More than just a social model:
reform and social justice

Patrick Diamond

European Alternatives 1, June 2007

In May 2003, Jürgen Habermas and Jacques Derrida wrote a public letter about the future of European identity in the wake of the Iraq war. The welfare state’s guarantees of social security, the European commitment to the civilising power of the state, and its capacity to address market failures were held to be distinctive characteristics that articulated Europe’s identity, differentiating it firmly from the United States.

The European Social Model (ESM) has become central to the definition of what modern Europe is for. The ESM is not a single concept, but a wider set of strategic principles and policy instruments designed to ensure security and opportunity for all in a changing world. This definition of the ESM reflects three categories or criteria:

Responsibility: society takes broad responsibility for the welfare of individuals, sheltering them against poverty and providing support against unemployment, illness, disability and old age. Society encourages and actively promotes high quality public goods such as education, health and support for families.

Regulation: labour relations are institutionalised. They are based on social dialogue, labour laws and collective agreements. Social partnership flourishes in firms. Regulation persists in product markets.

Redistribution: transfers and services are open to all groups. Differences in incomes are limited by redistribution through financial transfers, taxes on property, and so on.

The policy framework underpinning this conception includes a developed and interventionist state; a robust welfare system; the containment of economic inequalities; and a key role in sustaining the institutions of social partnership. The ESM also implies a rich framework of social and economic citizenship rights, gradually consolidated in Europe since the Second World War.

But the ESM is more than just a social model. Indeed, it influences productivity and growth, as well as the overall structure of the economy itself. The ESM helps to shape social institutions, social norms and the wider culture. At the heart of the ESM are values of equity, fairness, solidarity and freedom.

The starting-point for any discussion of the ESM today should be an acknowledgement that the debate in Europe has too often focused on the question of welfare state sustainability: will the ESM survive; does it deserve to in the future?

There are, of course, several compelling economic and competitiveness challenges confronting the welfare states of Western Europe. But this is the wrong perspective from which to begin. The centre-right has created a false choice - ‘liberalise or die’ - to justify the scaling-back of the welfare state while facilitating globalisation, world trade, and adaptation to economic change.

There is no compelling evidence that suggests the welfare state is becoming uncompetitive or unaffordable due to these external pressures. Instead, the debate about the ESM should be concerned with how reform of such models re-distributes opportunity, assists the vulnerable, protects the marginalised and strengthens social justice. Indeed, reform should be the friend of social justice in the new Europe, not the enemy.

Social democrats need to frame the arguments for reform more persuasively, however, reflecting the core priorities of social justice. This is a notoriously elusive concept, but the German political scientist Wolfgang Merkel has listed five priorities of social justice in a post-industrial society:

1. The fight against poverty - not just economic inequality itself, but on the grounds that poverty (above all enduring poverty) limits the individual’s capacity for autonomy and self-esteem.

2. Creating the highest possible standards of education and training, rooted in equal and fair access for all.

3. Ensuring employment for all those willing and able.

4. A welfare state that provides protection and dignity.

5. Limiting inequalities of income and wealth if they hinder the realisation of the first four goals or endanger the cohesion of society.

Defenders of the status-quo should appreciate that Europe’s models of welfare capitalism do not currently match these basic principles of social justice. At present:

∑ Full employment no longer exists in most EU member-states. Even high employment countries like Sweden and the UK have problems of working age inactivity and rising claims for sickness and invalidity benefit.

∑ Security against social risks is very partial: welfare systems insure against ‘old’ risks such as short-term unemployment, sickness and poverty in old age, but not so well against ‘new’ risks - single parenthood, relationship breakdown, and incapacity in old age.

∑ Fairness between the generations has broken down as pensioners fare better, but poverty among families with children and child poverty is rising throughout the EU.

∑ The industrial relations system protects privileged labour market insiders through strong trade unions and collective agreements, but excludes weaker and more vulnerable workers in the competitive service economy.

∑ Inequalities of income and wealth are rising in the EU, while the inheritance of social disadvantage among children is becoming more rather than less embedded.

Welfare states in the future will have to confront massive exogenous changes: the ageing society requiring traditional conceptions of retirement to be re-thought; the emergence of post-scarcity lifestyles; new kinds and greater numbers of vulnerable and impoverished groups, including migrants, women and children; social changes such as the decline of the traditional family; and the weaker performance of the European economy since the early 1990s.

In response, the EU needs a new social justice charter, enforced by the European Commission, to which all member-states sign-up. This developmental welfare state is an alternative to both EU Keynesian policies that seek to recreate traditional powers of national economic intervention; and the EU regulatory state where employment and social regulation fills the gap created by the collapse of the old constraints on market capitalism.

The social justice charter should involve:

∑ Effective peer review of social justice policies through Europe wide sharing of best practice through the Open Method of Co-ordination (OMC).

∑ New criteria to assess the quality of national public expenditure. The growth and stability pact has had perverse effects since public expenditure is often the prerequisite for structural reforms, for example in infrastructure and skills.

∑ Reform of the EU budget with a shift away from agriculture and old industries to research and investment in human capital.

This model attempts to counter the adverse effects of globalisation on the low skilled and low paid, by recreating three pillars of security in industrialised societies: ensuring that those who lose their job can find new employment; providing universal access to basic services such as health and education; and anticipating the root causes of insecurity such as low skills and lack of employability, acting to alleviate them early.

If Europe is to flourish in the future, then growth must be inclusive. The EU’s role should be to help member-states to transform welfare from the passive distribution of benefits to actively investing in opportunities and more equal life-chances. What is distinctive about the ESM is that it aspires to go beyond compensating for the injustices inflicted by the market, to shaping the market as well.

We should not lose confidence in the idea of the active state as an efficient instrument of social justice and economic modernisation. The enduring ideals of the ESM - solidarity, equality, liberty - are as valid today as a century ago. But the model itself is under strain. That is why its institutions and programmes have to be updated for the 21st century.

A future ESM would not be any one national model, but would fuse together solutions from across countries through policy emulation. These include obligations as well as rights in the welfare state, especially active labour market policy; sustaining the contributory principle in the services provided through the ESM; a shift from ‘negative’ to ‘positive’ welfare, promoting active social and economic participation, learning, and life-choices; and finally less bureaucracy and greater decentralisation and diversity of provision.

The future of the ESM does not amount to a choice between ‘Keynesian Europe’ and a deregulated ‘Anglo-Saxon’ Europe. There is an alternative vision of a ‘Social Europe’ that is both progressive and fair.

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