If it were only a question of the UK’s withdrawal from the EU, one could take a more relaxed view of Brexit. Decision-making within the EU is likely to become easier and, despite the current hard-line approach of the British government, neither side will be interested in wreaking serious economic damage in the exit negotiations.
But it’s about so much more than that. The main reason why so many British people voted for Brexit was because they see themselves on the losing side of uncontrolled international competition. They make up the squeezed middle class, including the core demographic for trade unions and social democracy: the workers. These directed their anger outwards towards the EU and immigrants instead of looking closer to home at their fellow countrymen complicit in worsening the social divide. This is no longer just a British phenomenon, however. In the recent Austrian Presidential elections, nearly 80% of workers voted for the country’s nationalist Freedom Party (FPÖ).
What is happening here is exactly what Mario Monti had feared when in a moment of enlightment he reported to the European Commission on the revival of the single market on 9 May 2010. This analysis was influenced at the time by factors including the judgements handed down by the European Court of Justice (ECJ) on the matter of Viking, Laval, Rüffert and Commission versus Luxembourg. Here, the ECJ ruled that freedom of competition took precedence over fundamental social rights. Following this decision, all national social standards, such as the right to strike, collective agreements or minimum wages, were not allowed to interfere “excessively” with the freedom of competition. This subordination of social rights is dangerous, leading to what Monti described as “the potential to alienate from the single market and the EU a segment of public opinion, ‘workers’ movements and trade unions, which has been over time a key supporter of economic integration”
Unfortunately, this potential alienation has now become reality. The decision to exit the EU also symbolises revolt against deregulated markets and growing social inequality. People have now come to realise the implausibility of the inflationary promises made regarding the benefits of the single market, the privatisation of public services and deregulation of product markets. Does anyone still remember the 1988 Cecchini report? Cecchini promised the single market would create an extra two million new jobs – that we are still waiting for – as well as 1m new jobs to come from deregulating the telecommunications market.
Most alarmingly, the welfare state continues to be dismantled without opposition. In Southern Europe for example, the EU and IMF are intervening to change key labour rights standards which the EU once formally signed up to through the Social Charter. The subordination of social protection standards was once again made policy through the CETA trade agreement with Canada. The agreement states that public policy protections must not constitute, as they call it, “disguised restriction on international trade”.
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For a long time, many critics have restrained their criticism of EU free market policies for fear of being considered anti-European or outright xenophobic. However, the lack of open criticism of these policies proved a huge mistake, as it meant that right-wing populists stepped up to fill the gap. If the European project reasserted its credibility by strengthening its social foundations, then EU critics would have no basis for their arguments.
The rapid growth of a European federal state is indeed an attractive prospect, but there is unlikely to be a general consensus behind it for the foreseeable future. It is more realistic now to envision a combination of ‘lesser’ and ‘greater’ Europe. ‘Less Europe’ will put an end to ‘negative integration’ (Fritz Scharpf) implemented via EU interventions in national protective rights. Basic social rights must once again take priority over competition rules. If member states are once again free to organize their social protection systems by themselves, foreign companies will not be unduly disadvantaged. Ultimately, all companies operating in a country must adhere to the same rules.
It is not enough for a future Europe just to protect people/societies from government cuts to the welfare state; far more importantly, our own concrete ideas and suggestions for “positive integration” going forward are essential. This vision must include programmes that deal convincingly with the high rate of unemployment – particularly the incredibly high youth unemployment levels in many EU countries – as well as a plan to tackle inequality.
An abrupt end to austerity politics brings with it short-term employment benefits. Underfinanced ‘placebo’ programmes, such as the Juncker investment plan, only serve to undermine the EU’s credibility even further. The promise that a €21 billion EU investment will achieve a leverage effect worth €315bn is bordering on fantasy. There is certainly no lack of alternative suggestions for increasing investment in Germany and supporting fully funded European investment programmes; just look at the suggestion by the Confederation of German Trade Unions (DGB) to have a European-style Marshall Plan, for example.
Plans for the further development of the European social model are a different matter altogether. Proposals for the long overdue advancement of EU directives, such as those on the protection of precarious employees, on working time or on European works councils, have not even been put on the table for fear of changes for the worse, to say nothing of new, certainly not yet fully thought-out ideas on a European unemployment insurance scheme, for example. The trade union movement in Europe is embroiled in defensive actions at national level and no longer has any convincing plans for European reform. This absence of a programme is alarming and must be remedied as a matter of urgency, for without a persuasive agenda for reform the distribution of power cannot be changed.
Gerhard Bosch is professor at the Institute Work and Skills (IAQ) at the University Duisburg-Essen. His main research topics are wages, working time, welfare states and industrial relations.