Economic growth versus social security—redeeming the EU’s original sin

The European Union has been on a path-dependent trajectory since its foundation towards market-clearing. Its mission needs to be redefined as social-embedding.

Despite the current slowdown, the European economy is expanding, for the seventh year in a row. Social and economic inequalities within EU member states have however increased dramatically in recent decades. It’s clear that not all citizens are benefiting from that growth.

If we do not want to facilitate the rise of populist leaders such as Matteo Salvini and Marine Le Pen, this is the right time to rethink the EU’s original sin—the asymmetry between the economic dimension and the social question within European governance. It is key to recapturing the political debate around social welfare, so far masterfully monopolised by European populist parties, in particular radical-right nationalist parties.

Even if its expectation was slightly lower than last winter, in the summer the European Commission forecast economic expansion in the euro area continuing at an annual rate of 1.2 per cent this year and 1.4 per cent in 2020.The condition of the labour market has also improved,10 million jobs having been created since 2013 in the eurozone.

The employment rate has thus increased to a historic high of 72 per cent, with unemployment expected to fall below its pre-crisis level to 7.3 per cent in 2020. It seems the EU is firmly pursuing the goal of promoting ‘economic growth aiming at full employment’ which article 3 of the Treaty on the Functioning of the European Union (TFEU) mandates.

The 0.1 per cent

But has the EU guaranteed an equal redistribution of this economic expansion? Have the principles of equality, solidarity, social cohesion and social protection—adverted in the same article—been respected?

According to data revealed by the World Inequality Database, the answer is clearly ‘no’. The top 0.1 per cent saw their incomes more than double between 1980 and 2017, while the incomes of the poorest and the ‘European middle class’ increased by only 30 to 40 per cent.

Social insecurity is also increasing, especially among workers experiencing new digital jobs (platform workers) and new types of contract (such as zero-hours). Work per se seems no longer sufficient to avoid poverty for most people.

According to the European Social Policy Network, since 2012 in-work poverty has continued to increase in many European countries, such that by 2017 9.4 per cent of all employed in the EU were at risk. This has particularly borne down on low-educated workers, those with a temporary contract or working part-time, single parents and non-EU migrants.

It is evident that, while demonstrating a hard governance in the economic arena, the EU is suffering a huge ‘social deficit’.

Not enough

Over the years an EU social space has emerged—from the Treaty of Rome (1957), where the European Economic Community was essentially an economic project with the social component largely left to national sovereignties, to the horizontal social clause contained in article 9 of the TFEU (2009). This led, in recent years, to a strengthening of the governance role of the European Employment Strategy and of the Open Method of Co-ordination, and to the 2017 adoption of the ‘European Pillar of Social Rights’. But this is certainly not enough.

The problem is structural: social policies continue to be primarily under the responsibility of member states and their governments, sharing only some competence with the EU. It’s time to remove the EU’s original sin and correct that asymmetry between the economic and social dimensions of European governance underlying the compromise of the Treaty of Rome.

The union needs new tools to be able to counteract, at a supranational level, the common social risks produced by asymmetric economic shocks and by other global dynamics, such as technological revolution, labour-market transformations and substantial migration flows. These must comprise hard-law instruments in the social domain, ensuring more binding rules and common actions.

To act effectively in this direction, the EU also needs adequate resources, funded by common taxation—very different from the current European Stability Mechanism, which is an intergovernmental institution, based on transfer of national funds, with a considerable veto power for the greatest financial contributor, Germany.

Under this new structure, for example, the popular idea of a European unemployment-benefit reinsurance scheme, supported by the new president of the European Commission, Ursula von der Leyen, could move forward. It could be the first step towards a European legal framework of real individual rights, directly guaranteed and funded by the EU.

Channelling frustration

We are living in times where broken promises and non-stop propaganda are the main way to channel frustration born out of rising socio-economic inequalities. European populist and nationalist parties rarely tackle social issues effectively but they at least depict themselves as interested. That is enough for Salvini, Le Pen and the like to gain political support.

The EU can succeed only by acting in a different way—adopting concrete and far-reaching social policies, made possible by bold political reforms in the direction of European integration.