Europe: The social challenge. Defining the union’s social objective is a necessity rather than a luxury

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No 11 / July 2012 Europe: The Social Challenge Defining the Union’s social objective is a necessity rather than luxury Frank Vandenbroucke University of Leuven © European Observatory OSE Opinion Paper 11– 2 Professor at Antwerp and Amsterdam “OSE Series” takes form three different publications available in English or French “Research Papers” are intended to disseminate results research by associated researchers colleagues from network “Briefing contain readily accessible regular information on variety topics “Opinion consist concise policy-oriented opinions “This Working paper reflects views author these not necessarily those Observatory” 3 Table contents Introduction 1 Why ‘social Europe’? 5 Inequality Europe Four arguments favour an active dimension policy 7 Argument 1: A safeguard against dumping 2: protective barrier around national sovereignty 9 3: An inevitability Monetary Union 4: as core political project that ‘Europe’ 20 Conclusion: no longer but 24 Setting agenda investment agenda: dramatic imbalances schooling 26 protection Great variation efficiency 27 Divergent pathways during boom 2004/5-2007/8 30 ‘how’ key issues 32 Epilogue Catch 22 for democrats? 33 References 36 Inaugural lecture occasion his appointment Affiliate Den Uyl Chair June (1 ) It great honour me be invited hold Not only was Joop important democratic leader 1960s up into 1980s; approach politics also had profound influence many including myself Jan Pronk wrote wonderful column ‘Den mentor’ which he summarised Uyl’s style politician ten lessons Lesson one went follows: ‘Never stop studying Never assume facts speak themselves truth has been found Investigate backgrounds less obvious associations asking questions ’ That precisely what I intend do For over fifty years we have debating whether requires This question already raised 1950s before establishment Economic Community six countries it still today twentyseven Member States number describing weaknesses Europe’ now beyond counting All too often writings merely inconsequential lamentations unreachable ongoing crisis may present opportunity put firmly Rather lamentation needed coherent conception reasons behind governance union In short ‘social Europe’ needs unequivocal answer why how Remarkably ‘why’ cooperation ought – matter principle hitherto received relatively little attention (2 therefore focus first foremost this part my briefly scrutinise am aware strike you being destructive ‘Is really time laying bare case Europe?’ wonder But bear mind ‘first lesson Uyl’ according will see would like thank Rita Baeten Tuba Bircan Bea Cantillon Paul De Grauwe Ri Ridder Steven Engels Joep Konings Kim Lievens Erik Schokkaert Chris Segaert Anne Van Lancker André Poeck Rompuy their detailed comments and/or assistance with sections exposé Responsibility expressed however own area widely developed either field normative philosophy few existing sources include famous appeal Habermas (2001) correspondence between Parijs Rawls (2003) literature ‘global justice’ EU featured very prominently Only recently debate instigated foundations Europe’; (2011) Sangiovanni (2012) Nicolaïdis Viehoff references 4 should championed if were self-evidence considering must separate wheat chaff notion intellectual hothouse plant can survive nurturing environment friendly like-mindedness more rigorous test idea cherish stronger likely emerge From conclude among other things whereas ago quest lucid description ‘the model’ might dismissed interesting strictly necessary existential conundrum True financial system faces urgent short-term problems detract fact term effective union’ indispensable survival practical implication addition fiscal compact argue basic consensus required meaning ‘social’ Europe’s citizens role play common orientation towards appear ingredient Such cover issue States’ mutual obligations i e demand another thus arises reciprocity incorporated institutional relationships same way within each State separately based individuals say monetary adequately meets requirements justice define them My argument limited scope: assert concerning envisaged model order could long shapes depending underlying significance attached However once add observation regarding primacy such engender broad support adhere objectives welfare states cannot contradict second illustrate ensuing does claim comprehensive Important left untouched instance regulate taxation funding undue competition third identify some urgencies respect particularly need restore unity economic long-term without dwelling refers democracy final address fellow democrats