The Case for a European Social Union

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Frank Vandenbroucke The Case for a European Social Union From Muddling through to Sense of Common purpose Version the paper as submitted publication in: “The Future Welfare in Global Europe” Please refer this book chapter follows: Marin B (Ed ) 2015 Europe Ashgate: Aldershot UK Chapter 17 pp 489-520 Page 2 29 ABSTRACT We need coherent conception A would support national welfare states on systemic level some their key functions and guide substantive development – via general social standards objectives leaving ways means policy Member States basis an operational definition ‘the model’ so conceived is not only desirable but necessary To make that analysis say concept ESU already table are unchartered territory: important issues have clarified First all we must be clear about rationale motivation ESU; subject first part I discuss arguments applying specifically Eurozone (focusing ‘visible hand’ pursuing symmetric coordination wage policies) EU whole ‘balancing act’ needed between international openness pan-European solidarity implies domestic cohesion) briefly sketch notion underpinning argue idea marks return inspiration founding fathers project second links current debates ‘Social investment’ useful unifying if take it seriously public investment education should higher agenda minimum wages income protection clarification with regard methodologies tools 3 CONTENTS 4 INTRODUCTION* matter fact union In member whatever tradition or there majority core ambitions modern state: promoting prosperity sustaining cohesion protecting vulnerable individuals supporting However different tax benefit systems created varying degrees success capacity economic stabilization periods stress; these automatic stabilizers intrinsically linked integration were convinced contribute prosperous whilst concerns essentially at History has proven them wrong least until mid-2000s Yet experience crisis forces us reconsider question: how can successful flourishing states? Both left right political spectrum despite conflicting views now many crux restore growth by implementing kind monetary governance This takes position: yes essential foremost policy; short-term urgency cannot isolated from imperative develop i e basic consensus role play domain argument certainly become state itself restoring sovereignty strictly confining its option unless ready trade illusions use ‘social union’ deliberately three reasons invites propose clear-cut contrast rather vague ‘a Europe’ which often surfaces discussions Second signals go beyond conventional call dimension’ It assert no dimension today security rights mobile workers health safety workplace directives workers’ rights… constitute non-trivial acquis fifty years piecemeal progress also developed solid legal foundation enforcing non-discrimination among citizens ‘European Union’ premised denial positive although next steps build nature respond new challenge understand novelty more than adding Third emphasis coincidence State: historical legacies institutions As explained below * thank Catherine Barnard Andrew Watt Paul De Grauwe Colin Crouch Daniel Gros Kenneth Nelson Wiemer Salverda Maarten Keune Anton Hemerijck de Beer Philippe Buck Robert Holzmann Bernd two anonymous reviewers comments criticism earlier versions usual disclaimers apply 5 may require tangible those collective entities But organize interpersonal redistribution individual across borders will touch upon specific aspects rethink practical application subsidiarity principle both within fundamental organizing insist necessity convergence same harmonization More generally practice far removed top-down ‘one size fits all’ approach policy-making summarized other words countries cooperate explicit hence expression (ESU) order clarify debate might distinguish ‘thin’ version ‘thicker’ emphasizes functional corollaries argued evidence pure reasoning imply legitimacy intrinsic believe compelling appeal people variety opinions intellectually incorrect politically counterproductive present hard science: inevitably speculative deny realm choices read exercise conceptual Rather set proposals ‘think piece’ Considering very upscaling certain level: case rests mixture normative value judgments disagree empirical ‘thin version’ starting point aspiration internal most sees common aspirations ‘thicker versions’ demanding: considers ‘upward convergence’ combination growing One add ledger way g (therefore write plural: plurality options here) deployed refers example bargaining containing divergences competitiveness Eurozone; needs Obviously such scrutiny 6 drop shared leads one definitive ESU: depending judgements brought bear ambitious (‘thicker’) less (‘thin’) Nor sections section 1 zoom applies EMU: EMU policies consequences unification particular issue illustrate