Anton Hemerijck (VU University, Amsterdam)

“Welfare states in transition and E(M)U crisis management. The imperative of a post-neoliberal consensus”

(Note: the seminar is on Tuesday)

Abstract

Half a decade after the Euro crisis, the EU is in dire need of a growth strategy that is – all at once – economically viable, politically legitimate and thus seen as socially fair. Without a strategic focus on an inclusive labour markets, helping to ease the employment transitions for working families, undergirded by comprehensive safety net and strongly supported by human capital investments from early childhood on, Europe risks becoming entrapped in economic stagnation and political discord. This was the central message of the  ‘Social Investment Package’ (SIP), launched by the European Commission in February 2013. The SIP is best read as a strategic vision for welfare state modernization for post-crisis Europe, based on forward-looking social policies to ‘prepare’ individuals and families to respond to changing nature of social risks in the competitive knowledge economy. The SIP was published in the wake of a major overhaul in EU fiscal surveillance – the Six Pack, Two Pack, and the Fiscal Compact – enacted after the Euro zone sovereign debt crisis of 2010. The central question of this paper is whether and to what extent Europe’s new macro-economic governance regime is supportive of the social investment imperative? The short answer to this question is ‘no’. Reinforced fiscal austerity, underwritten by heterodox OMT and QE interventions by the ECB to counter deflation, continues to be based on the widespread belief that generous social provision inescapably “crowds out” economic growth, private entrepreneurship, employment participation and labour productivity. The ‘long’ rejoinder to the central question in this contribution is more positive. With the publication of the non-binding SIP communication, the intellectual genie of the social investment policy paradigm is out of the bottle, with fairly strong evidence of ‘capacitating’ welfare provision enhancing dual-earner employment and skills levels, while mitigating the reproduction of inter-generational poverty. The current schizophrenic posture of the European Commission as the ‘social investment cheerleader’, on the one hand, and the ‘fiscal austerity headmaster’, on the other, informed by contradictory policy theories, is difficult to sustain. The Eurozone has entered a period of transition. Policy attention is shifting to accumulating evidence, brought forth most notably by recent OECD studies that well-calibrated social investment policies “crowd in” inclusive growth and social progress in tandem. At the same time, a fragile recovery, competitive divergences and the social imbalances of mass (youth) unemployment, rising poverty and a deepening intergenerational divide, are increasingly met with rising anti-EU populism. In conjunction, negative anti-EU political feedback and more positive social investment policy feedback, may open up a vista, contingent on effective political mobilization and adequate EU support, for anchoring an assertive social investment commitment in future EMU economic governance.