On 17 November, A European Pillar of Social Rights was declared in Gothenburg by the European Parliament, Council and Commission. This Pillar (what a name) indicates that there is now a shift away from austerity, back towards Social Europe. It is an open admission by the European elite that social Europe is being neglected and so is welcome. Without it, the drift to the far Right and Euosceptimism will grow, because the Post War Social Contract is being deliberately dismantled. This initiative will be examined in this blog and Eurofound, the EU body which studies how we work and live in Europe will be briefly examined in the following blog.
The Post-War Social Contract
The Post-War Social Contract is under siege with the emergence of a more savage economic system from 1970 called Neo-Liberalism by some, Naked Capitalism by others or simply our economic system by many. There are of course varieties of Capitalism and Europe has one of the best, with the Nordics leading within and the Anglos lagging.
The Post-War Social Contract (PWSC) – the understanding between capital and labour that incomes would be shared a bit more fairly did work until the new type of economics emerged under Thatcher and Reagan in the 1970s. The PWSC was not perfect but under it, each generation saw and expected to have a slightly higher living standard than their parents.
That Post War Consensus is over for the great majority of people. Inequality is rising. The Owners of capital have decided, deliberately or not, that they will no longer share national income, as they did in the past. The Soviet tanks and revolutionary parties in Europe are gone and social democracy is in disarray, having been taken over by neo-liberal economics. So what is to stop them taking all?
The recent Credit Suisse report said that the top 1% of the world’s population own the same value of assets as the bottom 50%.
Why should owners of capital share if they can take all? The answer is that Capital should share because this kind of world cannot survive. Its not just about morality and fairness or even about preventing the breakdown of social cohesion - gangs of youths of no property marauding cities and countrysides in search of assets and action – but the need to sustain economic demand through more equitable sharing of incomes.
Falling economic demand has meant that growth is less than it could be. It is falling because the top 1% or 5% cannot possibly spend or even invest the vast amount of wealth they now own and control. Their own greed has weakened economies on which we all, including the owners of capital, depend.
Today weakened unions demand decent shares as in the past but the eviscerated laws on collective bargaining means they can be and are safely ignored. With demand falling, so economic growth is slowing and is below capacity. There is some growth in Europe but it is less than in the past when the Social Compact ensured greater redistribution meant that there was more national income available to re-cycle. Wages are falling and weak demand means less investment, so companies are buying back their own shares. This seemed to be a temporary act but it is entrenched today.
The EU Social Summit 2017
With the rise of right-wing anti-European populism, the leaders in the EU Commisison appear to waking up to the need to redress the gross imbalance between capital and labour, demonstrated vividly by the sharp decline in labour’s share of national income in so many (but not all) countires over 30 years. So they organsied a Social Summit in Gothenburg on 17 November 2017, which focused on promoting fair jobs and growth.
Heads of state, the social partners and other key players met to work together on a more social Europe and to promote fair jobs and growth. They agreed that there should be effective and sustainable social protection systems and the promotion of social dialogue at all levels were at the heart of the summit agenda. The agreement says the of the social partners shall have the right to be consulted within national practice, but, unsuprisingly, the right to negotiate collectively was not enshrined. That will take another crisis to effect, if at all. They agreed on 20 principles here. Whether this will be tranformed into action which strenghtens trade unions and collective bargaining rights remains to be seen. Eurofound will help us monitor their commitment to social progress.
End of Liberal Europe?
Indeed the EU is pouring money into certain member states whose leaders sneer at European liberal insitutions and ideas like the separation of state and the law, and a free press. Victor Orban in Hungary has openly attacked liberal democracy and will not accept any refugees. The right-wing Law and Justice Party ruling in Poland is underming its own courts’ independence.
Many are now asking if the admittance of the 10 Eastern Europan countriees into the Union was a mistake, especially as some now reject much of what Europe stands for. Their votes have swung the EU to the Right. However the alternative would be worse, others argue, if they had then strayed into Putin’s arms.
There is an issue however: Poland is getting 10% of the EU budget. Why are we building their roads. grids, trams, schools, R&D in aviation and infrastructure when they are rejecting commonly agreed European values? Poland has been allocated a massive €86 billion from European Funds over the period 2014-2020. With a national contribution of €18.8 billion, Poland has a total budget of €104.8 billion to be invested in various areas. There is a strong case to reduce of even cut-off this funding, unless its government behaves like a European citizen.
In conclusion, the rise of the right and the shift to autocracy and against the European Union in some Eastern EU states was a wake up call to the EU elite. They have positively responded at last by mainstreaming the Social Pillar, but it remains to be seen if the EU and member states continue to undermine Social Europe with other actions. Words are not enough. These actions include the continuing tax wars (tax “competition”) between member states, the eviseration of progressive taxes in favour of consumption taxes, cutting employers’ social contributions, and what they call product and labour market reform (in English - making it easier to reduce workers’ conditions and pay and to fire them) and lack of investment, are undermining social cohesion by redistributing incomes upwards.. There must be greater real progress in all areas of policy in Europe and the member states, if Social Europe is to be maintained.
Paul Sweeney is former Chief Economist of the Irish Congress of Trade Unions. He is a member of the Economic Committee of the ETUC and chair of TASC’s Economists’ Network. He was a President of the Statistical and Social Enquiry Society of Ireland, a member of the National Competitiveness Council of Ireland, the National Statistics Board, the ESB, TUAC, (advisor to OECD) and several other bodies. He has written three books on the Irish economy and two on public enterprise, including The Celtic Tiger; Ireland’s Economic Miracle Explained and Selling Out: Privatisation in Ireland, chapters in other books and many articles on economics.