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Business and the Euro: business groups and the politics of EMU in Britain and Germany

Mark Duckenfield
Palgrave Macmillan (February 2006)

Business and the Euro examines the attitudes and activities of business associations towards Economic and Monetary Union (EMU), the European Union's project for the euro. Despite major public debates about whether or not EMU is "good for business" in the UK and elsewhere, there has not previously been an academic study of how business groups and firms engaged in the political debate over EMU during the 1990s. This book is the first to do so and it does so through interviews with officials at business associations and politicians, statistical analysis of polling data (often from business associations such as the Confederation of British Industry and Federation of Small Business), and research in the archives of business associations themselves. It covers the political activities of the major national business associations in Germany and the UK from the beginnings of the negotiations over EMU prior to the Maastricht Treaty through the launching of the euro in 1999.

Prior to 1999, business associations had ample opportunity to take part in the political battles within their countries over participation in monetary union. In both Germany and Britain, EMU was a divisive political issue with polls regularly showing that the majority of the national population was opposed to the project. Nonetheless, German business groups were united in their consistent support for German participation in monetary union. In contrast, British business associations were divided over the possibility of British membership and pressed their positions very weakly, if at all. Business and the Euro explains the different responses of business associations in these two countries.

Using Mancur Olson's "Logic of Collective Action" as a starting point, Duckenfield argues that the incentive structures facing the leaders of business associations help determine the style of lobbying that they engage in. He argues that leaders of business associations look to deliver specific policy benefits to their members. In order to succeed (and to be seen by their members as succeeding), they need to tailor their lobbying to the political environment either of the ministries that regulate their industry or the national parliament as a whole. They also need to take a politically realistic policy stance.

National differences in the political organisation of business change the incentive structures facing association leaders and influenced the extent to which different associations were able to consolidate a position on EMU. Specifically, the degree to which the associations of an industry were vertically-integrated within a common institutional framework heavily restricted the autonomy of subordinate-level associations and their leaders. Industrial associations that were part of an encompassing "association of associations" deferred to the political position of higher-level associations. These federations of associations had long-standing relationships with governments and existed as quasi-official institutions. As a result of the close and frequent interactions with government institutions and political parties, these peak associations sought cooperative relationships with the government. The vertical integration within German business associations is the mechanism that provided nearly unanimous business support for EMU in Germany. Industrial associations that lacked such direct linkages with other associations and did not have such intimate relations with the government had more variance in the political positions their leaders could stake out, although most resisted taking a stance on EMU. The relative absence of associational integration led to greater fragmentation of interests across British business associations. Even so, the interactions between Britain's peak associations and the British government were characterised by the same cooperative dynamic that the Federation of German Industry displayed in its involvement with the German government and political parties.

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