The European Union (EU) is founded on conceptual variants within liberalism such as corporatism and ordo-liberalism, which, in contrast to the U.S., are collectivist, not individualist, social, not contractarian, and confederal, not federal. The laws which grow from these concepts often parallel and/or converge on similar U.S. laws. This article traces out the conceptual foundations and objectives of the EU to understand the sources and extent of convergences and divergences in EU confederalism with respect to U.S. federalism.

It can be difficult for U.S. jurists to understand the EU's logic, which diverges from U.S. federalism. Founded on variants within liberalism that are collectivist, social, and confederal, EU institutions have grown from the desire to prevent war by using economic integration, and peaceful resolution of trade disputes. Rather than relying on the logic of the separation of powers and federalism, the EU follows the logic of limited, weak, unitary, confederal powers. The authoritarian tendency in EU structures is both less ambitious and less extensive than the powers of the U.S. federal government. In short, the EU tries to do less, but better.

This article explores out the conceptual foundations and objectives of the EU in order to provide North American jurists with the conceptual apparatus for assessing and applying lessons of European integration to *64 the Americas. Understanding Europe increases transatlantic understanding and enables North and South Americans alike to draw lessons about economic and political integration from the world's largest trading bloc. Such an understanding can improve inter-American economic well-being and political stability by applying the same principles of free movement of goods, capital and workers to the Americas in order to generate economic prosperity and, in turn, political stability and peace.

There are numerous parallels, but also divergences, in the conceptual foundations of the United States and EU. The U.S. political structure was designed to creare a central government strong enough to defend and expand U.S. territory, but also to decentralize power through the power-sharing arrangement of Federalism to provide a bulwark against the rise of an unchecked, tyrannical head-of-state. The problem facing the states of Europe, by contrast, was how to prevent another European war and rebuild their devastated economies.

The EU was built up gradually on the basis of functionalist theory. ¹ Functionalism is the idea that economic and political integration is best achieved through incremental efforts in diverse fields. Functionalist methods obtain political legitimacy in democratic terms after the fact because of the success of the institution in achieving practical goals. ² The objective of functionalism is to prevent war, not by keeping states apart but by drawing them together and by establishing rational transnational governance structures. ³ For more than 60 years, this approach has helped prevent a third world war. Functionalism works. Functionalist theory has successfully ⁴ drawn Europe from a community of six nations jointly developing coal and steel resources into a 25 nation union constituting the world's largest free trading area. ⁵ It has not, however, created a Federal Europe. ⁶ This is because functionalism's legitimacy is always ex post. Functionalism has built an economic union, but political union requires direct democratic input in concert with a clear political will. Functionalist methods cannot create political union but can create economic union.

*65 The teleology of the EU is a single market that creates the prosperity needed to enable people to live what Aristotle called "the good life," ⁷ in which a certain degree of wealth is a necessary condition. However, wealth is not an end in itself; ⁸ it is only the means to the end of the good life for all. In practical terms, this teleology is evident in recent efforts toward privatization and deregulation. ⁹ In the 1980s and 1990s, a consensus emerged in the West that private ownership of the means of production was more efficient than public ownership. Thus, state-owned enterprises such as rails, telecommunications, and post offices throughout Europe have been privatized and listed on stock exchanges.

This teleology also expresses itself through harmonization--the process of bringing the member states' laws into line with each other. Harmonization of the Member State's laws is one of the ways transaction costs are to be reduced so as to create a single integrated market. The single market is intended to enhance international economic well being and to avoid economic crises. ¹⁰

The EU is an expression of a variant of liberalism different from social contract liberalism. It has evolved in part in reaction to the ideologies of corporatism and ordoliberalism.

Corporatism argues that corporations and governments should cooperate closely to attain desired social goals. It argues that the goals of states, companies, and workers are closely aligned: corporations serve the goals of the state, and consequently, the state should create conditions favorable for the corporation. Likewise, corporatists believe the state should, in cooperation with corporations, create conditions favorable for workers. Thus, guaranties of medical care, retirement, unemployment insurance--the social insurance systems established in the first world since about 1900--are provided because educated, healthy workers are more productive, enabling corporations to better serve the interests of the state.

