Just Austerity? Background Justice, responsibility and effective sovereignty in the Eurozone

In the wake of the global financial crisis, many have come to appreciate the crucial significance that financial and monetary institutions play in realising social justice. Yet very little detailed theoretical discussion of what just monetary institutions require has taken place amongst political theorists. This paper begins to remedy this lacuna by analysing one particular monetary arrangement and presenting a philosophically informed blueprint for its reform, namely the European monetary union. Specifically, I answer the following two interrelated questions: First, what do states owe one another in terms of socio-economic support as a result of jointly participating in the Eurozone? Second, what institutional architecture can best instantiate these normative requirements? I argue that states have an obligation that their monetary cooperation not violate background justice amongst and within them, and that the only sustainable institutional arrangement to ensure background justice is a significantly enhanced supranational monetary and fiscal authority. Importantly, I demonstrate that this institutional conclusion follows from the most plausible interpretation of the values that underpin the internationalist view. The argument proceeds as follows: First, I sketch the moral significance of monetary arrangements and describe how the Eurozone affects the participating members’ problem-solving capacity for questions of distributive justice and effective sovereignty. Section two presents one prominent normative approach to Eurozone justice, voluntarism, which is the view that obligations that exist between affluent states that come together freely to form a supranational institution are exactly those to which these states have consented, and hence there are no justice-based reasons to reshape Eurozone governance. The following sections rejects the voluntarist position. First, by pointing out a number of empirical misconceptions on which the view is based, second, by rebutting the normative premises of the voluntarist view. This paves the way to normatively more convincing account of Eurozone justice based on considerations of background justice and effective sovereignty over monetary and fiscal policy. The final section pulls together the empirical and normative criticisms and presents a Keynes-inspired institutional blueprint for an alternative, more justified structure of Eurozone governance.