Roberta Pergher
Paper #3

Social Policy in a European Context

On September 28th, 1998, the day after the German parliamentary elections, Serge Schnemann wrote for The Denver Post: Like other center-left leaders in Europe, including Tony Blair in Britain and Lionel Jospin in France, Schroeder will now have to confront a central issue: how to adjust Germany's expensive welfare system to global competition without dismantling it and at the same time create jobs. In a very succinct fashion, this sentence expresses the common concern over the tension between the expanding global economy based on neoliberal principles and the function and scope of European nation states. The global diffusion of the free market imposes the dictates of competition on a global scale undermining a State's ability to provide a social safety net to its citizens and to guarantee full employment. Schneman's words also assert the popular opinion that governments have to adapt to the unstoppable and unchangeable process of global economic integration by elaborating appropriate responses to the new economic order. Economic integration, deregulation, and liberalization around the world increased the level of global competition substantially. Today, individual nation states compete for utilizable capital inflows and for the job-creating settlement of multinational firms. The high degree of global competitiveness puts considerable pressure on national governments to deregulate and relax labor laws, environmental policies, and social programs because lower labor costs and lower environmental and social standards attract profitable investments. Many European countries are confronted with the dilemma of striving to economically succeed in the world market or offering adequate social protection to their citizens. Independently of a nation's priority however, the effectiveness and viability of its welfare system will be impaired by the rapid expansion of the neoliberal world economy. If a country wants to successfully compete in the world market, it will have to dismantle its welfare system. If, on the other hand, it decides to prioritize its social agenda, it will confront major difficulties in implementing and realizing its programs because of international factor mobility. 

In light of the ongoing European unification process, the debate surrounding the future of individual European welfare states is closely connected to the debate over the development of social policies and institutions within the European Union. For some economists and political scientists, the European economic and political integration can provide viable mechanisms for the recovery of the welfare state. Other scholars, on the contrary, believe that the European Community will further erode the welfare state. The Euro-pessimistic position recognizes a definite asymmetry in the process of economic and political integration and claims that the European Union is moving toward a "State-less market society"(Platzer, 25). Similarly, Fritz Scharpf argues that European unification will bring about "monetary equalization and social and economic differentiation"(qt. in Platzer, 25). Euro-pessimists criticize the advocates of the neoliberal regime for rationalizing the liberalization process, for assuming that deregulation will increase efficiency and overall prosperity, and for disregarding the adverse consequences of unrestrained integration for some segments of the population. Overlooking the negative effects of economic openness prevents the establishment of institutions for the protection of people who occupy a disadvantaged and vulnerable position in society. Also, the individual nations' loss of sovereignty regarding monetary policy and exchange rate flexibility worsens their ability in warranting social security. In view of the Union's excessive promotion of economic liberalization and its lack of political institutions for ensuring social protection, the Euro-pessimists regard the European Community as the ultimate vehicle for the erosion of the welfare state. Also the Euro-optimistic position asserts that economic globalization causes individual nation states to lose their autonomy and their high-handedness in defining social policies thus acerbating the conflict between international competitiveness and the welfare state. However, the Euro-optimists believe that the European Union can prevent the detrimental social consequences of economic openness through political action. While individual nation states have lost their sovereignty and while the prospect of global political action remains bleak, the European Union has the capability of defining political institutions which would place economic activities under strict social and environmental regulations. These measurements would block downward competitive pressures and social dumping practices. As Johano Strasser argues, "nicht im nationalen Alleinga(e)ng(e), nur in enger europaeischer Zusammenarbeit kann die Gestaltungsfaehigkeit zurueckgewonnen, koennen Demokratie und Sozialstaat gesichert werden"(qtd. in Platzer, 26). Strasser thus advances European collaboration and coordination in order to redeem the welfare state as well as to secure democracy. However, can the loss of freedom of action on the national level be compensated by an expansion of social political activity on the European level? Currently, the European Union does not dispose of the competencies and the institutions necessary to counteract the national loss of sovereignty on a supranational level. According to Johano Stasser, the process of European integration lacks the institutional conditions of democratization and democratic legitimization. In his view, the European Community represents a system of negotiations rather than a democracy. The action of the Union is limited to the extent that the interests of member nations converge. While harmonization of regulations has occurred in some areas of social concern, other spheres have remained untouched by social policy debates or implementations of actual policies within the European Community. Environmental regulations, labor laws, and social policies can substantially increase the production costs of firms who have the option of moving their production facilities throughout Europe and the world. The competition over firm location within the European Community arises because of significant differences in economic development of various member states. The amount of per capita GDP varies enormously across the Union. As illustration, per capita GDP in Portugal amounts to less than a third than per capita GDP in Denmark. If the less developed countries want to be competitive within the Union in spite of their lower level of productivity, they have to offer mobile firms smaller labor, environmental, and social costs. The accession of Eastern European economies into the Union will further worsen the tension between richer and poorer countries. However, the notion of harmonizing differentiated integration can constitute a solution to this conflict. Coordinating differentiated integration entails agreeing on regulations that differ across countries in their strictness and allowing less developed countries to slowly move towards the adoption of higher standards and stricter policies.