Corporatism has evolved over the course of the twentieth century. The idea of a close cooperative relation between labor and management was a central tenet of Hitlerism. While Marx proposed that labor and capital were fundamentally antagonistic, Hitler argued that labor and capital should relate cooperatively in the interest of the nation.

Right-wing corporatist governments have held state power in the post-war era in Argentina, Chile, Paraguay, and Bolivia. Some argue that Putin's Russia is corporatist. ¹¹ In Europe, left-wing corporatist governments *66 have, at various times and with weaker authoritarian tendencies, governed in both Germany and France. French and German corporatism was partly a reaction to the excesses of national socialism.

A key feature of post-war Europe is the rise of strong constitutional human rights guarantees protected by judicial review before constitutional courts modeled after the U.S. Supreme Court.

Neo-corporatism recognizes that autarchic national economies underperform in comparison with today's globalizing networked trading economy and that isolated national economies led to war for market share because no other possibility existed in the world before the GATT and its successor, the WTO. There is nothing inherently authoritarian or totalizing about the essence of corporatist thinking. Today, corporatism plays out in the legal structure of enterprises and in labor-management relations in different ways in different legal systems.

Corporatism in German law is expressed by guarantees of a voice for labor in managerial decisions. ¹² Labor representation on the board of directors of German corporations is guaranteed. ¹³ Further, the German social insurance system is more extensive than that of the United States, guaranteeing not only unemployment, disability, and pension insurance but also promising medical care and affordable university education.

While French labor is not similarly guaranteed a voice in managerial decisions, ¹⁴ French labor contracts, as in Germany, are more generous than those in the United States. ¹⁵ Most U.S. labor contracts are "at will," which means that the employee may be fired at any time for "any reason or no reason at all." In Germany and France, following a "periode d'essai"--a 30 to 90 day trial period--the employee is no longer "at will" but rather may be fired only "for cause." French social insurance is even more extensive than German social insurance. The French government guaranties all French citizens a minimum income--essentially, sufficient revenue to cover the citizens needs for food and shelter.

Functionalism argues that institutions are best understood by and designed around the functions they serve and are intended to serve. ¹⁶ The EU was built using functionalist logic; institutions, defined by their functions, would allow the steady acquisition of the attributes of sovereignty--the acquis communautaire. ¹⁷ The function of the acquis is to help Europe grow into an ever-closer economic and political union of a diverse number of peoples.

The English speaking world generally, and the United States in particular, should be seen as the epitome of liberal capitalism. As such, among developed states, the English-speaking world is the place where, *67 theoretically, conflict between labor and capital is greatest, due to its historical commitment to liberal individualism. American ambivalence toward corporatism is justified by history. But neo-corporatism, by abandoning the failed, under-productive and warlike national corporatist model in favor of a labor-management partnership in a highly networked and open trading system, empowered Europe to surmount the problems of first generation corporatism.

Marred by their historical association with fascism, corporatist tendencies in the EU tend to be downplayed. Ordoliberalism, by contrast, presents an alternative to social contract democracy that is liberal, but is not totalitarian like fascism. European ordoliberalism is an outgrowth of liberalism rooted in the thought of Aristotle, Adam Smith, and John Locke. Since at least Alexander Hamilton, one strand of liberalism has proposed that the wealthy must be protected from democracy. Ordoliberals would agree with Hamilton that it is necessary to protect unpopular minorities, specifically the wealthy, from the levelling effects of direct democracy. Liberalism's promise to protect political, religious, and racial minorities also extends to wealthy minorities. This is because liberalism is predicated on the premise that the wealthy deserve their wealth. Liberalism thus cannot ultimately grasp the problems of economic monopoly or inherited wealth.

Unlike other liberal schools of thought, ordoliberalism limits itself to the economic realm and lacks social and political dimensions. Thus, classical liberals, corporatists, fascists, and libertarians could all claim to be ordoliberals. This is both a strength and a weakness of ordoliberalism, granting it broad support, but also allowing it to be tainted by association with discredited political movements such as fascism.