emphasise ‘historic compromise’ families supporting governments parliament Does historic compromise constitute catch search enhanced identity? To context start factual One wrestle enormous diversity systems histories there Income inequality US; manifests itself If find hard believe consider panEuropean Gini coefficient (a commonly applied measure income inequality) approximately US ( As association destiny well afford overlook sure extent generally much individual states; greater Leaving aside super rich Luxembourg per-capita GDP purchasing power parities (PPPs) poorest Bulgaria amounts richest Netherlands (in euros tenth) similar exercise reveals Mississippi about half (4 Minimum wages low uniform cranked they Federal hourly minimum wage USD7 25 By comparison Bulgarian monthly estimated Eurostat amount EUR122 even standards 10% Dutch Obviously most recent expansion played Figure visual representation distribution whereby distinction made ‘old’ EU15 ‘new EU12 On basis EU-SILC 2009 net disposable equivalised household terms PPPs 0 352 EU27 (calculation Tim Goedemé) latest representative USA provided OECD 378; regional price differences presumably insignificant See Brandolini (2007) Burkhauser Couch (2010) Milanovic Similarly ignoring super-rich outliers Even impoverished Puerto Rico included American its relative position PPPs) favourable al 6 01 02 03 04 05 06 07 08 50 100 150 200 250 300 350 400 450 500 Relative frequency Equivalised PPP) % median SILC poverty threshold Source: Mechelen Goedemé horizontal axis represents all Europeans; take account size composition incomes measured proportion pan-European dotted line used 60% defined threshold; areas indicate population below respectively analysis 15% compared 70% new gap least affluent quite considerable: ‘rich’ Romanians (by mean: better-off middle classes) poor ‘poor’ leave class who wealthy refer classes Expressed Romanian 80 percentile (Vandenbroucke 3) Let begin positive counter predominantly negative discourse integration plays progressive development non-discrimination Starting principles grounds nationality (at citizens) equal pay work men women created solid legal foundation enforcing fields gender age ethnicity… Stephan Leibfried suggests expanding courts forward further developing entity so heterogeneous dominated vetoing Seen light reformulated as: require goes anti-discrimination? distinguish four possible arguments: is… dumping; ii sovereignty; iii Union; iv instrumental nature; fourth Although proposed follow mutually exclusive convincing conjunction? So let us premised far-reaching harmonisation induces downward pressure advanced becomes aggressive Hence (somewhat sloganesque) summary ‘safeguard dumping’ subject 1956 Ohlin report together Spaak laid Bertil (the Swedish party chairman later awarded Nobel Prize Sciences Heckscher-Ohlin Theory) assumed labour costs concerned closely related productivity free trade cause did emphatically any subsequent divergences evolution corrected adjustments currency exchange rates (International Labour Organisation 1956) Given clearly caveat 8 Prima facie history proven wrong parallel process expanded sometimes spectacularly Successive enlargements invariably resulted upward convergence; World Bank dubbed EC veritable ‘convergence machine’ (Gill Raiser 2012) (6 turned out spectre reality Now argued contravention doctrine coupled market high-level certain particular 1980s 90s relation health safety workplace (7 noted ‘upward’ ‘downward’ nature convergence depends context: situation widespread unemployment gain upper hand due example overall weaker unions occasions prevailing balance society here qualified warrants Nonetheless thesis lifting obstacles constitutes progress prima exaggerated functional preventing strong following consideration restrictions unequal puts brake then insurmountable problem shows impossible level playing economically feasible economies yet impactful ones (8 insist Germany introduce meaningful; contrary opposite rationale relates data says nothing (or subnational) divergence happened creation single Single Act ‘level field’ mean absolute set average latter means self-evident though obviously far challenge follows plea Pisani-Ferry expansive past decade; increased fit strategy legitimacy discussed de facto autonomy (i actual room policymaking) concerns Fritz Scharpf Maurizio Ferrera others intrinsic conflict imperatives trans-border mobility services communities through nationally conceived rights duties (10) presuppose borders membership solidarity circles; former extend circles fundamental logic ‘opening’ ‘closure’ paraphrase 11) implies enjoy right attaching excessively strict country-specific conditions; under earned adherence conceptions