier to see why
large, concentrated, well-organized and well-financed groups will usually win
out in carving up the pie.
Finally, since Majone’s research is based on a typology of policy-making, it
is by its nature limited to analysis of politics within the state, and between the
state and relevant societal sectors. This discourages an appreciation of the larger
shifts in European society, particularly the opening and widening of a space for
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capital. The lessening of capital controls during the 1980s and the freeing-up of
markets for both industrial and financial capital, advantaged capital more than
labour. If capitalists do not like their regulatory environment, they are able to exit
more readily. This of course increases their bargaining power in relation to
labour. Even if workers enjoy the right to move from country to country, they can
not exercise it as freely as capital (which, as a more abstract factor of production,
can move without as great a human cost as labour).
The informational and organizational costs confronting labour are high and
simple numbers work to their disadvantage. In addition, labour and labour power
cannot be separated the way capital and capitalist can. Compared to the
sluggishness of labour, capital is quicksilver. It moves fluidly across borders,
often accompanied by a highly mobile transnational capitalist class (Cowles,
1995). If an international capital regime is a ‘cooperation non-problem’ (Duvall
and Wendt, 1987),because leaders of central banks, finance ministers and chief
executive officers of corporations meet regularly, without the guidance of a
central institution, a labour regime did not make much progress for quite
different reasons. Interests are diverse, collective action problems daunting and
prospects of winning not encouraging.
In short, the regionalization of the European economy, guided by the EU, is
not a politically innocent process. Manageable national markets, capital con-
trols, national control over monetary policy, inflation, interest rates and central-
ized wage bargaining (typified by corporatism) were important underpinnings of
labour strength. The importance of the EU is only partially captured by a
typology of policy-making. Relations between the state (both domestic and
international) and the economy have changed to the advantage of capital.

V. The European Union as Post-Modem State

In ‘Territoriality and Beyond’ (1993), John Ruggie reminds us of our epistemo-
logical predicament. To think about the state in novel ways requires us to shed,
or at least modify, the social episteme in which we have been steeped. Our
foundational assumptions, and the ‘inarticulate major premises’ from which
nearly all thinking about the state proceeds, are shaped by the vocabulary of the
nation-state system. It is telling that most definitions of statehood stress proper-
ties such as citizenship, sovereignty and monopoly of legitimate violence, thus
bypassing the territorial principle on which nation-states rest. Ruggie’s defini-
tion, in contrast, is as follows:
... politics is about rule. And, the distinctive feature of the modem system of
rule is that it has differentiated its subject collectivity into territorially defined,
fixed, and mutually exclusive enclaves of legitimate dominion. (1993, p. 151)

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 THE EUROPEAN UNION AND FORMS OF STATE 45
Ruggie's thoughts are valuable not because he identifies a precise alternative to
the Westphalian state, but because he makes us dissatisfied with the current
repertoire of conceptual grids. As such, he urges us to break loose from
conventional ways of viewing territoriality. The nation-state system is not just
the modem expression of a universal political form organized at the national
level. It is a distinctive form of organization based on carving up the world into
territorially exclusive enclaves. Sovereignty, in its modem form, is the right to
exclude - people, capital, ideas, foreign powers, and so on.
The difficulty scholars have in grappling with the state at the European level
is that the reconstitution of political authority in the EU has not conformed to
classical lines. As Sbragia puts it, '... [tlhe European Community is a political
entity that does not fit into any accepted category of government' (1993, p. 24).
From this, some have concluded that no European state exists, that Europe is only
an arena, a site where intergovernmental politics is transacted. Others, working
within the same basic conceptual framework, disagree with the conclusion but
subscribe to the same rules of inference. For them, a European state exists to the
degree that EU political structures have policy-making competence, express or
recognized authority, autonomy from national political institutions, and so on.
The post-modem state contrasts most strongly with the Westphalian state. It
is abstract, disjointed, increasingly fragmented, not based on stable and coherent
coalitions of issues or constituencies, and lacking in a clear public space within
which competitive visions of the good life and pursuit of self-interested legisla-
tion are discussed and debated. Elements of all of the above can be found in
domestic politics too, but a significant difference of degree exists.
As suggested, the European post-modem polity is not easy to describe.
Elements of politics and governance occupy different sites (Basle, Brussels, the
national capitals, Luxembourg, bilateral meetings among economic and finance
ministries), and these sites can change. Process and activity become more
important than structure and fixed institutions. The state becomes not so much
a thing (which it is not even in domestic contexts) as a set of spatially detached
activities, diffused across the Member States but reflecting no principled - let
alone constitutional - considerations.
Three aspects of the post-modem polity can be emphasized in the EU. The
first is that it has a weak core. That is, the central political institutions of the EU
are thin in comparison to domestic institutions, and possess limited autonomy.
The EU does not yet play a significant role in security and foreign policy, welfare
policy, social policy in general, citizenship rights, and police and international
security.2 True, the EU is 'young', but earlier remarks about the different