Historically, ordoliberalism was shaped by the economic and political crises of the Weimar Republic: hyperinflation, unemployment, and bank failure leading in turn to both communist and fascist reactions against liberalism. The ordoliberal response to these crises was a call for a strong, limited state that could check extremist tendencies. ¹⁸ Ordoliberalism thus is related to corporatism and Thatcherism. It asserts the power of the state *68 to enforce individual property claims against democratic efforts to erase inequality. Thus, "[e]ven before the National Socialists' seizure of power, Herman Heller criticised ordoliberalism as 'authoritarian"' ¹⁹

In the post-war world, the same concerns--the extremes of communism and fascism--subsisted. Ordoliberalism re-emerged and tried to present an alternative by arguing for the concept of the economic constitution--the idea that the state must guarantee at least a minimum of economic institutions in order to create a functioning economy and that the society's economic rules constitute its political order. Some proponents of the EU advance the idea of the economic constitution as the conceptual constitutional foundation of the EU. It is particularly well-adapted to the construction of a limited confederal state-like polity in that it sets forth a limited yet economically powerful European legal order.

Both corporatism and ordoliberalism are different from social contract liberalism. Neithet of those ideologies plays a dominant role in the creation or functioning of the EU but both have influenced the Union. Those who call for a "social Europe" are, knowingly or not, voicing the echoes of corporatism. Seeking a limited and purely economic union is likewise an ordoliberal vision: the idea of a minimal state setting up only the framework and otherwise leaving individuals free to interact economically as they wish. Just as corporatism tends to see the state as totalising, so ordoliberalism tends to see the proper state as minimalist. Neither ideology dominates in the EU, but both are there in the background and are sufficiently distinct from social contract liberalism that they merited examination.

We now turn our attention away from contentious and uncertain ideologies and toward the concrete laws that are used to implement the vision of a single market for goods, labor, capital, and services resulting in economic integration, prosperity, and peace.

U.S. jurists have difficulty understanding the EU due to a lack of parallel structures. This is partly because the functionalist method advocates the creation of numerous specialized technical experts to disaggregate sovereign unitary national power, providing a different perspective than *69 the separation of powers logic of Montesquieu and Locke. The limited understanding of the EU by U.S. jurists is also partly due to different constitutional histories of the Member States as compared with the U.S. Dissimilar histories and logic together result in different institutions that serve different roles than U.S. institutions. We briefly survey EU legal institutions in order to understand the framework through which political and legal ideas are worked out. The functions of the institutions are illustrated by examples from the EU Common Foreign and Security Policy.

The main political actor for the EU is the European Commission (hereafter, the Commission). ²⁰ The Commission is the central initiator of legislation at the EU. The Commission also determines and conducts the EU's foreign trade policy. ²¹

The European Community (EC) Treaty empowers the Commission to represent and act on behalf of the EU in both formal and informal international agreements. The Commission represents the EU before the United Nations, the Council of Europe, and the Organization for Economic Cooperation and Development. The Commission also receives and sends out diplomatic missions on behalf of the EU, and provides an authoritative opinion to the Council in regard to applications for EU membership.

Under the Treaty of the European Union, the "Commission shall be fully associated with the work carried out in the common foreign and security policy field" (Article J. 9) ²² In terms of the EU's foreign policy, like the Member States, the Commission can propose general guidelines, common strategies, joint actions, and common positions to be considered for implementation by the Union.

The European Parliament is the only directly elected EU institution, yet it has few powers. The Parliament can recommend actions to the Presidency and request and receive information from the Commission and Presidency regarding the Common Foteign and Security Policy. Parliament also has a consultative function and has the power to fund the operating expenses of the Common Foreign and Security Policy. Pailiament has the right to ask the Commission to introduce legislation.

The European Council brings together the heads of states and the President of the Commission. An executive of executives, the European Council shapes the contours of the EU's foreign policy by determining the content of general guidelines and common strategies of the Common Foreign and Security Policy. "Guidelines" outline the goals of the Union, "common strategies" clarify how those guidelines are to be implemented, and "joint actions" implement the policies outlined in the guidelines and the common strategies. EU foreign policy instruments are hierarchically arranged from general to specific with differing decision mechanisms for each policy instrument.