Taking allow shop freely Belgium care covered insurers jeopardize Belgium’s planning rate agreements dictates authorities regard provisions neither open nor both foreigners point (2009) hammers home exist architecture systematically decided expense community explains treaties legislation clear pure ‘state action’ ‘solidarity action’) ‘economic provides direction jurisprudence Court Justice) dividing realms extensive grey where mechanisms operate concurrently occurs 10 sharp articulation pessimism (2005) optimistic develop partially (i) consequences movement persons Bismarckian insurance (ii) citizenship-based Beveridgean (iii) schemes (iv) service allowed discriminate application anti-discriminatory preclude (‘no contributions’); words rule kind ‘reciprocity’ inherent flexible rules access come consequence cross-border grand scale analyses inspired propose ‘horizontal clause’ purpose emphasising strongly ordering provide clearer guidance institutions Justice 2002c) representatives nongovernmental organisations campaigned Convention Via IGC adapted version text Article TFEU unlike leads irresistibly liberalisation unchecked (moreover perhaps Art contribute restoring respect) (12) There initiative aimed correction sovereignty: receptive deterministic apparent Services Directive Parliament amended farreaching Bolkestein transpires drafting 2011 Council sought appropriate patients’ control 13) agree assertion seek granting requirements; seems surrounding implementation (14) disagree nonetheless remains heroes asymmetric constitution economy irrelevant critical interaction (to referred discussion argument’) reduced tension exists every State; result generosity 12 9TFEU Charter Protocol General Interest elements Rhodes Armstrong Lenaerts 13 resolved dynamics (including originating primarily forced defensive evaluation impact law domain 14 brief viewpoint adopted determining factor comes pseudo ‘self-employed’ entering subsequently live off benefits Whether actually materialises balanced indicated Another Are country employment applicable posted workers statutory wage? And actions when feel regulations violated posting workers? notorious judgments (Viking Laval) called unions’ scope action matters seem give precedence liberal thought cases merits nuanced diminish legislative change framework use Mario Monti March Commission took adapt effect widen Bruun Bücker Commission’s proposal inadequate go enough They given receive weight freedoms (convincing) illustrates word spoken policymaking policymakers wish previously pointed expressly because divergent socioeconomic evolutions Of course buried assumption Eurozone consequences? Ben Chu writer Independent formulated May 2012: ‘Europe become ‘country’ beast euro survive’ arguing essential structural flaws design Union: absence central bank currency; depositors; centralised government whose budget forms automatic buffer event downturn; ‘national’ decision-making Since ‘a country’ simply manage conclusion straightforward: unified black white that: ‘merging state’ since ‘state’ foreseeable future foregoing correct inevitably imply doomed stabilising ‘technical’ just fine-tuning inter-state shocks topic theory optimum (OCA) using diagram (15) relate reduction transaction eliminated variability) comparability participating stimulating contributes wealth drawback joining loose tool adjustment potentially instrument developments diverge affected shock outweigh drawbacks display adequate combination symmetry flexibility Symmetry degree output growth correlated Flexibility interregional international determine country’s ‘internal’ capacity Less necessitates flexibility: internal adaptability beneficial measures vertical trade-off shown declining OCA group above costs: attained sufficiently zone met situated 15 broadened starting premise creates collective goods valuable risks specific undertaking; essence equitable Andrea arrives ‘reciprocity-based internationalism’ lies concept embedded taken granted upscaling nationally-conceived concepts outset differently Sangiovanni’s criticised points He uses ‘risk’ series limitations facing rightly categorised ‘risks’; apply ‘insurance paradigm’ More fundamentally ask ever solely (problems in) functioning mission EU: priori limit perspectives justice? equate fair (I moreover paradigm fall functionalist diversion (cf infra) analyse discrepancies detail regarded OCA; les comfortable Trade-offs Based p 110 trade-off: possibility absorbing budgetary transfers shifts OCA’ (as two arrows) OCAs permanent redistribution member area; transfer stabilisation ‘redistribution’ ‘stabilisation’ element moral hazard pronounced instances Moral occur flow resources richer poorer postpone Stabilisation temporary cyclical (By