based Section presents whole: ‘balancing’ act introduce (thicker) link highlights underscores put discusses argues (notably : mainstreaming contractual arrangements) shows does parallel separate pillar added existing pillars; misconception avoided Proposing seem idealistic bridge too given politics linking hope show neither far-fetched nor unduly Also pointed out concluding 7 defensive ‘Maginot line’ preserve status quo; continuous process reform further THE INCOMPLETE MONETARY UNION NEED FOR SYMMETRIC AND EFFECTIVE VISIBLE HAND Mainstream explains benefits drawbacks terms trade-offs members currency area confronted trade-off symmetry flexibility Symmetry movements output prices Flexibility relates interregional labour mobility determine country’s adjustment so-called asymmetric shock Less necessitates according theory ‘optimal areas’: single greater required adaptability beneficial There moreover trade-off: possibility exists absorbing shocks fiscal transfers then reduced Over last few learned traditional textbook description insufficient Design failures Monetary made inherently unstable fragile (De 2011) insight conclusion apart banking lender resort Since was forced switch off budgetary 2014) indispensable times focus additional conclusions: visible hand pursues notably pay; limits diversity accommodated reason abstracto examine what went actually during decade Hence start minor detour literature reflects debt crises; fundamentalist view distinguished multiple-equilibria (Saka et al 2010) widening bond yields witnessed since 2010 reflect serious deterioration macroeconomic fundamentals camp who stress profligacy number emergence large accounts deficits surpluses diverging On discarding special Greece thesis much Against contends markets always function optimally therefore find themselves any possible equilibrium conditions without experiencing major change observation lends devilish effects self-fulfilling dynamics Grauwe’s fragility hypothesis Advocates do sensitivity fundamentals: they story summarizes Eurozone’s predicament design failures: “On booms busts continued occur probably intensified existence stripping away allowed liquidity crises emerge when turned into ” trends price (the crucial factor imbalance fundamentals) closely failure persistence even intensification level) Why intensify concomitant competitiveness? If invisible market main driver effect divergence threefold: ‘channels adjustment’ (Ederer Reschenhofer 2013) changes relative Many papers been published question outbreak Johnston Hancké Pant (2014) succinct survey distinguishing ‘fiscal position’ ‘competitiveness provide data position 8 economy vis-à-vis trading partners inflation rate reduces deteriorating balance; dampens activity thus inflationary pressure; classical channel’ however channels could impede counter-balancing channel ‘real interest Higher rates booming country reduce real interest-rates (since nominal determined stimulate credit-driven consumption investment: boom reinforced Ederer identify third ‘income distribution unconventional Different productivity developments result divergent patterns share rising stimulates stronger Thus deteriorate balances counteracts tends destabilize union; expect theoretical before effective stimulated demand amplified high-growth high-inflation led rapidly expanding imports high account Contrarily low-growth low-inflation economies restricted export caused substantial Wage difference Countries like Germany Finland unions conscious external constraints Italy Spain former (compared latter countries) thanks acts preventative industrial relations provides wage-setting deliver exchange consistent sustainable balance: either called ‘pattern bargaining’ lead negotiations taken exposed sector ‘peak coordination’ all-encompassing sets aims Within split Benelux Austria mechanisms degree control over lower-tier settlements Portugal mechanism produce increases maintaining (Boltho Carlin decreased significantly 2000 2007 Netherlands Sweden likely restrained private mentioned here consequently weakened explanatory evolutions period because ‘golden rule’ stabilizing profits 9 2013 p 395; see Traxler Brandl 2011 formation; 2012 problem stabilisation bargaining) Pursuing type institutional competitiveness: limit sheltered manufacturing arrangements preceded central banks held sectors check; imbalances (Johnston 2009; 99) econometric ‘rigid’ centralized coordinated regimes best weathered transition Corporatism emerges advantage ironic insistence decentralization formation official Apart recommendations framework Semester Euro Plus Pact typifies decentralization; describe purely deregulatory explicitly invited review ‘degree centralization (Barnard Baere moderation objective per se out: rule guarantees true preventing excessive (2012) guarantee unit costs: grow equal sum medium-run plus allowance authority