Eu at Fifty- continuity and change, a Non-Paper: Birthdays in Collective Lives George Ross

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EU at Fifty- continuity and change, a Non-Paper: Birthdays in Collective Lives

George Ross

Confidential preface.

This is obviously not a research report. And equally obviously, it is insufficiently argued and documented as it stands. The main reason for these egregious violations of conference etiquette is that the author has other goals in writing it this way than satisfying conference etiquette. Criticism is, of course, welcome. Welcome as well will be suggestions about topics and areas not yet covered. The paper is obviously an initially memo for another project. What, in large terms, is missing and needs inclusion? Thanks, GR

Feting a fiftieth birthday is a serious challenge for human beings. At this point youthful enthusiasm and energy have given way to a life lived into its real shapes. Such shapes reflect basic choices about investing in certain things and not others and to becoming one kind of person rather than another. The fete itself, when there is one, usually prompts reflection about the meanings of the past, the intelligence and rectitude of choices made, and, often, the limited tractability of the real world. In the best of circumstances, the reflective cinquantenaire will have insight and wisdom about all this and more. In the cold light of experience, it should be clear what equilibria have been struck, whether they are noble or expedient, what has been achieved, and what is unlikely to be so. At the same time, the fêtard will also be aware that although time is limited, there remain at least a few years to refine and correct the choices made and trajectories already set and to better understand why they occurred where they are going. Above all, a fiftieth is one moment, if there ever is to be such a moment, when subtlety, complexity, reflexiveness based upon facts, and self-evaluative capacities should have supplanted impulsiveness, ideology, and passion, for better or for worse.

The European Union is not an ordinary human being. With the anniversary of the Rome Treaties in 2007 the EU is about to turn fifty, however. It is absurd, of course, to suggest that there might be an analogy between the biography of a human individual human and that of a huge and complicated set of organizations like the European Union. Moreover, if the three score and ten years allotted to humans is what prompt reflexiveness at fifty, the lives of things like the EU have no such limit. It may still be useful for leaders, citizens, and observers of the EU to observe the rules of 50th birthday by simultaneously feting and stepping back to reflect, the way individuals might. The event will certainly prompt a flood of conferences, academic books, speeches by leaders and similar documents. The non-paper that follows is meant only to step back from the narrow, quotidian, sometimes polemical, and often hyperbolic tone that much of this flood is certain to have in an effort to delineate a few of the most important central “life choices” that the Union has made in its first half-century, the constraining equilibria that these choices have created, and the problems and prospects that these equilibria seem to dictate.

1. Social Europe

“Social Europe” is a theme that must be at the center of any “EU at Fifty” reflections. There is incessant discussion about social Europe, from which it should be evident that a clear and fundamental equilibrium has indeed been struck. Starkly put, as it was at birth, the EU at 50 is overwhelmingly a market-economic affair, . With notable but limited exceptions the EU’s evolving treaty-constitution has left “social model” matters (employment relations and welfare state programs) in the hands of national polities. This basic division of labor, while not the end of the story of social Europe, has structured the past and will continue into any foreseeable future (Scharpf 2005 elaborates this as clearly as anyone). From this it follows that, in general, the EU’s influence in the realms of employment relations and welfare state matters has been overwhelmingly indirect, and often indirectly overwhelming.

The Union has had broad scope for legislating and regulating market integration. Indeed, this has been its raison d’être. On the other hand, it has faced stringent treaty limits on legislating and regulating in social model areas, whatever its leaders might have wanted to do at any given point. It can act directly, to a degree, in equal opportunities, in certain specific market matters such as freedom of movement, in health and safety regulation deemed a market matter, and, following the Maastricht Social Chapter, on a short list of employment relations issues. This historic division of labor has created an asymmetric equilibrium, however, and, more importantly, its asymmetry has increased over time. EU-directed market integration has always had powerful implications for the conditions within which nationally-regulated social models have operated. The more the Union has promote market integration, the more its member states have had to function in a trasnnationally opening market space, the greater constraints have become on national capacities to protect dimensions of their social models. It would be only slightly hyperbolic, therefore, to assert the true story of Social Europe is to be found in the Union’s efforts to reshape the European market. If EU social policy is primarily what occurs indirectly through market changes, the focusing only on what the EU actually does in “social” areas is really focusing on epiphenomena, however interesting they may be. What is more important, at least initially, it understanding the ways in which market opening have affected national social models. The ways of social European indirection have varied historically, however.

