Amidst geopolitical shifts, the notion that Europe must choose between security and social support is not only politically dangerous but also economically unsound.
President Trump’s reshaping of the United States’ global role has made it undeniably clear that European societies must strengthen their collective defences to deter potential aggressors. While the prospect of increased military spending is hardly welcomed by most Europeans, it is widely seen as an inevitable and indeed necessary step to safeguard fundamental values: democracy, liberties, and the rule of law.
However, the implications for another deeply cherished European principle, the welfare state, are less clear. A growing sentiment, particularly in some circles, suggests that greater investment in defence will inevitably necessitate cuts to public spending on vital services such as schools, hospitals, and pensions.
Those who subscribe to this view are divided into two opposing camps. On one side are those who prioritise social protection over military expenditure. Some adopt a pacifist stance, expressing concerns that military escalation could lead to armed conflict. Yet, they often struggle to provide a convincing alternative for self-protection should Europe face adversaries less inclined towards peace than they might assume. Others openly admire President Putin, opportunistically aligning themselves with pacifists by professing a newfound support for the welfare state and “peace”.
Conversely, the other side argues for increased defence spending, advocating that it should be financed by reducing expenditure on social protection. Most present cuts to the welfare budget as an unfortunate but unavoidable consequence of the need for fiscal space. Some, however, appear to view these cuts as desirable in themselves, a long-overdue correction to what they perceive as an excessively generous welfare state that has weakened European societies. They would welcome a reduction in its size, aiming to end what they see as European exceptionalism and make Europe more akin to the United States.
Despite their diametrically opposed conclusions, neither side seems to question the fundamental dilemma of welfare versus defence. Both take it for granted that a choice between the two is inescapable. We disagree. Framing welfare against defence is a politically damaging proposition. It is easy to see how this could be exploited by anti-EU populists and Europe’s adversaries. President Putin, undoubtedly, would welcome such a division. But the entire narrative that Europe faces a supposedly unavoidable choice between protecting its social model and bolstering its defences is not only politically unfortunate; it is empirically unfounded.
In our book, published last year, we contend that the welfare state is an integral component of what makes Europe such an attractive place to work, live, raise a family, pursue happiness, and enjoy freedom. These are all values worth defending. Therefore, even if the immediate need to deter aggression and protect our freedoms temporarily limits the fiscal space available for ambitious social investment reforms, in the medium to longer term, the defence versus welfare trade-off ceases to apply. Far from depleting scarce resources that could be better used to address more pressing needs, a well-funded welfare state makes a crucial contribution to the resilience of liberal democracies.
Europe has navigated a challenging decade and a half. The relentless pursuit of austerity measures meant that the recovery from the global financial crisis was slower and less decisive than in the United States under President Obama. Then, of course, came the Covid-19 pandemic. Nevertheless, despite the frequent talk of European stagnation in stark contrast to American dynamism, the employment rate in the European Union stands merely one percent lower than in the United States. In Northern Europe, where the welfare state is more robust – and, admittedly, more expensive – the employment rate is significantly higher than the US average. This hardly suggests that high social spending is an obstacle to growth.
What admirers of the allegedly “cruel-to-be-kind” market society across the Atlantic conveniently overlook is the significant waste of human potential resulting from a failure to protect and support vulnerable groups. In Europe, the non-employed tend to be individuals seeking work, early retirees, and parents on parental leave. A disproportionate number of their counterparts in the United States are incarcerated, suffer from chronic illnesses, or are battling addiction to opioids and other harmful substances. In Europe, factory workers who lose their jobs due to automation or increased competition from cheaper imports will receive not only compensation but also retraining opportunities, providing them with a genuine chance to find better employment. In the United States, these workers would be fortunate to find a job in an Amazon warehouse or a grocery shop; many simply give up, leaving the workforce and becoming inactive.
This squandering of human capital, a major policy failure even in the best of times, risks becoming a fatal flaw in an era defined by immense challenges – from managing ageing populations and climate change to adapting to automation and artificial intelligence, and deterring aggression. In this context, maximising citizen employment and productivity becomes an absolute necessity. And how can we achieve this without effective lifelong learning, universal healthcare, and strong social safety nets – what we term “social investment”?
Critics fail to recognise that social spending is not solely about redistribution; it is also about preventing the loss of human capital, investing in the health and skills of both current and future workers. It is about addressing the “motherhood penalty”, ensuring that all mothers who wish to work are able to do so.
Furthermore, even redistribution, when implemented effectively, can enhance economic performance by ensuring that no one’s potential is wasted, by breaking the cycle of intergenerational poverty and deprivation, and by alleviating the constraints that force the poor to make detrimental decisions. Poverty relief is not just a hallmark of a caring society, something Europeans rightly take pride in; it also makes sound economic sense.
These are extraordinary times, which is precisely why we must remain resolute. Europe possesses significant strengths, and a robust and cherished welfare state that invests in human capital is one of them. Depriving it of tax revenue would be a gift to Europe’s enemies. Instead, we should maintain (and modernise) social assistance and pension benefits, and invest generously in childcare, parental leave, lifelong learning, health, and long-term care.
Those who believe that now is not the time to discuss social investment should reconsider. After all, the aftermath of the Second Battle of El Alamein (October-November 1942), when the outcome of World War II was still uncertain, hardly seemed like an opportune moment to discuss building a welfare state. Yet, that is precisely what British troops in North Africa and elsewhere did, at numerous improvised conferences just a few kilometres from the front lines. The Beveridge Report, fresh from the Ministry of Information press, was meticulously presented by officers and eagerly read by soldiers. Sceptics at the War Office and elsewhere had to acknowledge that fostering the realistic expectation of a fairer post-war social order actually strengthened the war effort, rather than detracting from it.
Sceptics should take note.
Anton Hemerijck is Professor of Political Science and Sociology at the European University Institute. He researches and publishes on social policy, social investment and the welfare state and is a frequent adviser to the European Commission.
Manos Matsaganis is Professor of Public Finance at Polytechnic University of Milan, and Head of the Greek & European Economy Programme at the Hellenic Foundation for European & Foreign Policy ELIAMEP in Athens.