Whither the E.U – A Social Project or A Failed One

In Budget Politics, Economic Planning, Economics, European Politics, Full Employment, Political Ideology, Politics of Policy, Public Policy, Public Works, Regulation, Social Democracy, Social Policy, Welfare State on August 7, 2009 at 8:12 am

Introduction:

In my previous post about the E.U elections, one thing I neglected to talk about was the worrying rise in the anti-E.U vote in some nations, witnessed by the expansion of the UKIP (U.K Independence Party) in the U.K, as well as a more substantial increase in unaligned fringe parties, such as the election of a Swedish Pirate Party member (although given that the Swedish Pirate Party is now the third-largest in Sweden, that might be an unfair label).

However, the election was hardly a smashing success for supporters of the “European project.” At a time when pro-E.U forces are still regathering from the failure of the E.U Constitution and the Lisbon Treaty is still making its way through the slow process of ratification, it doesn’t help that the E.U is widely viewed as an elite political project, rather than a mass project.

But I would argue that this doesn’t have to be the case. The E.U’s Regional Development Funds, which made an enormous difference in the economic development of countries like Spain and Ireland, are generally publicly popular. And there’s a reason for this.

A Social/Economic E.U:

While this is a guess based purely on my own intuition and some reading on the E.U, I think that one of the major reasons why the E.U is struggling as an institution in the realm of popular approval is that, by and large as an institution, the E.U helps systems not people. A lot of its work, like the elimination of trade barriers between countries, the standardization of regulations, the establishment of a common currency and central bank, is important, but the immediate benefit falls mostly to Europe’s business elite. And unfortunately, a lot of the negative side-effects, such as a rather low-growth bias perhaps driven by the overly conservative traditions of German banking circles, who dominate within the E.U Central Bank, fall harder on European workers – is it any wonder that something like the E.U’s common immigration policy can be scapegoated to take the blame for local troubles?

The solution for this, in my opinion, is to strengthen the E.U’s capacity to intervene economically and socially to the benefit of ordinary Europeans.

A Keynesian Policy For the E.U – as observers like Paul Krugman have noted, Europe’s fiscal and monetary response to the recession has been much weaker than that of the U.S or China, which moved more vigorously for counter-cyclical expansionist efforts. One way for the E.U to increase its visibility in peoples’ lives at the same time that it enhances its capacity to actually do counter-cyclical policy Europe-wide (in the event, say, of a global recession) is to establish a European Investment Reserve Fund, similar to the Swedish system, to fund local jobs programs and infrastructure/social services projects at the same time.

Liberate the ECB – similarly, I would argue, the E.U needs to begin to unhook the European Central Bank from the overly-constrictionist views of German financial circles. The Euro has been tremendously successful at achieving monetary unification, and has become a well-respected and stable currency. However, if the E.U as an economic institution cannot deliver steady economic growth, it will suffer politically – already we see the pro-E.U vote ride high in economic good times, but rebound sharply downwards when things turn bad. Ultimately, the ECB has to make maintaining and expanding employment and growth part of its mission as a central bank – otherwise, national governments will find themselves increasingly torn between EU commitments and the need to pursue national economic strategies in times of crisis.

Embracing Deficit Spending – a good example of this is the E.U’s restrictions on national budget deficits at 3% of GDP. Now, during normal economic times, this isn’t a problem. But at a time when an unusually sharp global recession has truly hammered the economies of all of Europe, these restrictions are causing nations from every kind of European nation – from long-time stalwarts like France to developing nations like Ireland and Spain to relatively newly-arrived E.U partners like Hungary, Lithuania, Malta, Poland and Romania – to chafe at the bit or be barred from pursuing a Keynesian strategy. Ultimately, what the E.U needs to do is to establish parameters that separate structural deficits run in times of economic growth and strategic deficits deliberately incurred to counter economic decline (a 5-10% GDP budget deficit over one or two years, for example should be allowed). Indeed, if nations in the E.U knew that they could find assistance from the E.U’s central authorities in times of crisis (perhaps from a central anti-recession reserve fund), it would both encourage governments to pursue Europe-wide recovery strategies and populations to see the E.U as a potential savior in times of trouble.

A European Social Welfare Equalization Fund – one of the signal accomplishments of the E.U has been the way in which its Copenhagen Requirements for membership have pushed new applicants, especially in Central and Eastern Europe, to begin moving to a common European standard for political freedoms, human rights, and democracy. Moving to a common and high standard for social welfare would only further this tradition, but also give European citizens a strong motivation for supporting and protecting the E.U’s project. Moreover, there are genuine Europe-wide phenomena that deeply affect the welfare state’s future – the increasing average age of Europeans and the likely impact on old age pensions, the impact of immigration, and in many countries, the problem of persistent high unemployment among youth. To that end, two measures would seem like a natural fit – one would be the establishment of an E.U social minimum for welfare states to live up to (which, especially in the newly-admitted states, would also serve to boost consumption and growth), and eventually an E.U-wide pool for social insurance systems to spread the costs of running the welfare state as widely as possible.

Conclusion:

As a naive American, one of the elements of the now-sidelined EU Constitution that really struck me was the formal inclusion of the Charter of Fundamental Rights. The breadth of these rights deemed common to all Europeans by virtue of their common identity was impressive: the right to “receive and impart information and ideas without interference,” the right to “right of everyone to form and to join trade unions,” the right to an education, the right to social protection, the rights of children, and the right to health care are just a few.

If the E.U is to win a permanent place in the hearts and minds of Europeans, I think it must start by making those sentiments a reality.

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