Until the crises of the 1970s the institutions and purposes of the EU were meant to open up trade among the previously protected economies of its member states.1 European integration began exactly when its member states were consolidating national social models and managing their national economies in part to facilitate this consolidation. It would have been inconceivable at this moment for member state governments to have allowed significant European interference in these tasks, for they lay at the center of national democratic lives. In face, in these early years the amount of indirect spillover from European-level market opening into national social models was minimal. In the most recent period, roughly from the early 1980s onward, reshaping the market has taken on different and more energetic dimensions and the indirect consequences of this for member state social models has been much larger.

The ‘1992’ Years: Direct Action For a Real Social Europe?

In the first part of this recent period the institutionalization of EMS and the Single Market Program were the major vehicles of social European indirection. Among its effects, EMS was central in shifting the direction of French policies in the early Mitterrand era from radical dirigiste nationalism towards the renewal of European integration. The consequences were French competitive deflation, with huge implications for French social arrangements and subsequently, for those in Spain and other places, whose governments emulated policies chosen in France. The French policy shift, which most observers now believe to have been inevitable, but which most certainly was not, changed the entire course of European market integration and social policy. Without the French shift and Mitterrand’s commitment to a European strategy to replace his administration’s earlier “social democracy in one country” outlook, there would have been no “1992” episode and today’s EU would be completely different.

The effects of the “1992” years were complicated. Indirect change spilling over from the Single Market program did not happen until the 1990s, by which point the political environment for European integration had changed. What did happen with great intensity in the Delors-1002 years, however, was discussion about and legislation for the Single Market, nourishing considerable anxiety about possible “social dumping” and social policy races to the bottom that could follow member states choosing to undercut the social policy standards of others to gain market advantages. In this atmosphere, and hopeful of obtaining labor support for the new integration thrust, the Commission and Parliament promoted new EU-level social policy that might help to parry anticipated indirect effects of the Single Market. Among the many dimensions of this were Single Market legislation on workplace health and safety justified on the grounds that national health and safety programs could be used as non-tariff barriers to trade, promotion of EU-level social dialogue, the 1989 Social Charter, and the Commission-originated Social Protocol to the Maastricht Treaty that provided strong incentives to EU level collectively-bargained social legislation.2

The Single Market and EMU: Indirectly overwhelming and overwhelmingly indirect

The second part of the recent period, roughly from the start of movement toward EMU to the present, looks very different. At some point soon after Maastricht the Commission lost both its desire and its resources for pursuing a direct “Social Europe” trajectory.3 There were many reasons for this. The Delors Commission had pushed too hard, in too many different areas, to make new integration go as far as possible, with the Maastricht negotiations providing a “red line” stimulating member state resistance. Some member states, not least Germany, objected to EU-level social legislation and meddling in national social affairs (particularly about poverty programs). The Union was enlarging – in 1995 to include Sweden, Austria, and Finland, with a large pack of CEECs lining up in the background - and as the union enlarged so did the diversity of social models among its member states, making one-size-fits-all social regulation less and less plausible. Finally, exuberance about the Single Market gave way to anxiety about high unemployment and slowing growth. Attention at European level thus turned toward finding ways to enhance European international competitiveness rather than worrying about social dumping.

Staged movement to EMU in an atmosphere of relative EU economic stagnation – pervasive except for a few years since the early 1990s – has made a huge difference to social Europe. In the background was the Single Market Program promoting a genuine European market from separate political economies tied by common trade and tariff rules that had ceased being talk to become new rules. These rules were felt seriously, and not always happily, by citizens and companies. Member states were already losing much of their leverage over market regulation when EMU, designed to make them lose even more in the critical area of monetary policy, began to pinch. Given the stringent Maastricht convergence criteria (subsequently inscribed in the Stability and Growth Pact) and the ECB’s strict price stability orientation after EMU came into being in 1999, EMU also placed enormous new limits on member states freedom in macroeconomic policy areas. EMU was explicitly designed to oblige Euro-zone members themselves to allocate adjustment costs for shifts in competitiveness via domestic methods. There were really but two ways of allocating these costs, either by shifting wage levels (down) or reining in national budgets themselves dominated by indirect labor costs from social protection systems.

Today: Asymmetrical Equilibrium and Social Europe

The new social European equilibrium between European level market regulation situation and the maintenance of national social models is dramatic. EU member states retain their legal prerogatives over employment relations and social policy issues. Yet indirect market pressures on these national prerogatives and their use have become overwhelming. This is true partly because of the progressive realization of the Single Market. Beyond this, globalization effects that were unforeseeable in the 1980s when the Single Market and monetary unification trajectories started, have intensified the onslaught of invasive markets on national political economies. In particular, far Eastern manufacturing successes plus the new exit prospects for corporate delocalization presented by the end of the Cold War in the light of EU enlargement to new Central and East European countries have made real differences. And, last but not least, EMU put Euro-zone members in monetary and macroeconomic policy straitjackets at the same time that their national employment and social policy systems faced major squeezes.