The Council of the EU consists of a representative of each Member State at a ministerial level, authorized to commit the government of that State. The Council is a political rather than administrative body. ²³ The Commission's perspective on political integration is federalist, whereas the Council prefers an intergovernmental approach. ²⁴

The Council lacks formal powers at the Union level but nevertheless indicates the broad outlines of EU policy. For example, in foreign policy the Council determines joint actions and common positions. The Council must ordinarily reach its Common Foreign and Security Policy decisions unanimously. However, Member States can abstain from voting, and abstention from voting will not prevent all other Member States from adopting a policy. In the event the Union as a whole cannot act, Member States can also act with each other in "enhanced cooperation." However, enhanced cooperation as to matters with military or defense implications is essentially forbidden.

Exceptionally, some votes of the Council may be taken by a qualified majority "when adopting joint actions, common positions, or taking any other decision on the basis of a common strategy, when adopting any decision implementing a joint action or a common position, when appointing a special representative in accordance with Article 18(5)." ²⁵ However, qualified majority voting is expressly forbidden as to "decisions having military or defense implications." Further, Member States can force a vote to be taken on the basis of unanimity.

The principle legislative actions of the EU are regulations and directives. Regulations are directly binding laws, are applicable to Member *71 States and their citizens, and are analogous to U.S. federal legislation. They are supreme as compared with national laws.

Directives do not have any equivalent legal form in U.S. law. Directives are framework goals established by the EU for implementation by the Member States. They are not directly binding; however, they are nonetheless hard law. A Member State which fails to implement a directive can face sanctions and the directive can be made to have direct effect where a Member State fails to implement it.

The ECJ interprets national laws in light of directives and encourages national courts to do likewise. It does so exclusively (through the doctrine of supremacy of EU law) and its decisions are binding precedent. National courts are not able to hold a Commission decision void as incompatible with the EC Treaty. The ECJ could be compared to a supreme civil court in a national legal order.

The European Convention of Human Rights, though founded independently from the EU and having several non-EU adherents, is nevertheless in symbiosis with the EU and advances basic human rights in industrializing countries such as Turkey and Russia, where the rule of law is sometimes still at issue. The symbiotic relationship between the ECHR and the EU is set out in the Maastricht Treaty, the preamble of which affirms its respect of the principles of freedom, democracy, as well as human rights. Likewise, the treaty states that the Union respects fundamental human rights as guaranteed by the European Convention on Human Rights and the constitutional traditions of the member states as far as they form general principles of community law. ²⁶ This linkage of fundamental human rights to general principles of law is crucial to understanding how the EU broadens human rights protection.

In terms of political geography, it is most useful to think of Europe as a series of associations, much like a set of concentric rings, with a dense core and a loose periphery. The core of the EU are those Member States that are both members of the Eurozone (the single-currency European Monetary *72 Unit) and the Schengen group (whose members do not maintain border controls between each other). The next ring consists of Member States who are not in NATO. This ring includes Sweden, Finland, Austria, and Ireland.

The picture is complicated somewhat by the accession of Eastern European states to the Union. In terms of political and economic integration, Member States of the former Eastern Bloc are clearly economically and politically on the periphery of the EU; however, all are strongly in favor of the EU because of its economic advantages and because they are also members of NATO. The security interests of Eastern European Member States are heavily Atlanticist, while their economic interests are clearly European.

The Union ends and the periphery starts with the associated states--European states such as Switzerland, Norway, and Iceland. These are states which could have become Member States but chose to remain outside the Union, usually because they were already prosperous and/or neutral. A bit further afield are states like Turkey or Ukraine who aspire co become Member States but face political hurdles.

In sum, the EU is a unique system of governance from the geographic and political integration perspectives. This system becomes even more remarkable in its structure when we recall the diverse institutions and conceptual apparatus that under-gird the Union. EU confederalism is clearly shaped by, yet differs from, U.S. federalism; the EU represents a collectivist-statist variant to liberalism in contrast with the Anglo-American tendency toward liberal individualism and social contract views of the state. Europe represents a bracing challenge, a competitive partner, but not a political or economic threat. To the bravest, Europe represents an inspiration for possible inter-American governance projects centered on economic and political integration of the Americas. We now turn to the intellectual foundations of the EU to understand why and how all of this is so.

