Social Europe vs. Competitive Europe Is a Fool’s Choice
A competitive Europe needs a social Europe; the latter cannot exist without the former
By pursuing a generous social policy, Europe is losing economic competitiveness. This commonly held opinion has much truth to it. However, cohesion must not be pitted against competitiveness. A competitive Europe needs a social Europe; the latter cannot exist without the former. Both require a major overhaul and a new comingling. The latter will be particularly difficult. Otherwise, however, we cannot defend European values and our way of life, which is worth fighting for.
Social Europe Is Still Going Strong But...
According to many, social Europe is the “culprit” behind the decline in competitiveness and productivity, as well as stagnation of the European economy. Its underpinning principles of social justice, interventionism and an institutionalised system of collective bargaining between state, labour and capital are being challenged by many as archaic and harmful. There are calls for their thorough revision, with the ultimate aim of ensuring their annulment.
Europeans still live a good life, as reflected in quality-of-life rankings. According to the United Nations World Happiness Report 2023, the top ten happiest countries include six European Union countries. According to the ranking, the best places to live are Finland, Denmark and Iceland. Similar conclusions follow from the US News Best Countries report. Six European countries feature in the top ten. The Quality of Life Index (mid-2023 rating) puts five European Union countries in the top ten.
These figures show that the European Union is still a very attractive place to live. However, problems are beginning to mount. In the 2023 ranking of health care systems, no European country made it to the top five. This is a clear regression. It is also evident in the 2022 Purchasing Power Parity (PPP) ranking, which includes only three European countries in the top ten.
Competitive Europe Is Not Doing Well
The European economy is losing global competitiveness. This is increasingly evident. The importance of the European Union on the economic map of the world is shrinking. As recently as 2010, the European Union was the second largest economy in the world; by 2022, it was in third place after the United States and China.
The rate of economic growth has been lower in Europe than in the US for decades. The EU now accounts for 18 per cent of world GDP, compared with 27 per cent in 1995. Its share of global industrial value has also fallen significantly from 27 per cent to 16 per cent over the same period.
European companies cannot compete technologically with their US counterparts. European companies invest 8 per cent less in research and development and grow 40 per cent slower than their US peers (Securing Europe's future beyond energy: Addressing its corporate and technology gap).
More than half of the most valuable companies come from the US. There is no company from Europe in the top ten. The top five most valuable firms are US companies and the top ten include Asian companies such as Samsung and Huawei (Global 500 Report).
Since the mid-1990s, average productivity growth in the EU has been lower than in other economies, resulting in an increasing divergence in productivity levels. EU countries are also losing their competitive position in disruptive technologies that underpin economic development.
Attempts made by the EU to enhance the competitiveness of the European economy, such as the Lisbon Strategy, which was supposed to make the EU the most competitive knowledge-based economy in the world by 2010, have not produced the expected results. The new Europe 2020 strategy is designed to achieve this objective based on three priorities: growth based on knowledge and innovation; transition to a low-carbon economy; and promotion of a high-employment economy delivering economic, social and territorial cohesion. The goals seem well defined. It remains an open question to what extent they can be achieved.
Uneasy Relationship Between Social Europe and Competitive Europe
The relationship between social Europe and competitive Europe is not an easy one. Sometimes it even seems hostile. The increasing pressure of the global economy is forcing governments to develop social policies as a reme dy for the problems caused by the global market. Meanwhile, the global market and its corporations are exerting pressure on national governments to lower social standards, liberalise labour markets, and refrain from interfering with wages. The 19th century antagonism between labour and capital is now emerging in a new guise. The tensions between social Europe and competitive Europe capture its essence.
Average productivity growth in the EU has been lower than in other economies
On the side of competitive Europe, there is growing pressure to reduce the minimum wage, cut labour costs, reduce benefits, increase private funding of the pension system, and increase private participation in health care spending. Calls for privatisation and contracting of public services are getting louder.
On the side of social Europe, on the other hand, expectations are rising for better employment conditions, support for educational investment and lifelong education, the development of municipal housing and public transport. Proposals are made to improve the availability of social and health care, to contract public services to non-profit organisations, and to strengthen dialogue with trade unions and employers’ organisations.
It is quite obvious that these expectations are antagonistic. At the same time, it is clear that without finding a new balance between them that is based on a rational agreement, the European project will be in serious trouble.
Which Direction?
The European Union needs new energy and a new narrative. They should be expressed in a new Community agreement tailored to the needs and aspirations of EU member states.
The agreement should be based on the principle of relative balance between social values and economic competitiveness. In the social sphere, it should suggest the actions necessary to reform social security systems, modify employment policies and build structures for civil dialogue at a Community level. It should focus on competence building, creating quality jobs, ensuring a high quality of life, and combating all forms of exclusion.
In the economic space, the focus should be on increasing Europe’s competitiveness through an effective research policy, better use of modern and state-of-the-art technologies, especially disruptive ones, and energy transition. A more complete deregulation of the European economy and the radical reduction of administrative burdens on firms should be an important part of the agreement.
A wave of pessimism is sweeping Europe. It is easy to forget the great benefits of the extraordinary project that is the European Union. It is Europe that still has the highest per capita incomes, the lowest levels of exclusion, income polarisation and corruption. Europe is still a place to live well. It is important to keep it that way. That is why we need a new Community agreement that can reconcile the legitimate interests of both Social Europe and Competitive Europe. They must not be pitted against each other; they must coexist. Marginalising Social Europe will provide fertile ground for populists and radicals, undermine the principles of equality and lead to polarisation and exclusion. Underestimating Competitive Europe will erode the foundations of European welfare, without which the European way of life and democratic values will be threatened.
It is commonly believed that the European Union evolves by overcoming crises. This may well be the case this time, too. However, the challenges facing Europe now are so momentous that the solutions to make this happen must be exceptional. To bring this about, Europeans must reinvent the idea of the European Union through dialogue at both a member state and pan-European level. ©Ⓟ
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