Differences and disagreement among member states about social issues plus the essential fact that employment and social policy issues remained the heart of domestic democratic politics meant that the new equilibrium puzzled actors at both national and European level. At national level, anxiety about employment, sustaining employment relations systems and protecting social protection ran extremely high. However, given EMU there was little that most governments could do but await a return to growth that seemed very reluctant to come, promote unpopular and electorally costly domestic reforms, or, in extremis, to defy SGP constraints. None of these strategies have been good for keeping governments in power. One result has been rapid turnover in the partisan balance of government power in many places. The situation also led politicians to promise repeatedly more than they could deliver, making them constantly vulnerable and feeding the deterioration of the legitimacy of democratic politics more generally.

The major Euro-level response was the tapid, almost promiscuous, contagiong of the “open method of coordination” (OMC). Because “hard” approaches were no longer feasible in social European policy areas, there was a shift toward attempts to promote social model coordination and harmonization via “soft” methods. OMC was meant to be a way of promoting member state convergence on desirable general policy goals pre-established at European level through decentralized processes that would develop common vocabularies, indicators, objectives, and, eventually, results. OMC processes and their achievements would be compared cross-nationally through a “peer review” system that would allow European institutions eventually to praise the better participants and shame the laggards. The ultimate product, should all of this work well, would be parallel national-level decisions, each fitted to particular national circumstances, providing the functional equivalent of Euro-harmonization.

OMC began as part of the Maastricht Treaty’s approach to coordinating macro-economic policies among member states about to face imperatively coordinated monetary policies from EMU in exercises to prepare Broad Economic Policy Guidelines (Hodson and Meier 2001). It was then advanced in social policy areas by the 1993 Delors White Paper on Growth, Employment and Competitiveness (EU Commission 1993). But it really came of age in new European Employment Strategy in 1997, a product of the Amsterdam Treaty, high anxiety about the EU’s unemployment problem and contemporaneous shift Leftwards in national governments. Since then the EES has become the model OMC process.4 OMC, in different permutations and combinations, has also spread into other areas such as social exclusion (poverty) and pensions, as well as becoming a central tool in the pursuit of Lisbon Agenda general economic goals (Rodrigues ).

This dynamic picture of much stronger indirect (or exogenous) market pressures on member state social models and policy prerogatives, member states deprived of important coping mechanisms in monetary and macroeconomic policy, and wholesale adoption of “soft” approaches through decentralized OMC processes, is incomplete. If OMC has become the great hope of advocates for more social Europe, what have been its consequences? Here, alas, we are left largely in the realm of informed and uninformed speculation. All OMC exercises are recent, making conclusions difficult. A connected problem is that available information and the purposes of those who have gathered it are inadequate and suspect.

Most is known about the EES (Zeitlin and Pochet 2005). This is because many academics have spent a time investigating and evaluating the EES process, in part to see whether what has happened is what was supposed to happened. The available record is mixed. In part this is because the EES was initiated when the Council was dominated by Left-Center governments, then restructured when the balance had shifted Rightwards, in line with a shift in political focus from social democratic to neo-liberal reformism from a focus on Scandinavian-style activation toward Anglo-Saxon “workfare” (Manow et al 2004). Political goals aside, Commission and Council have learned their roles, but what has happened in member states is more complicated (Barbier 2004). In some countries where the OMC game has been played well, this is mainly because something like OMC predated EES in national policy practices. In others there are participation gaps, significant bureaucratic barriers, and sometimes even ignorance of the EES and OMC.5 This means that even if OMC-NAPS (National Action Programs) are dutifully churned out annually, there may be massive procedural non-compliance. Evaluating EES process development has also been complicated by a rather biases present in the academic community. For reasons beyond our scope, OMC has been received with great enthusiasm by some who see it less as an instrument that could serve EU’s needs for employment policy convergence and lucidity and rather more as a possible answer to planetary needs for new democratic participation. The EES OMC will almost certainly not provide this answer, but belief that it might makes at least some analysts overoptimistic in their assessments (Zeitlin, Trubek, Sabel). Problems of a different order are found in the academic social policy community where deep commitment to reforming post-war welfare states in threatening new circumstances leads to overinvestment in OMC, restraint of criticism, and/or denunciation of neo-liberalism. It may also be the case that the flattery and funding given to this community by the Commission lessens critical distance, not to speak of increasing willingness to accept the substantive interpretations of the Commission. In short, there is a lot of confusion about the EES OMC process, and there is no reason to think that similar confusion will not be present in discussions of the many other OMC processes.

