Draghi report: a social agenda is lacking

The report on European ‘competitiveness’ is good on industrial strategy but poor from a social perspective.

This week, the former Italian prime minister Mario Draghi published his long-awaited report on the future of Europe’s ‘competitiveness’. In a grim period for many European industrial workers, assertive action is needed to support Europe’s industrial fabric, invest in it massively and foster an ambitious social agenda—with quality employment at its core—to ensure a fair, green and digital transition.

Draghi’s report includes some convincing and powerful proposals. Unfortunately, it however overlooks important features of the European model, such as social dialogue and collective bargaining.

Industrial strategy

The report is based on a thorough analysis of the European economy in a global perspective. Using an impressive collection of data, Draghi offers a comprehensive approach to industrial strategy, with assessments and proposals covering innovation, skills, trade, competition and energy markets.

Starting the new European policy cycle with a report stressing that the future of industry is the biggest test the European Union faces is very welcome—industriAll Europe, the trade-union federation representing industrial workers, has been arguing this since the start of the energy crisis in 2021. And in challenging such EU sacred cows as competition law, trade policy and the approach to energy markets, Draghi shows the strategic priority of keeping a strong industrial base.

The report analyses ten sectors in depth, highlighting the challenges they face. Addressing traditional industries—such as the extractive, energy-intensive and foundation industries—alongside cutting-edge sectors is a big plus. Trade unions have insisted for years that they are complementary and interrelated: Europe cannot be an industrial power if it focuses only on ‘sexy’ clean technology and neglects basic industries crucial to the latter’s supply chains. And Draghi’s proposal to decouple electricity from gas prices is the kind of bold measure energy-intensive industries, facing high electricity prices, ugently need.

Social agenda

If the report is strong from an industrial-strategy point of view, its Achilles heel is however its failure to recognise the intrinsic link to a genuine EU social agenda. While it affirms that competitiveness must not be predicated on reducing labour costs and must go hand in hand with social inclusion, specific proposals are lacking.

Conversely, social dialogue, collective bargaining and the power of placing social conditionalities on investment and support are barely mentioned in the report’s 400 pages. A social agenda needs more than such interesting proposals as the right to training for all workers.

The report places a skewed focus on productivity. It explains weak growth in the EU by weak productivity growth, claiming that this in turn results in slower income growth and weaker domestic demand.

It correctly insists that, to improve competitiveness, ‘wage repression should not be used to lower relative costs’. Yet low productivity is consequence as well as cause—of corporate greed. The drop in the labour share of income since the early 1980s is not only a possible effect of automation but is the direct result of the massive increase in the profit share during that time.

Those record profits have mostly ended up in shareholders’ pockets. The report neglects the issue of the fair distribution of wealth created. Yet low wages have themselves played a role in depressing domestic demand. And the failure adequately to reinvest company surpluses has suppressed innovation—and so productivity—as well as, indirectly, demand.

Massive investment

Draghi’s call for massive investment to digitalise and decarbonise the economy—aiming for a return to ratios of investment to gross domestic product characteristic of the 1960s and 1970s—is welcome. Ambitious investments are indeed needed to ensure a just transition to a decarbonised economy and fair digitalisation for workers.

Public investment needs however to be matched with social conditionalities, to ensure public money only goes to companies which invest to produce in Europe and provide good unionised jobs for the long term, while respecting collective bargaining and workers’ rights. 

Those industries, moreover, rely on quality public services to ensure safe, educated and healthy societies. The austerity implied in the renewal of (amended) fiscal rules agreed by EU governments is anathema to this vision of investment.

The report claims that regulation is a burden for Europe’s industry. Yet it fails to provide convincing arguments to substantiate this assertion, rehearsing the views of employers to that effect. If Europe performs much better than other regions in the world, including the United States, in terms of living conditions (such as life expectancy at birth), it might though be to a large extent because EU regulations provide greater protection for workers and society.

Simplification and efficiency are always welcome but EU rules are also there to ensure private companies behave within the parameters of the public good. We need strong social and environmental safeguards to ensure that changes in regulations do not come at the expense of core European societal interests.

Political will

Finally, the key question will be how this report translates into action, in the context of rising nationalism and with fiscal consolidation leading to harsh austerity plans in most EU member states. The proof of the pudding is always in the eating.

If the European Commission and national governments continue with cost-cutting plans and labour-market ‘flexibilisation’, Draghi’s report will remain an academic exercise. What is needed is the political will to implement a genuine European industrial strategy, based on investment and on social conditionalities ensuring quality jobs.