Unlike the institutions, the legal concepts that are key to implementing the vision of Europe generally parallel similar concepts in U.S. *73 federalism. Further, where some concepts do not appear similar at first glance, a closer inquiry reveals that analogies exist. In fact, legally, rules of law are converging due to globalisation toward free movement of goods and capital to create economic integration both to avert war and to create prosperity -- the EU is however the most advanced example of this tendency of rule convergence around the concept of economic integration through free movement of goods, capital and also of workers. Once we understand that general principles in the EU play the same role of guarantors of basic human rights that constitutional rights play in the United States, it is much easier to understand their content, functions, limits, and extensions.

The acquis communautaire denotes the set of all EU legislation and case law. ²⁷ Any state that wishes to join the EU must agree to abide by the existing acquis. The acquis ensures that the EU moves Member States toward the desired goal of economic interdependence. The acquis can be seen as both constitutional laws that express inalienable rights (the American sense of constitutional) and also as constitutive rights that create the core of the EU (the European sense of constitutional, i.e., the basic economic rights which constitute the polity).

General principles of law exist in the domestic legal order of civil law jurisdictions in countries such as France and Germany. They also exist in international law and the law of the EU. However, the general principles of law, as a source or interpretive guide to the law, do not exist in the common law's domestic legal order. Although the general principles of law are a source of international law, in domestic civil law they are usually persuasive evidence (the case in France). In contrast, there are no domestic general principles of law in the common law. ²⁸ Understanding this asymmetry is a partial explanation of terminological confusion among terms such as "general principles of law," "fundamental rights," "basic rights," and "human rights." All these concepts are converging on each other around the concept of jus cogens (non derogable fundamental rights in international law).

Terminological confusion also arises out of language differences. "Fundamental rights," "principes généraux de droit," "droits de l'homme," "Grundfreiheiten," and "human rights" as legal concepts are simultaneously *74 similar and different. All address the basic idea of how to discover inherent claims of the individual to protection. However, they are not entirely congruent. When a German lawyer speaks of Grundfreiheiten it is fairly evident that she means the basic four freedoms of the EC treaty--free establishment and the free movement of labour, capital, and goods, ²⁹ the constitutive rights of the EU. Those rights are an artificial construction intended to serve the purpose of creating a single market. They are thus not "natural" in the sense that a natural right means one that is inherent to the human condition and could not be otherwise. Grundfreiheiten can be thought of as the economic means to political goals and are thus distinguished from inalienable fundamental rights. ³⁰ They constitute the economic constitution of the EU. While a "basic right" (Grundfreibeit) would thus be hierarchically superior to ordinary legislation of the Union, it would also be logically inferior to the inalienable fundamental rights in, for example, the ECHR.

When we consider "fundamental rights" we must also note that French law does not generally speak of droits fondementaux but rather of droits de l'homme--the rights of man, i.e. human rights. French scholarship also addresses human rights through the general principles of law, a persuasive evidence of the law in France. Principes généranx du droit and fundamental rights are not however the same concept. Nevertheless these concepts are all converging due to globalisation.

To this complexity is added the fact that the EU is a sui generis legal order. ³¹ The general principles of national and international law are tinged by this fact and do not transfer immaculately from either the national or international legal order. This fact allows both the Strasbourg and Brussels courts to flexibly develop human rights.

Distinguishing between constitutive principles and constitutional principles allows us to understand the content and limits of rights. Constitutional principles refer to those principles of law that are so fundamental to the legal order that it could not exist without them. They are generally natural, not positive, and are substantive ends. Constitutional principles are by this definition indispensable to the final logic of the legal structure. Constitutive principles, in contrast, refer to those rules by which other rules are formed. They are the framework through which the goals *75 of the legal structure are expressed. The constitutive principles constitute the framework in which the constitutional principles are expressed. They are generally positive, not natural, are usually procedural and are means to the end.

A constitutional right is hierarchically superior to a constitutive right in some senses: the constitutional right is the end toward which the constitutive right seeks. The substantive-procedural distinction is dichotomous but valid because the former expresses the teleological and material cause, whereas the latter expresses the efficient and formal cause.

The "four freedoms" are those economic liberties that are needed to assure the economic integration of Europe: the free movement of goods, labor, capital, and services. They are constitutive principles.