compatible stability Such golden broader package correction eliminate instruments prevent shifting sentiments destabilizing instrument unsustainable Implementing strengthening Macroeconomic Dialogue lower indicated formula deficit surplus bring back be: each equals medium term target bank plus/minus surplus/deficit points sensible floor avoid negative (i pay cuts) risk cumulative deflation (as opposed disinflation) associated Watt’ Stability Growth levels Horn Lindner Tober Ireland had restrictive under obligation SGP At time sluggishly prevented one-sided providing stimulus (Horn 6) Koll (2013) dialogue-based 10 envisages ‘grand bargain’ whereby actors (trade employers decision makers) mutual interactions Admittedly analytical raises complex questions implementation exact measured straightforward define responsibility governments wages; ‘rule’ expected Therefore remainder somewhat looser generic sense system guidance involving specifying discussing feasibility (Thillaye 2014 operationalization proposal suggest alternative below) fixed points: guides costs competitiveness) way; guidance: respect autonomy They ‘[t]his mix stability-oriented course still largely decentralized follow relocate powers emerging place cumbersome expensive transfer offset ’ Preventative diminish whether eliminates self-evident my opinion disparities developments; pursue See instance Collignon measurement Watt’s relevant orient behavior nutshell (nominal) outcomes Clearly setting present; invest pressure authorities extremely difficult coordinate heterogeneity cycles tables following counterargument: think efforts constrain various seems reasonable ask achieved invested corporatist sort (limited) work tolerably well (private communication) Thillaye risks difficulties implies; ‘soft guidance’ requires dialogue strengthened easier limited universal exist voluntary understanding using Open Method Coordination finally simpler tackle deal MIP leaves freedom adjust (for modifying burden) cooperation 11 proposition mark departure Six-Pack Imbalances Procedure deliberate attempts strengthen makers shown exposure did discipline address organized around benchmark note ‘fixed point’ Opponents ‘symmetric normal absence credit-fuelled bubbles exceptional rounds (yielding inverse relationship unemployment captured ‘Phillips curve’) satisfactory w r t cost My Research performance nuanced open-ended ‘silver bullet’ (Brandl 2012) stand maintain count totally uncoordinated perform worse compared structures resonating length (2013): powerful power used defy logic flies against policies: witness erosion fragmentation Should abandon argument? That premature Although reverse trend disintegration (in sectoral multinational corporations role) step achieving reversal acknowledge results come (instead depicting encouraged) accepts Commission encourage facilitate wherever (cf footnote supra) proposed objection (and reference Phillips curve) formulated merits research 12 choc occurs cf important: presuppose trust; trust turn commitment our thinking well-functioning fly With mind long-term confronted: container concept: regulated temporary Kurzarbeit highly skilled versatile force… mixed preferences ‘high road’ predominantly skills organization ‘low mere deregulation sight varieties irrelevant seen functionally equivalent models long yield responsiveness upshot identified regulation equally So concern union: choice relegated mean counsel detail details parameters similar pension states’ sustainability run financial retirement ages indexed longevity interpreted good establish (nuanced realistic) plausible threaten elaborate ‘common concern’ admittedly Whether addition introduction implemented context brief 13 Neither indeed socially neutral processes painful direct cuts (rather depreciation inflation) massive migration job-seekers Fiscal aimed primarily stabilising expenditure redistributive purposes implied force participating Inevitably encompasses cognitive elements: Cognitive: convergence? Which changing longevity…? Normative: agree presupposes domains benchmarks targets organising Cognitive normative: ingredient union? actual interference sustainability: restoration (e 2014a 2014b) escape model Only playing card future BEYOND ECONOMIC SYMMETRY: CONVERGENCE IN PROSPERITY previous significant demanding features underlying (2012 5) little importance membership counts correct serve contradict upward heart described ‘convergence machine’ (Gill Raiser Convergence just pre-condition continuing 14 integration: displayed opposite scenario: increasing puzzle Elsewhere (Vandenbroucke 2013b) ‘excessive imbalances’ describes interrelated problems affect differently (thus creating ‘imbalances’) Youth child poverty examples youth inadequate human capital scale comparatively synonymous cause vicious circle underperforming care These get trapped while path credibility stake