Subsidarity, Localism, and the Origins of National Modes of Economic Production

What are the historical origins of the differences between Europe’s northern coordinated and southern less coordinated political economies? They have regularly been pictured as the result of political decisions on the national level. Instead, this paper presents the northern penchant for worker-employer coordination as the product of regional traditions, political decentralization and a wider process of societal change: the rise of subsidiarity, a social order first formalized as a normative theory of ecclesial organization during the early modern period. Coordination is more likely on the local level, given the greater homogeneity of individual preferences; but strict decentralization into small, homogenous sub-units complicates non-market modes of collective action across them. Instead of rigid sub-division as under US-style federalism, subsidiarity’s unclear decentralization of powers enables local groups to self-organize but still receive assistance from higher levels. The earliest forerunners of modern coordination arose under very specific regional conditions along the Rhine; they predated the creation of nation states. At the turn of the 20th century, local traditions instead led to the coordination of the emerging national economies in northern (Rhineland) Europe. Early centralized state formation in southern (Mediterranean) Europe led to the emergence of very different, non-coordinated political economies. The Paper presents a broad, qualitative comparison of the French and German experiences up until 1914, when national political economies had been largely carved out. Presenting national modes of economic governance as the result of bottom-up processes, it casts doubt over the current idea of the outside, top-down imposition of structural reforms.