theoretical example: mechanism co-funding initial period excluding activated rises satisfy condition ‘perpetual redistribution’) unchangeable place surveillance prevent trends Sixpack finalised 2010 succeeds harmonising union’s move upwards arrow) herein additional effectively prevents asymmetry smaller sustainability black-and-white choice confronts interrelated trade-offs restrict our options Neither indeed socially neutral choices processes perceived painful difficult direct nominal cuts (rather real erosion depreciation high inflation) facilitation migration job-seekers Often smooth dismissal procedures While job markets rigid heed British economist Richard Layard founder Centre Performance theoretician activation policies pursued 1990s asserts make people unhappy opposed decentralized setting induce personal insecurity (16) Clearly meanings hence Budget practice public expenditure redistributive purposes (17) Is pursuing finally option? essentially budgets cost productivity: relationship parameters properly attuned 16 sticks welfare-to-work tried convince choosing road FrancoGerman felt lenient uncertainty Instead argues strive secure decentralised negotiations willingness increases security (Layard 2005) 17 Bargain illustration partial Europeanisation tax large groups winners losers option chosen after necessitate it) scheme avoid complex Consider question: retirement ages across Eurozone? maintain run linked life expectancy opinion realise easier said done wishing naive ageing good state discuss scrutiny ensure sake link generous insofar end larger debt higher per unit builds ultimately able organize (greater) pensions (lower) (higher) expenditures; despite continue meet requirement ‘symmetry’ substantiation battery ‘political economy’ relating behaviour employers (18) 18 simple speaking Imagine adjusted while B increase rising contributions gross evolves identically Nor rise difference alternative unproblematic scenario satisfied pension conceivable chooses economise expenditures reasoning simplistic supply generate wages; lead response (and/or unions) tighter possibilities mitigating shortages immigration Under reject compressible type ventures realm willing draw w r t age: coat cut cloth Ultimately compromises cohesion self-evident: impacting variables holds equally education Suppose shortage skilled surplus unskilled expect (assuming imbalance migration); alternatively insufficient ensue compensated (on low-skilled) turn taxes deficit B) leading lower generated ‘pay’ (relative) training accumulation ‘unpaid bill’ unwillingness ‘cut one’s cloth’; prove universal applicability rely (which timeframe contemplated here) substantial education: comparatively eventually excess prompt responses jobs conspire (see footnote elaboration point) Moreover dimensions true pose (that immigration) whole gamut pursue domestically becomes: union? Again cut-and-dried answers ‘ifs’ phrasing ‘ifs’: proofs unproven tuning strategies presupposes certainly plausible hypothesis outlined supranationally shaped neatly separated arenas reason either: Furthermore possibly Before section return Grauwe’s described crucial conditions topical moment: banking emphasised namely sovereign slipping ‘bad equilibrium’ shortterm liquidity solvability achieved joint eurobonds object interest ‘undisciplined countries’ kept shortfall Lack failure ‘disciplined Mutualisation implemented objections g 19) These ‘black-andwhite’: persuasiveness banks debt) surpass focuses shall dwell burning presents What implied entail Union? conclusions show members encompassing cognitive summarise necessitated union: · stabilised? economists 20) Robert Mundell father contributed 1973 presenting original 1961 ties (Mundell 1973) Monetarists look Keynesians At launch tended view ‘Mundell I’ Much accepts self-stabilising convergence? schooling? Scholarly never concur entirely arrive decisions analytical agreement doubt institution science requiring bedrock Some entertain doubts connection 19 Cf Moesen (De 2009) proposals sense mutualisation (part) resolving prisoners’ dilemma attain Pareto improvement concerned; calculated self-interest Fuest Peichl overview types Scholars critically popular expedient acknowledge (retirement age) (minimum wages) explore ways fostering realistic demands twofold: transfers? evolutions? entail? substitute knowledge always effect? benchmarks targets organising arena tend connotation vitality purport limited; broad-based tie goals stressed diverse accurately minimal normatively charged Subsequently dealing answered technical Jean Southern treated onesided successful serves prepared accept slightly inflation prices Spain (given stability guaranteed assuming implement reforms) applies Northern ‘overkill’) observed decade euro) ‘Reciprocity’ share responsibility concerted efforts burden competitiveness placed shoulders partner inter-human cohesive agent 2011) previous contrasted homo reciprocans economicus: driven desire ‘return investment’ money effort differs shopkeeper mentality Homo attaches capable compassion vulnerable ensues (and remain) net-contributor ‘his’ tackle wasted ‘filling bottomless pails’) relevant something Thus cement 2010) Samuel Bowles defines ‘strong reciprocity’ ‘propensity cooperate similarly disposed (21) Reciprocity ‘enlightened selfinterest’ ‘conditional’ Editorial Constitutional Law Review WTE DN meaningful involves various intertwined ‘individual’ evolution? How responsibilities attributed ‘asymmetric evolution’ definition notion? jointly organised (such transfers)? Should principled morality (whereby ‘sinners’ face punishment sins merit) consequentialist (taking sinners get saints trouble)? Can enter unbreakable 21 manner develops human relations founded transposable relies ‘considered self-interest’ assumes finds expression punish comply personally costly imposing ‘principled reasoning’ transgression norms sanctions irrespective consequences; cf infra commitment horizon selfsustaining 22)? country’; layered underpinned sustainable 23) fragility ‘deep variable’ purpose’ carried German reunification: ‘(T)his deep variable Put endogenous force existence inconceivable started having centralized making regions weakly Level’ 113) shared outlook 1999 Affairs Minister coined ‘Open Method Coordination’ method substance ‘European followed came strongly: coordination 2002a 2002b) perspective seemed somewhat superfluous recommence blank slate non-social construct inferred grounds: protecting loss success ethical-philosophical ‘responsibility’ entities): governments? upon attempt defining entities 23 emphasises ‘More facilitate arrangements persistent occasioned ‘lax government’ step preventative monitoring avoiding … eyes Jürgen remaining mobilisation consists life’ pressures globalisation phrase Lionel Jospin characterised cultural inclusion supported interpretation repeatedly intervenes legitimised historical peace purely fails encapsulate undertaking non-economic levers influences broader build degrees cosmopolitism Habermas: stake societal epitomises precise increasingly losing manoeuvre His constituting roles adopt remind reduction) subsidiarity mentioned launched 2000 Lisbon Summit During criticism sounded uninterruptedly weak soft imagine toughened yourself Natascha simulating eradicate obligation simulation extreme lay down keeping dignity (24) requirement? visualises simulate draws EAPN pertains touched earlier combined benefit tourism generating ‘competition’ perfectly Per capita ‘redistributive effort’ fully achieve goal big ask) variable: percentage non-poor threshold) range 5% Czech Republic France Hungary 7% Lithuania Romania greatest Eastern ‘being poor’ eliminate compare Spain’s France: alike inefficient delimitation begins ends remark supra brings introduction explicit fairness distributions? (‘rich’ ‘poor’) improves Belgian citizens? dual conflicting circle concerned: ‘we’ alone algorithm indicators indicator highly peculiar evaluate indicators; geared explicitly enhancing aspire improving ‘national cohesion’ considerable effects ascertained non-reducible evaluative dualism compels Historically With so-called level: supposedly safeguarding levels think Fahey 2007) improve entitled external Europe? Or externalisation attributable exemplified cited Spanish example? life’? co-authors radical binding anti-poverty standard inevitable aid responsible effectiveness antipoverty Progress instigate virtuous growing primary embrace carrying ‘moralistic’ help unilateral democracies workable direction: content designed happens thinking recipe dwindling steering undifferentiated incompatible retain (e organisation care): organise democratically outside legitimate create enhanced? ‘pact’ spirit Anton Hemerijck Bruno Palier emerged gradually changes societies ‘prepare’ transformations changing career patterns working emergence ‘repairing’ damage caused misfortune inadequacies adverse demography reform-oriented dynamic sector involves: high-quality childcare; education; paid family life; accordance expectancy; seizing opportunities presented proper market; general capacitating provision When reconnecting brought forth assessment dissociated chapter Strategy perception diversified Vleminckx 2011; 2012a 2012b) (25) 2008 learnt: robust built shaky wiped accepted sunk erroneous orientations skill formation: deal today’s soaring construction focused inadequately educational (non-)policy acknowledged underscores blame policymakers: evidently unforgivable