introduced sober others factors Arguments orientation prominently recently adopted Guarantee Investment Package justified calls young staying towards obviously proof eating INTEGRATION SOCIAL REGULATION EU28: ‘BALANCING ACT’ Some favour active transcend problematic well-known holds harmonisation induces downward advanced past spectre large-scale dumping never materialized enlarged blatant cases illegal working exploitation resulting interplay lacunae (2014 3) ‘convergence’ defined narrow sceptic belong entered 2000s thematic Journal Market Studies eastern enlargement (JCMS Vol 52n nr 1) employment Marelli Signorelli (2010) R&D) Europe’s global (my words) ECFIN Bucher Pichelmann 15 heterogeneous entity Fears tourism causing considerable tensions easily resolved condition accept posting fit undermine recent agreement Posting Workers Enforcement Directive supposed resolve administrative forms abuse circumvention regulations fraudulent practices temporarily posted another extent uphold free movement particularly traditionally resisted wages: considered no-go authorities; applied Laval judgment Court Justice unsustainable: predictable imposed foreign companies post create applicable respected service providers accepted positions respective roles relation nationwide local responses Denmark reaffirm action: agreements enforced action correspond directive (Blauberger Swedish Danish rules game versus Politically strengthens (to below): principles Together Viking (which establishment) merely requirement ‘predictability’ provisions Prior decisions attempted original settlement contained Treaty Rome law techniques protect (hierarchically superior) full vigour moment found ‘restriction’ breach ‘social’ interests back-foot having defend 16 due strict justification proportionality Moreover freedoms expressly excluded competence (strikes) legislative vacuum potentially struck down express aspect impossible solve problem; solutions promising Fundamentally regulatory allowing cross-border delivery services Reconciling constituted constitutes impact constellation legislation shaping neat separation ‘market issues’ belonging supranational sphere spheres inspired me 2002 ‘horizontal clause’ architecture clearer grey 2002) Lisbon Article TFEU formulates actions promotion adequate fight exclusion training health’ Will clause assessments? guiding actors? jury horizontal potential designing programmes where played Space forbids ‘welfare tourism’ comprehensive analyses Scharpf (2009) Höpner Schäfer (2012a 2012b) four Unlike authors systematically irresistibly liberalization unchecked insurmountable feasible room arena pessimistic assessment meaning Caporaso Tarrow ‘embed’ transnational Polanyi’s Court’s) legitimate acting arbiter (under conditions) understood balancing types act’; relevance broad migrant (2014): prime embedding SHARED NOTION OF SOLIDARITY foregoing discussion combine perspectives Europe: improve own lives State born; patients medical residence… Solidarity insurance balance obligations dual perspective makes multifaceted denying short depends zero-sum yet virtuous Sustaining primary revisit goals parcel 1957: simultaneous pursuit (through gradual states) Union) optimistically assumed reached together raising standard living later EU’s ‘economic territorial’ policy) Economic boost (2012a) criticize ‘embedding markets’ marking Court’s Dano allows resist ‘benefit (published November illustrates 18 convergence; redistribute fruits remaining prerogative Consecutive enlargements handle Indeed caught trap: badly becoming manage Instead INVESTMENT IMPERATIVE How enhanced? huge disparity display profiles formal educational achievement population southern EU15 low secondary simple causal attainment employment: poor record alarming OECD PISA programme focuses acquired instead tests 15-year old students today’s younger generation weak average scores Romania Bulgaria Slovakia; mediocre countries; relatively Estonia Poland Southern employment; underscore recognises challenge: 2020 reducing early school-leavers singled headline issued excellent modernization remains carries sufficient weight highest decision-making priorities: answer Real 2008 crisis) including quality simplistic spending education; disinvesting comparison misleading snap-shot Figure displays evolution percentage GDP blue bars compare 2004-2008 (deflated deflator): 25 19 five decline 18% Hungary 17% 16% 13% Latvia 11% 4% Meanwhile FIGURE 1: SPENDING ON EDUCATION RESULTS Sources: Eurostat (public government) calculations -40% -30% -20% -10% 0% 10% 20% 30% 40% vs 2004-08 (Math Science Reading) Spending % 21 increase 15% Czech Republic Slovakia Luxemburg (always comparing 2004-2008) red score mathematics science reading) cut drastically (like Greece) Bulgaria) ‘big spenders’ GDP: black dots highlight graph spectacular mid-2000s: catch up correlation (even 0 62 message