Can the EU change? Two conferences in Brussels in October 2013 on the social dimension of the EMU and European unemployment benefit scheme

18. lokakuuta 2013

A conference report from Brussels. On 2 October 2013, the Commission published a short paper setting out rough contours for deeper integration and for strengthening the EMU by creating a “social dimension”. The idea has been discussed in the past. This time it is also about responding to the Euro crisis and rising forces of nationalism. Integration needs to be given a “human face”.

Many of the ideas of the social dimension are still in the development stage. Thus, Commissioner László Andor organized a big conference in Brussels to discuss among experts and interested parties the most recent but still preliminary ideas, just a week after the Commission statement came out.On the next day (Friday 11 October), Andor also appeared in a key role, in a Bertelsmann Stiftung organized conference on automatic stabilisers and the European unemployment benefit scheme.

It is indicative of the internal constellations and power relations of the Commission that Andor gave great importance to the fact that presidents Manuel Barroso (European Commission), and Herman Van Rompuy (European Council) opened the Conference. Neither president stayed on to listen to others speak; both went to conduct more important things immediately having delivered their speeches, which were read from paper. The contents of their speeches reflected the basic lines of the new Commission paper.

The name chosen for the conference was Conference on Restoring socio-economic convergence in Europe”, indicating a relatively modest target-setting. During the morning sessions the theme was first dealt from a general point of view, and then particularly focussing on the development of social indicators. In the afternoon the overall discourse revolved progressively more and more around the positions of different interest groups and parties, including business. Well begun discussions began to atrophy. Part of the audience had anticipated this and come to listen to the morning sessions only. What can anyone answer when someone comes in and simply states that, “hey, my organization has this view”? What remains possible after the expression of one’s pre-set position is strategic bargaining at best, not any form of genuine dialogue or argumentation.

In my own presentation in the first morning panel, Istressed the fundamental contradictions of the EMU and also Commission’s proposals. Of course it is possible to try to patch up the anti-social effects of austerity and competitiveness in terms of a separate “social dimension”, but the likely effects are fairly minimal if the key politico-economic institutions and policies of the Union remain intact. In addition, the Union is only a part of the global political economy. The same discrepancies, imbalances and contradictions are repeated there on a larger scale.Far-reaching cosmopolitan changes are required.

In the same morning panel Anton Hemerijck from the University of Amsterdam and Kurt Hübner from the University of British Columbia illuminated the process of constructing the “social dimension” and its inherent lacks and omissions. They, too, were critical, though perhaps a little more restrained and ambiguous. Especially Hemerijck was quite explicit in criticizing the “open method of coordination”, through which the EU has recently attempted to create tiny changes on intergovernmental voluntary basis – especially as it has been often led and dominated by Germany during the Euro crisis.

After the panel, and then throughout the day, a number of trade unions and NGO representatives came to comment my talk and the first panel in general.Times may be changing when one hears this kind of talk in an event organized by the Commission.”

The second panel discussed the social indicators and their use as a political tool (the idea is to rank the member countries depending on how well they are doing the ‘social dimension’). Especially Italian Minister Enrico Giovannini’s presentation was insightful. He brought up potential deficiencies in the conceptual basis of social indicators and also highlighted their political nature. Giovannini argued furthermore that it is not right to focus solely on monetary income when it comes to poverty; and he also underlined the importance of including intergenerational indicators.

The afternoon sessions were generally of a more “formal” atmosphere. One of the presenters was Koos Richelle, the Director-General of Directorate-General “Employment, Social Affairs and Inclusion”. Richelle gave the impression of a rather typical Commission technocrat finding it difficult to see – at least in any critical-reflexive fashion – the impact of their own activities on European developments. The impression was strengthened in the evening when the dinner conversation turned increasingly political in a table with several people from The European Trade Union Confederation (ETUC) and the academic world. First, Richelle was telling stories and lecturing about the unreliability of corrupt EU-countries such as Greece and Romania. Gradually, the whole table began to turn against Richelle’s viewpoint, highlighting the macroeconomic consequences of EU’s own policies. These effects are quite visible in many local contexts, including in Greece and Romania, determining socio-economic opportunities and their absences. Moreover, the amounts invested in Romania, for example, are in fact modest from a wider economic perspective.