'However, see Leibfried and Pierson (1995) and Pierson (1995) for an argument that the importance of the
EU in social and welfare policy is increasing.
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templates compared to the building of nation-states still stand. The EU may never
perform the functions currently performed by states.
Do the EU’s institutions and practices add up to some constitutionally
recognized form? Does it have a constitution at all? International lawyers and
legal scholars have given a resounding ‘yes’ to this question (Mancini, 1991;
Weiler, 1991; Stone, 1994; Shapiro and Stone, 1994), arguing that the jurispru-
dence of the European Court of Justice (ECJ) has in effect ‘constitutionalized’
the Treaty of Rome. However, Mann’s argument runs in the opposite direction:
Europe does not in effect possess a constitution, clearly regulating these
complex institutional relations. The major encroachments on national sover-
eignty are not really constitutional - the replacement of one sovereignty by
another. Instead, they are the practical, surreptitious, and delayed implemen-
tations of decisionstaken by the Council of Ministers, whose decision making
processes reflect partly consensus and partly the geopolitical influence of the
various member powers. The encroachments are routinized, constraining
practices like the dense web of product regulation or the narrow band of
currency fluctuations permitted by the EMU. (1993, pp. 127-8)
The relative weakness of the core is best illustrated by social policy, an area
where by general consensus the EU has made only modest inroads. But as
Leibfried and Pierson (1995) point out, the conclusion that EU social policy is
weak has more to do with our analytical focus on central political initiatives of
the EU and less with the substantive development of social policy. Preoccupation
with efforts by the Commission ‘... to foist an activist “social dimension” on a
reluctant Council has been a mistake’ (1995, p. 4). Social policy has in fact
developed substantially but less as a result of conscious, centrally directed
policy, more as a consequence of practical problems stemming from market
integration.
The relative weakness of the core does not imply a weak state. A second
characteristic of the state form in Europe is that it has many spatial locations.
Gary Marks and his collaborators (Marks, 1993,1994;Marks et al., 1993,1994)
have picked up on the dispersed nature of the state with their concept of multi-
level polity. Marks et al. see two separate logics operating in the EU - the logic
of state executive bargaining in the Council of Ministers and the European
Council, and the logic of multi-level governance operating through the Court,
Parliament and the Commission (Marks et al., 1993, p. 4).
According to the multi-level framework, regional integration is not a zero-
sum process. Nation-states are simultaneously ‘throwing out’ functions to the
supranational level and devolving responsibilities to subnational regions. Dense
policy networks exist among Member States, supranational institutions and
subnational institutions. Analysts should not have to choose between intergov-

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ernmentalism and international forms of political activity. Both logics operate in
the European polity.
The multilevel polity is based on the idea of interconnectedness rather than
nestedness. ‘Nestedness’ implies the traditional federal (territorial) principle by
which smaller units (counties, states, provinces, cantons) are situated within
larger units. Constitutional responsibilities are more or less clearly delineated,
which is not to say that blurring of boundaries does not occur. Elazar’s notion is
applicable here: federalism is best conceived as a ‘marble cake’ in which actors
within federal systems interpenetrate in their performance and sometimes in
their formal competences, rather than as a neat ‘layer cake’. Interconnectedness
is a less formal principle, implying ongoing interactions among different levels
above and below the nation-state. It is these networks of interaction - more
sociology than constitutional principle -that Marks et al. refer to as ‘multi-level
polity’ (1993, p. 8).
It would be surprising if the reconstitution of political authority took place in
an economic vacuum. Whatever the meaning for viability of nation-states,
consensus exists that economic interdependence has increased greatly over the
past four decades. Yet one of the most significant factors affecting politics at the
EU level is not merchandise trade, trade in services, or capital movementsperse,
so much as a change in the relationships between capital and labour. One
literature providing insight into changed economic relations belongs to yet
another discourse, the Marxian analysis of transnationalization of capital.
According to this viewpoint, the making of a European state, the fragmented
nature of political power, the absence of strong party and legislative institutions,
are not politically innocent. The EU, especially since the passage of the SEA in
1986, amounts to a reconfiguration of power relations between labour and
capital.
For most of the post-war period, labour and capital have been negotiators at
the same bargaining table. Goods and services have moved freely across borders,
but capital has been restrained. With the liberalization of factor markets, capital
has gained the upper hand. The decision to go ahead with the Single European
Act while leaving ‘Social Europe’ for another day is only partly responsible for
capital’s upper hand. It would be difficult - some would say impossible - to
reconstitute corporate bargaining power at the supranational level. Capital has
not escaped the state. Rather the state has created new transnational spaces for
capital, those where the opposed forces of organized labour are not prevalent.
The historic compromises lying behind European welfare states have been
based on a rough equality of bargaining power between labour and capital. The
distribution of bargaining power is affected by voice (votes, political organiza-
tion) and exit (ability to leave). Perfection of the market has resulted in capital’s
differential ability to exit national boundaries while still preserving the political
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structure of a decentralized state system. Capital also has increased its ability to
alter its form from fixed capital with large sunk costs, to smaller and more
flexible forms of capital. In short, the sectoral and geographic mobility of capital
has increased.
By contrast, labour is weak, disorganized and still largely confined to national
economies. This is less and less true for legal reasons (labour may move too) but
it remains the case for personal and sociological reasons. Capital is separable
from the capitalist. It can circulate geographically without physical accompani-
ment by the capitalist. No such separation is possible for the labourer and his or
her labour power. This fundamental asymmetry between the two factors of
production implies changes in their bargaining power when integration occurs.
The weakening of national political institutions has both resulted from and
caused changes in bargaining power between labour and capital. While national
welfare states have been more resilient than many expected (Pierson, 1994), they
have been on the defensive. National corporatism, defined as centralized
bargaining between capital and labour, has also deteriorated. At the same time,
as John Lambert notes, capitalism has ‘... organized world wide [and] it escapes
those checks and balances built up over the years in the nation-state framework,
by workers’ movements and parties of the left’ (Lambert, 1990, p. 1).
Those who worry about the democratic deficit have identified an important
problem, one that is given a different twist by theorists of the Left. From this
standpoint, the deficit is not just an across-the-board shortfall of democratic
participation and control, to be corrected by extending citizenship rights,
broadening participation, and increasing legislative oversight and control. More
importantly, the uneven political power of labour and capital resulting from the
‘freeing up’ of the European market needs to be brought into balance at the EU
level. A restructured political framework is needed to compensate for the
increasing irrelevance of national political institutions such as centralized wage
bargaining, trade unions and political parties which play a role in class-based
politics (Streeck and Schmitter, 1991).