There is also confusion about results (Barbier 2004; Pochet 2004). The EES, on its own, was never likely to produce far-reaching changes in terms of increased employment, mainly because EMU has deprived governments of the demand-side policy leverage needed to promote significant job-creation. The EES has focused primarily on supply-side approaches, in particular promoting new active labor market policies particular and inciting “employability.” In these areas there have been changes in member state approaches, although they vary tremendously from country to country. How much these changes have to do with the EES OMC is a central question, however. The countries that are the best practitioners of active labor market policies are Sweden and Denmark, both long-time adepts of such policies who played important roles in bringing their use and techniques to the attention of other EU member states. Moreover, the logic of longer-term changes in different countries probably override EES influences – Barbier (2004, 430-1) illustrates this by contrasting completely French and UK approaches to reforming “tax-benefit” systems. “Employability” policies involving building new work-seeking incentives into unemployment insurance programs that had been designed for full employment conditions have been widely implemented, but once again coming from much further afar historically than the EES and demonstrating deep national differences that belie any “convergence” goals. While the EES OMC may have helped in this contagion, it is quite likely that budgetary pressures on social spending from EMU have helped a great deal more.

Barbier notes that “the European Commission’s communication on the assess of the first five years of the EES (CEC 2002) actually displayed an overall lack of evaluation findings of policy outcomes causally linked to the EES.” This is indeed an astounding result! It may be that announcing the larger results of the EES OMC, if any, will be a job for economic historians. Processual, political, and substantive policy differences among member states are so vast, as are the possible reasons why any member state might choose, or feel obliged, to change the labor market and welfare state areas covered by the EES, that causality is obscured. It is reasonable to conclude, however, that EES OMC is not a magic bullet that will solve the EU’s very large employment problems, whatever else is may achieve either procedurally or substantively. This is certainly one of the underlying conclusions of the two Kok Reports (Kok et al 2003, 2004). Other OMCs have not existed long enough to assess. A priori, the “social exclusion” OMC, built on slightly different lines than EES OMC, might make a clearer difference. Poverty policy is a narrower area than employment and different EU member states have for some time been engaged in serious reforms, both on policy and cost problems – here the French RMI and CSG have been models. Substantial poverty pockets and “social exclusion” are also relatively new issues, since prior to the 1980s near-to-full employment provided wage incomes and kept most individuals tied to markets. In general terms, the new poverty is therefore a subset of larger employment matter. Exchange about best practices of the kind OMC can provide may well encourage better fine-tuning. There is some possibility that the EES and social exclusion OMCs, to the degree to which they are effective, will work at cross purposes, however. In the absence of much higher levels of employment, which probably depend upon factors beyond the scope of the EES OMC, the “workfare” – or, to be gentler, active labor market - policies promoted widely by the EES OMC (measures such as shortening the time period when high replacement rate unemployment insurance benefits are received) are likely to create more “new poor” who then burden poverty policy programs and are menaced by social exclusion. Benchmarking and exchanging best practices about pensions is undoubtedly useful, but changing public pension programs is such an object of controversy across the Union that the reforms that occur are bound to be the product of national politics. As for the Lisbon Agenda OMCs, as of writing the Lisbon Agenda is an embarrassing failure.

Our first claim, therefore, emerges relatively unscathed from the various OMC exercises. The main EU-level influences in the area of social Europe are market-reshaping and liberalizing initiatives like the Single Market, soon to be reinformed by more liberalization in the general services and financial markets areas, and EMU, which places all responsibilities for adjusting to changing competitive circumstances on member state while simultaneously constraining their adjustment capacities. The exact weighting between European policy effects such as these and more general, and global, movements to more open markets is impossible to assess. What we know is that Euro-level policy pressures move in the same directions as those of globalization. “Social Europe” is thus Euro-level agencies and policies that promote increased market pressure on member state capacities in the social model areas which remain their prerogatives. Besieged by such market pressure, low growth and exiguous public finances, member states have much narrower margins for maneuver than they had earlier. The social Europe equilibrium is thus assymetrical, and growing more so, with member state social models on the defensive. In the middle is a spectre, the OMC. Will it make any difference? What difference will it make? Whose side is it on?

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