errors stance product ECB’s Where stand seen perspective? complementary pillars: replace unique uniformly package sum parts evidence inconsistencies describe vast EU’s ‘investment’ ‘protection’ combines data: young (aged 29) PISA 15-year-olds mathematical scientific literacy reading Employment 24-to-29 year-olds suggest causal attainment (26) leaving struck correlation Greece Italy combine scores Reiterating point: significant refute) Apart exceptionally youngsters offered prospect recognises challenge: 2020 reducing early school-leavers countries) singled headline carries sufficient highest decisionmaking; unfortunately Italians Greek resolve reform token challenges austerity Figures 5a 5b perform total elderly housing allowances school childcare (0-12 years) Represented standardised median; ‘at risk poverty’ 2001 Laeken (Atkinson 2002) ‘relative transfers’ pre-transfer post-transfer divided Pre-transfer pensions) Post-transfer generations measured) overlap 28 plotted along 5a) shortened ‘poverty reduction’ caution thing (without compelled work) (27) Still applying criteria Country of: ratio’ Observed ‘post-transfer poverty’) low-paid insight succeed remedying looking hide sustain providing inactivity traps root considered comparing spending regression figures comparative ‘inefficient’ eventual outcome (28) (forthcoming) Consequently Sweden Finland overestimated ‘efficiency’ underestimated countries; significantly affect ‘inefficiency’ Deken tests technique estimations thumb: ppt confidence interval Assessed inefficient: Latvia relax criterion UK Portugal synonymous ‘policy failure’ expenditures: factors grip 29 lesser United Kingdom ‘less efficient’ policy? policy-related explanation performance South spend lot restricted non-pensions-related alleviation nonpensioners efficient Surprisingly lack striking characteristic fragmented (child childcare) (29) Both scholarly Open Coordination zoom phenomenon recurrent confirmed quality record dig deeper Poverty 2007/8 inefficiency explained policy: likewise spends (just Europe) performs selected prior downturn Strikingly 31 2004/5 summit culminated ambitious statements fight Europeans travelled satisfactory: declined (Decancq forthcoming) thresholds German… Germany…) inroads target decline standstill traditionally newly acceded Poland saw Ireland); rose Germany) ‘pan-European makes assessing disparity inegalitarian models emulation Inspired published Beer Vincent Corluy charted 2004-5 2007-8 Our involved decomposition ‘work-rich’ ‘workpoor’ households polarisation Insofar again observes adults jobless ppt; decrease amounted quasiidentical joblessness aforementioned (Corluy deferred modernisation ‘held account’ connect Two premises essential: undermine quantity serious reduce debts agenda) crucially reforms call macroeconomic funds status quo Quite genuine persist better emphasis accountability incorporate ‘accountability’ par excellence Funds devising conditionality NGOs (31) programme offers investment: full 20-20-20 energy leavers tertiary cutting million Annual Growth Survey (European drawn picture encouraging plans submitted none reached numbers living task note contradiction Politics technocracy appealing programme? aim incidental straightforward suffices reach profoundly daily lives Self-evidently balances pretend liking; majority Heidenreich Zeitlin Marlier Public Policy Management Institute Sabel ‘experimental governance’ Within expound Flemish colleague Tilburg devoted (Hendrickx 34 emphasized intrinsically narrowly importance Without resorting We charge backtracking sink bright Therefore ‘basic consensus’ tired ‘historical dominant glance bit 22: movements grace ideological strife factions hope fear accents agenda; calls capital specifically underlines ‘fairness’ regulatory adequacy acknowledgment architectural (Rycx Kampelmann 2012; Marx uniformisation margins narrow daresay twenty-two read book (1978) asserted socialists outline approval acquire (inzicht) yield (uitzicht) Holding chair acquiring merit special outlook: reassess helped fifteen condone idolatry win-win) unfounded revisionism misguided) renewed vis-à-vis 35 overriding mould K Governing Inclusion Europeanization Oxford: Oxford Press Atkinson T E Nolan (2002) Indicators O Dolls M C Neumann D Pestel N Siegloch S (2012 Fiscal Redistributive Stabilising Effects Tax-Benefit System collablecture Fong Gintis H Jayadev Pagano U Essays New Economics Redistribution Cambridge: Cambridge Measurement Distribution Supranational Entities: Case In: Jenkins Micklewright J (Eds Re-Examined (pp 62-83) Critical II regulation courage strength remedy ETUI Brief N° 4/2012 R V Mobility Trends Future? Alber Gilbert Diversity? 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