Free trade agreements normally include only the idea of free movement of goods. However, the EU also guarantees the right of a business to set up shop anywhere in the EU--the right of establishment. The EU also guarantees the right of capital to move from any bank in the EU to any other bank in the EU-- the free movement of capital. Finally and perhaps most importantly, the EU guarantees workers the right to take up residence for work or study anywhere in the EU.

The free movement of workers globally is the next step in global prosperity. Due to demographics and an aging population, the first world faces an increasing labor shortage: Third Workers in the First World remit some of their pay home, lifting well-being in the Third World and reducing global tension resulting from vast income inequality. The logic of the free market should also be applied to labor markets to benefit the world's poorest. In this sense, the EU has been the vanguard of liberalism.

Americans usually think of constitutional rights as fundamental and inalienable. The basic four freedoms of the EU form a type of "economic constitution." These "basic rights" (Grundrechte) are teleologically interpreted not as absolute inalienable rights but rather as relative to other basic rights, and as the means to the end of creating a single market to attain the good life for all Europeans. Thus, the fundamental economic freedoms (Grundrechte) are subject to the general principles of proportionality and perhaps also subsidiarity. To American legal scholars, the principle of proportionality is a familiar test for the constitutionality of a law, ³³ though it is better known to U.S. jurists as means-end rational review. The law must be a rational means to a permissible end. Subsidiarity essentially *76 holds that the EU acts only where the goals of the Union would be best achieved by collective action at the level of the Union. ³⁴ In theory, the confederal power is final, but limited. When in doubt, powers are reserved exclusively to the Member States. However, since human rights are by their nature guaranteed to all persons, subsidiarity cannot limit human rights protections by the EU since such protection complements and does not replace the Member States' human rights protections.

The key organizing and legitimating principle of the post-war world is human rights protected as fundamental rights e.g. the non-derogabley jus cogens of international law. The ultimate goal of the EU is to guarantee and improve the quality of life for all through increased prosperity. This view is consistent with the materialist view of human rights, which holds that human rights are conditioned by economic development. EU law seeks to ensure the maximum possible standard of protection of human rights by permitting private causes of action to be heard before the European Court of Justice. ³⁵ Contemporary international law is marked by directly enforceable individual rights.

In addition to the European Convention's express protection of human rights, the EU also recognizes numerous basic rights outlined in treaties. These rights are usually expressed, not with the American terminology of "fundamental rights," but rather in terms of the civil law as "general principles of law." General principles of law are used by judges to render terms of the treaty more precise, to fill gaps in the law, ³⁶ and to cure ambiguities in the law by lending their support to the interpretation most reasonable and coherent with the spirit of the treaty. ³⁷ Further, the principles permit judges to limit the discretionary exercise of power by the community's organs or even by Member States where the Member State acts in an area of community competence. ³⁸ However, this very flexibility can create confusion as to the application and contours of the general principles. Legal terminology here appears only partly helpful. The description of one and the same concept as at times a "fundamental right" and at others as a "general principle" is partly to blame. ³⁹ This tendency is due to globalisation and (deductive) general *77 principles and (inductive) fundamental rights are currently converging on each other due to globalisation to create a uniform world law.

General principles of European community law often operate in the same manner as fundamental human rights. Fundamental rights guaranteed within the EC treaties as general principles of law include: the principle of equality, freedom of religion, ⁴⁰ freedom of expression and of information, protection of confidentiality, the inviolability of one's home, the right of self-defense and the rights of the accused, the non-retroactivity of criminal laws, the right to redress before the court, economic and property rights, ⁴¹ and freedom of association and employees rights to organize. This list of rights protected directly by the EC treaties is hardly exhaustive. ⁴²

Whether a right exists and whether the holder of that right has the power to enforce it are two distinct questions. The direct effect of the basic rights of the EC Treaty and ECHR--the self-executing nature of the rights in those treaties--is sometimes analyzed using a concept from German constitutional law, third party effect (Drittivirkung). Vertical direct effect (vertikale unmittelbare Drittivirkung) binds EU member states such that individual citizens will have rights against the Member State. ⁴³ Horizontal direct effect (horizontale Anwendbarkeit) binds the citizens of the member states inter se. ⁴⁴

The problem is that the term Drittwirkung admits of more than one meaning. ⁴⁵ Some contend that Drittwirkung refers only to vertical direct effect, the relations between citizens and Member States. A second school contends that Drittwirkung means that "provisions concerning human rights also apply in mutual legal relation between private individuals, not only in legal relations between an individual and the public authorities." ⁴⁶ The distinction appears to turn on whether the right can be used by an individual to compel another individual to act or refrain from acting as to a particular conflict.