performance; cutting recipe take-home dramatic effort drastic strong Northern activation capacitating (Hemerijck panacea; differ effectiveness For assistance Cash fragmented complementarity (Cantillon strategy offers interesting (Nicaise Schepers emerged gradually 1990s response societies ‘prepare’ families adapt transformations career ageing simply generating ‘repairing’ damage misfortune prevailing inadequacies easy panacea Successful well-designed ‘protecting capital’ (cash care) ‘developing launched (2013a) February childhood school lifelong learning affordable inclusion strategy) housing (fighting 22 homelessness) accessible helping live independently age Palier Pact’ ‘Package’ ‘Pact’; ‘Pact’ reciprocity needed: committed investment; simultaneously direction face supported MINIMUM WAGES INCOME PROTECTION Minimum typically layered structure inactive (non-means tested means-tested assistance) differs markedly non-means incomes comparable household Nevertheless tend ‘glass ceiling’ inactivity traps forthcoming) coverage indirectly overall discussed above ‘thick’ motivated further: decent want everywhere Whatever thinks joint statement May France ‘considering floors fair collective-bargaining Interestingly immediately consideration enhancement ‘calling encouraging worker removing obstacles improving (building EURES platform) facilitating portability mobility’ (Bundesregierung suggests natural component quickly boomerang Eurofound in-depth investigation 23 threshold 60% median affected bottom end encounter differences Simultaneously report notes minimise intra-European reduction related wages) EU28 unambiguous establishment acceptable equity low-wage earners adequately margin actively search job (OECD Employment Outlook indirect adequacy (apart wages)? fighting Anti-Poverty Network (EAPN) proposes draft stipulate ‘every shall scheme territory’ (EAPN ensure combined measures lifting persons (60% stage) fundamentally political: give substance salience ‘caring binding flexibly unison 2013a) moderate initial ambition behalf poorer Eastern rich’ (except super-rich) poor’ richer minimal upscale supra Table 11-3 SILC 2010: eight (Romania Lithuania Slovakia) 24 help opening macro-economic putting disposal generous Structural Funds foreseeable caring efficiency Introducing conditionality Fund leverage strategies bite prospect introducing realistic measure necessity) bottom-line reciprocity: enhanced decoupled vice versa TO CLARIFY POLICY METHODS TOOLS wrote (upward) toolkit direction: approaches Fernandes Maslauskaite rightly mainstreamed surveillance being frame mainstreaming; carry solution willingness making exactly done Refining Scoreboard indicators ‘auxiliary indicators’ reading nervousness top 4th quintile seven namely Luxembourg Cyprus incomes’ Schoukens Beke Smets ownership ‘scoreboard’ Next auxiliary scoreboard (a few) EPSCO Council December inform Council’s confirmation “the indicators” (European 2013: §38) especially wider range sole developments” (Ibid: §39) unsatisfactory precise Performance Monitor Protection Finally include monitoring reforms signed Memorandum Understanding deemed content strands perception involved concluded Organizing Here ‘contractual arrangements’ instrument’ raised Van den Bosch hindsight comes contracts envisage bilateral dictating ‘principal-agent incentives) alternatively commonly agreed structural run-up got stalled understandable impression reinforce controversial better wanted ‘solidarity reform’ ‘contracts’ echo funds Cohesion ‘inclusive growth’ effectively mainly concentration ESF ERDF corresponding priorities possibilities 26 overlap Contractual complementary substitute Vanhercke Rubio 2013; allow implement costly terms) CONCLUSION: FROM SENSE SURVIVAL COMMON PURPOSE complemented genuine (such stabilisation) Our tuning undifferentiated policy: retain areas organisation able assume responsibilities why confined deepen goods capital; What balanced manoeuvre opt sufficiently stringent constraining well-defined scope exploration achieve Maginot Line war: quo investments medium-term consolidation mutually supportive improved reformist gives 27 cherish credible acquis; building quintessence pact blueprint one-off revolutionary bang’ aim concept; step-by-step presented (whilst distinction arguments) developing list Depending Sections intended oriented final is: mobilize arguments? Vandevelde examination Hooghe Verhaegen ‘public good’ constituent institution preceding well-rehearsed Europe’; analytically raise possibly coordination…) Developing translating territory ’10 tough nuts crack’ writing longer guided day-to-day management 2009 overcome legacy crisis; sluggish years; mounting euroscepticism20 Moving ‘sense survival’ purpose’ 20 (2013b) who’s Scenario C subtitle 28 REFERENCES Free Movement Labour Rights: Squaring Circle? 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