Marshall Auerback served as discussant in the penultimate panel of the afternoon. Auerback, who is from the Institute for New Economic Thinking, was able to sum up in five minutes several key issues of the Euro crisis. Auerback represents the post-Keynesian “new monetary theory”, according to which it is essential ensure adequate levels of overall demand by utilising central bank capabilities and monetary circuits.

What may deserve a special mention is the attention my brief comment on ‘the Nordic model abuse’ aroused. Some interventions glimpsed the idea that the Nordic countries – and often, especially Finland – provide a great example of how economic competitiveness and a strong social model can be combined. When I brought up how inequalities in Finland increased at a record pace in particular during the 1992-2008 period, and how competitiveness is used also in Norden to attack social solidarity, many in the audience sighed in relief (as was evident from people’s faces, and as they came later to tell).

“The Finnish model”, which, for example, Manuel Castells and Pekka Himanenhave been propagating (whom I have in turn criticized), is actively used to support neoliberalisation all over Europe and the world. It is assumed that the country may at the same time be highly competitive and a well-functioning welfare state; thus the pursuit of competitiveness is supposed to have no anti-social consequences. The features cannot be freely combined, however. Finland is a case of a process of gradual and complex transformation. Finland and other Nordic countries are part of the on-going global processes and therefore cannot provide a model about putting incompatible things together in any sustainable way. It is an optical illusion to think otherwise.

On Friday 11 October was held a closely related conference on automatic stabilizers organized by the Bertelsmann Stiftung, a foundation that has been criticized for disseminating neoliberal ideas in Germany. The second conference continued and deepened the launch of the ‘social dimension’, focusing particularly on possible automatic stabilizers and, more ambitiously, unemployment benefit scheme in the EU.

In his opening speech, Andor underlined that the debated new mechanisms do not affect the current Euro crisis, but are rather to be seen as medium-term measures. Furthermore, the Commission’s report shows that such far-reaching proposals cannot be implemented without revising the basic EU Treaty. This is the right direction; without changing the treaties it is not possible to develop the EU into a well-functioning and legitimate entity. Let us open the Pandora’s Box: as in Greek mythology, at the bottom is the spirit of hope!

Especially the debate in the first session about different models developed by researchers was good and enlightening. Models are basically of two types. The more conservative model – which seems to be favoured by many Germans – starts from the premise that we should create a fiscally neutral mechanism through which funds can be transferred each year from countries in a better economic situation to countries with temporary difficulties. However, the system will pay for itself and even out in due course, so no permanent transfers occur.

A more ambitious plan starts from the idea of developing a separate European unemployment benefit scheme. It would be a common unemployment insurance, guaranteeing a minimum income for all EU citizens and creating a bond of solidarity among them. The Common European unemployment scheme would not eliminate the national unemployment insurance systems. The national systems can continue to provide additional security for citizens.

This option would not be fiscally neutral, but rather involves shifts of income from one place and social class to another, and could also take on debt when the overall economic situation is bad. As the well-known economist and critic of mainstream economics, emeritus professor John Weeks said in an afternoon workshop discussion, fiscally neutral system would not have any significant overall economic or ethical, and political implications. I stressed the same point: if you’re going to build something good, it has to be done properly and involve transnational solidarity and real fiscal policies.

If this kind of system had been there when Finland faced a deep crisis and depression in the early 1990s, a great deal of unnecessary suffering could have been avoided. A mere automatic stabilization mechanism, or even a decent unemployment insurance scheme alone, is not sufficient however. Central Bank’s role must be changed and we also need European and global taxes and the institutional basis for proper fiscal policy.

Heikki Patomäki