The various meanings of Drittwirkung can also be illustrated by the example of the ECHR. In dualist states such as Britain prior to the passage of the Human Rights Act, individuals might have rights under the ECHR, even as to other individuals, but they would nonetheless only be able to proceed against a state. That seems to correspond to the first meaning of Drittwirkung given above--the individual has a right, but can only enforce it via invocation against the state. The second situation can also be illustrated by reference to the ECHR. In monist states such as France, treaties *78 are an integral part of the domestic legal order and the ECHR may be invoked by private persons against private persons. Drittwirkung acquires multiple meaning as soon as the focus changes from "who holds the right" to "how may the right be enforced." This confusion is only partially reduced by the concept of "direct" and "indirect" effect.

Third party effect may be either direct or indirect. A direct third-party effect (unmittelbare Drittwirkung) exists in German domestic law when the legal rule is applied against the individual citizen. ⁴⁷ Indirect third party effect (Drittwirkung) exists when the fundamental right loosely binds individual parties to some basic legal rule by legal interpretation, for example where a law is interpreted in light of a right expounded in the convention or treaty.

In EU legal discourse the terms "horizontal" and "vertical" effect are often used in further defining Drittwirkung, particularly when discussing the four basic freedoms (Grundfreiheiten). In a conflict between the right to contract (a general principle of law) and the free movement of persons (one of the four freedoms, a Grundfreiheit) horizontal direct effect would say that the community law binds the individuals inter se. Thus if the basic freedom (Grundfreiheit) has horizontal direct effect (unmittelbare Drittwirkung) then the general principle of freedom of contract would probably have to give way. This illustrates a related problem: even if we know whether the right is applicable to individuals inter se, and whether such effect is affects individuals inter se or vis-à-vis the state as either binding law or merely as a persuasive interpretive guide, one still does not know the relative positions of basic freedoms (Grundfreiheiten), fundamental rights (droits fondemen-taux), human rights (droits de l'homme), and of the general principles of law (which may be national, international or European ... ) in the hierarchy of norms. The typology here suggested is to recognize the convergence of fundamental rights into general principles and then to distinguish among basic rights by these criteria: whether the right is natural and inalienable, or instead positive economic and alienable; whether the right is a means to some other end, or an end in itself. Whether the right is procedural (a rule for determining other rules) or substantive. The resulting hierarchization places economic rights below inalienable rights, substantive rights above procedural rights, and ends above means.

To see that Drittwirkung is just one more method--and a subtle, nuanced one at that--by which liberals attempt to channel political struggles, class conflict, hatred, and jealousy into constructive economic competition, requires no great imagination. The entire liberal order is predicated, since at least Aristotle and at latest Hamilton, on profitably *79 channelling democratic impulses to avoid political extremes. Thus, in so far as Drittwirkung is one element in the (neo) liberal order, it is nearly tautological to say that the exact content of the concept of third party effect (Drittwirkung) is manipulated in order to channel conflict and avoid political extremes. Consistent with that realist view, it is useful to recall that the essence of the post-war constitutional structure of Germany was to protect human rights and prevent the rise of a strong, central, absolutist government. The finality of Europe is not merely a "market without a state." Rather, European market integration is and has always been intended as a necessary first step toward political integration. The ultimate contours of Europe--federal state, confederation, or a concentric association of states spanning continents--may not be clear to us today. However it is clear that while the concept of an "economic constitution" helped Europe to achieve the initial goal of a single market, it cannot direct European policy toward any goal other than a mere customs union. The idea of Europe as only having an "economic constitution" completely ignores the cultural and foreign policy aspects of European integration.