VI. Conclusion
The purpose of this article has been to explore the potential of three metaphors,
broadly captured by the labels Westphalian, regulatory and post-modern. No
attempt was made to decide which category proved to be most relevant and no
unplanned success occurred along these lines. The Westphalian model illumi-
nates the ways in which the European state both resembles and differs from the
traditional (domestic) state. Legal scholars have provided surprising mileage out
of notions of federalism that were once dormant. The newer concept of consti-
tutionalization not only provides a lever for understanding transformations in
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state-society relations; it also weakens one of realism’s objections to the
importance of international law, namely that it has no enforcement mechanism
and relies upon the voluntary compliance of states whose interests may be to
defect.
Yet, legal scholars are open to the criticism that progress in policy-making,
and the ECJ’s jurisprudence, are limited to market-perfection exercises and
regulation of the self-disorganizing aspects of market capitalism (e.g. monopo-
lies). The Court’s jurisprudence revolves heavily around questions of competi-
tion, free movement and the elimination of barriers to trade.
The regulatory state model captures an important part of the intemationali-
zation of the European state. While the EU lacks an overall political architecture
specifying relations between citizens and representative institutions, it provides
abundant evidence of islands of political authority centring on regulation of
economic activity (civil aviation, pharmaceuticals). While policy-making is
authoritative in these areas (regulatory agencies rely on delegated powers from
Member States), there are nevertheless problems. Majone’s work highlights
problems of accountability, explores the tensions between independence and
accountability, and identifies ways in which the two can coexist. But is account-
ability the main problem? Special purpose authorities fragment power, rely
heavily upon expertise, and utilize power and knowledge within narrow deci-
sion-making contexts that lack transparency and general popular interest. To the
extent that the respublica of the EU are preoccupied by the details of civil
aviation, regulation of pharmaceuticals, and the labelling of food goods, genuine
popular engagement is unlikely to be forthcoming.
The post-modem state model dovetails in some surprising ways with the
regulatory approach. Both stress the fragmentation of political power, the
decentring of authority, and the lack of overall coherence in the integration
process (this last point also made by legal scholars). To a federalist, the
fragmented political structure of the EU is vertical, arranged along a territorial
axis. Other cleavages (e.g. between sectors) are attributed to the EU’s incomplete
development. To the post-modernist, the polymorphic structure of the EU is
simply the reflection of the post-modem condition, and quite likely permanent.
Let me return to a point made at the start: that the study of European
integration is in its post-ontological phase is a refreshing development. Endless
debate about ‘what the EU is’ cannot be productive unless tied to detailed, though
theoretically informed, empirical studies. Similarly, these empirical studies are
unlikely to acquire their full significance unless integrated with broader concep-
tions of the nature and significance of the evolving European Union. Hopefully,
the decade ahead will harmonize these up till now somewhat unconnected
projects.

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