Conversations for the Future of Europe: 4. The Future of Social Policy: Can Social Investment provide the basis for a European Social Union?

The Conversation for the Future of Europe series continued this week with the topic of European social policy. More specifically, we asked whether Social Investment can provide the basis for a European Social Union. Our speakers on this topic, Anton Hemerijck (EUI) and Chiara Saraceno (University of Turin), could each draw on extensive expertise in this area and provided superb input for the lively discussion.

Hemerijck kicked off the discussion by building an elaborate argument in support of a concrete policy proposal at the EU level. Recent history of some European welfare states suggests their ability to defy problems from which they were thought to suffer according to neoliberal orthodoxy: some Northern and Western European states are capable of sustaining both high employment rates and generous employment insurance;  both decent growth rates and above-average economic equality, etc. Based on his analysis, Hemerijck suggested that the key to success is threefold social investment: First, investment in (human capital) stock, i.e. the quality of the existing labour force. Second, investment in flows, i.e. the economy’s ability to re-skill and redeploy in the face of structural changes and competitive pressures. Third, the maintenance of buffers, that is, universal safety nets that form the backbone of macro-economic stabilization in times of crisis.

Based on this analysis, he suggested that one EU-level policy could provide especially powerful: If state expenditures dedicated to social investment up to a certain level (say 1.5% of GDP) could be  deducted from the budgetary rules enshrined in the Solidarity and Growth Pact (SGP) for a decade, then this would strongly  incentivize member states to adopt a social investment perspective. This strategy would, moreover, “put the horse before the cart” in that it seems more likely to be able to gain support amongst northern states and would more sustainably address the structural deficits in the Southern states by offering them “ownership” over national reforms.

Saraceno‘s contribution consisted in an extensive analysis of the social investment strategy in general and the particular EU-level proposal in particular. Her focus was especially on the following two questions: First, the goal of inequality reduction: Does the social investment perspective in general and the EU-policy proposal in particular advance the fundamental problems of growing domestic and international inequality? Whilst sympathetic to the overall outlook expounded by Hemerijck, Saraceno worried that social investment alone would not be able to address this issue and therefore needs to be supplemented with fiscal harmonization and other measures such as a European Unemployment Risk Sharing Scheme to better address the sources of inequality and fundamental concerns of EU citizens. Second, feasibility: One might well wonder whether such an ambitious proposal could in the short or medium term enjoy sufficient support at the EU level to be a realistic approach. More generally, she was concerned that the ‘rosy’ world of the social investment welfare state might not be quite as rosy after all once we turn to the structural issues of underemployment and low-quality employment that has grown in some of the ‘success states’. Relating to the EU, she feared that propagating a shift towards a European Social Investment strategy may prove to be little more than an -unfortunately all too familiar- rebranding exercise at the European level whereby existing strategies and policies are presented as a new policy paradigm.

Our commentator, Julian Garritzmann (Max Weber fellow, EUI), concurred with some of the worries raised by Saraceno about the social investment strategy and Hemerijck’s proposal, but also helpfully opened up the debate by pointing to questions of agency: in the domestic context, focus on social investment has been possible because a somewhat heterodox range of actors (business interests, progressive cultural left etc.) came to form a powerful constituency in support of it. Where could such a coalition in its favor be found at the European level? There ensued a lively debate, touching on such issues as the potential and limits of the language of social investment to transcend the ‘neoliberal’ policy paradigm, and the representativeness and transferability of the positive Northern and Western European recent welfare state experience given the vast differences in terms of state capacity across the EU.

This year’s last instalment of the Conversation for the Future of Europe will take place on June 4, when we will debate the topic of Differentiated Integration with Sergio Fabbrini (LUISS) and Frank Schimmelfenning (ETH).