Because the concept of an economic constitution, of which Drittwirkung is a part, coheres well with a minimal state, it was easily and compellingly subsumed into EU law. The community was weak, and an object of the post-war economic constitution was to accommodate competing interests precisely so that the central governments could absolve themselves from totalising goals. Further, the process of European integration has always been driven by economic arguments of increased efficiency through free trade, reduced transaction costs, and improved competition overseas which also mesh nicely with the liberal market assumptions underlying the idea of a (purely) economic constitution (Wirtscbaftsverfassung).

But if on the surface an economic constitution appears to mesh perfectly with the raison d'être of the Union, a closer examination reveals that in fact the idea of a (pure) economic constitution is inapt to the final logic (teleology) of the Union. The advantages of the Union go beyond a mere customs union to include the benefits of a single currency, common foreign and agricultural policy, and common cultural policies. The idea of an economic constitution served Europe well in its first phase of economic integration but cannot by definition go beyond economic integration to political integration.

To the extent that Dnitwirkung embodies and protects a purely economic constitution, it is inapt to address questions of human rights. Fundamental human rights are values which are inalienable and in that sense prior and superior to economic rights. Trying to use market based tools of analysis for determining whether and when the ECHR or the Maastricht Treaty create rights between private parties inter se is inapt because:

"It is often unclear how 'private' private property really is: when the Government reduces the tax payable on petrol, is this a subsidy to the oil companies? Is a state-regulated private monopoly 'private'? When a company relies entirely on tax incentives and government patronage, is it still 'private'? Why should it be different from a company where the State owns 51 percent of the shares or from a company where the Government has a 'golden share'? Is a self-regulating occupational organization, such as the Law Society, private?"' ⁴⁸

The public/private distinction has been academically long discredited. ⁴⁹ Even if it were tenable, the existence of private bodies to assign rights through market interactions does not mean that such a method is socially desirable. Some values have greater importance than money; it might be socially desirable to ignore the public/private distinction. Thus,

"Even if we could find completely private bodies, there may still be a case for making them comply with public standards. For example, private television companies may be obliged to screen the party political broadcasts of all major parties, and American privately owned corporate towns and private shopping precincts have been forced to allow their premises to be used as a marketplace not only for goods, but also for the market of ideas." ⁵⁰

Finally, appealing to private ownership as the key to assigning rights ignores the fact that the mechanisms to enforce property rights are granted by the state. ⁵¹ For these reasons the market is simply the inadequate instrument for protection of human rights.

Political reasons are not the only explanation of why Drittwirkung may be inappropriate as a doctrinal concept at the EU. The term itself has several different meanings. ⁵² As two scholars noted: "Drittwirkung is a complicated phenomenon about which there are widely divergent views." ⁵³ Drittwirkung doctrine confuses the existence of a right with the possibility to enforce that right. Such a basic confusion should really simply be obviated by avoiding the term and speaking less abstractly about concrete legal disputes in individual cases.

*81 Finally, the confusion of the meanings of Drittwirkung results in doctrinal incoherence in EU law. This confusion arises because transposition also results in transformation.

"What seems to have happened is that the more usual mittelbare Drittwirkung [i.e. indirect effect] application, as developed at the national level, has been adopted at the international level in its unmittelbare form [i.e. what is called indirect effect in the domestic German legal order is somehow recast--or misunderstood--as direct effect at the EU level]." ⁵⁴

This confusion of Drittwirkung's meaning and consequences at the ECHR and EU explains why this author believes the question would be better analysed through focusing on the practical questions whether and when the ECHR and EU law has effect on individuals vis-à -vis the community and on individuals in their relations inter se. Focusing attention on the concrete legal questions in actual cases obviates confusion created by the term "direct" or "indirect."

This article has sketched out the ideas, institutions, and laws that form the EU. The EU is conceptually and politically organized by a confederal structure markedly different to U.S. federalism, despite some juridical similarities. Founded on holist-materialist variants of liberalism, as opposed to Lockean liberal individualism and social contractarianism, EU confederalism is influenced by, yet different from, U.S. federalism. The EU expresses a pragmatic yet visionary response to the problems of war and poverty. An understanding of the intellectual, institutional and juridical framework of the EU enables North and South Americans to draw on European models for economic and political integration to build economic prosperity and political stability throughout the Americas.