While harmonizing differentiated integration promises to be successful regarding the implementation and observance of environmental regulations, it encounters significant problems in instituting social policies. Substantial structural and institutional differences between highly developed welfare states nullify European harmonization efforts. In fact, individual European nation states have developed different welfare state models. The distinguishing characteristics of welfare systems are manifold. Different states spend different amounts of their social budget on different social programs and policies. Individual countries finance their social expenditures through universal taxes, specific contributions, or a mixture of both. Different national policies and programs comprise differing combinations of social services and transfer payments. Also, the structures and institutions that handle the relationships between business and labor vary across EU member states. In light of these distinctions, Scharpf recognizes the only possible way for saving the welfare state in an European agreement that determines the minimum amount of GDP percentage that each country has to spend on social programs (Scharpf, 189). Such a convention would allow single countries to determine how to raise as well as how to spend their social budget. Imposing a floor on social expenditure would undermine downward competitive pressures to dismantle the welfare state without at the same time requiring the structural standardization of European welfare systems. While Scharpf presents a viable solution for maintaining national social programs in spite of global economic liberalization and European unification, his model ultimately denies the possibility of coordinated policy prescriptions on a European scale. True, the economic goals of the EU have been pursued much faster and more extensively than the social directives laid out in the Act of 1987. Even though the common charter of social basic rights of 1989 has been considered morally binding, it remained noncommittal in a legal sense.  Also, the agreed-upon regulations were rarely translated into national law on schedule. Currently, the Union focuses on advancing factor mobility and economic efficiency rather than social redistribution, and so far the social political instruments of the EU are limited due to the limited reconstruction of statehood on the European level. Nevertheless, some common standards and regulations have been implemented, and even though their implications are difficult to ascertain, they will influence the future development of the European integration process. A strong political commitment toward social protection on a European scale will certainly be essential for the establishment of institutions and policies to harness unrestrained global economic forces. In light of the expansion of the global neoliberal regime, supranational policies will be more successful than national regulations in attaining their goals. Due to international factor mobility, individual states have lost some sovereignty and autonomy in determining social policies, but the European Union can use its magnitude as a lever against economic liberalization. Sociopolitical structures and institutions on a European level will provide general European directives as well as coordinate and harmonize national policies undermining the negative consequences of an unregulated free market economy.

Bibliography
Bean, Charles and others. _Social Europe: One Policy For All?_ Washington,D.C.: Brookings Institution, 1999.
George, Stephen. _Politics and Policy in the European Union_. New York: Oxford, University Press, 1996.
McCormick, John. _The European Union: Politics and Policies._ Boulder, CO: Westview Press, 1996.
Platzer, Hans-Wolfang. "Erosionsvehikel, Rettungsanker, oder Gestaltungsfaktor." _Internationale Politik und Gesellschaft._ No. 1 (1996), pp. 23-35.
Scharpf, Fritz W. "Konsequenzen der Globalisierung fuer die Nationale Politik." _Internationale Politik und Gesellschaft_. No. 2 (1997), pp.184-192.