Public Economics: Welfare states and inequalities University of Castellanza Session #1 A European Social Model? 06 May 2013

Three sessions l The European Social Model (ESM) »What is distinctive about Europe l One or many Europes »Three worlds of welfare »Flexible and inflexible Europe l Europe 2020 »Income inequality and social inclusion »Inclusive growth?

Learning Objectives By Wednesday evening you should be able to… l Identify key differences between the social structure of Europe and the USA l Identify the different forms of labour market participation and non-participation l Differentiate between the main groups of European societies and welfare states l Explain different employment rates across Europe l Understand the concepts of income distribution and poverty l Evaluate possible relationships between economic growth and European social policy

This first lecture l Welfare state as defining Europe »Social cohesion and social inclusion l Elements of the European Social Model »Social citizenship »Restrained egalitarianism »Backbone state »Economic citizenship l The EU and the ESM

Reading for today l Anthony Giddens, Europe in the Global Age, Cambridge: Polity Press,2007, Chapter 1. l James Wickham, ‘Potential and weaknesses of the European Social Model’, Employment Research Centre, Trinity College Dublin. Briefing paper for Infowork Project. Available at l T.R. Reid, ‘The European Social Model’, Chapter 6 of The United States of Europe (2004).

Some quotes l “There won’t be a bill to pay. We do it a bit differently here. In the National Health Service, we don’t charge for medical treatment’. (British nurse to American visitor in casualty ward)… quoted in Reid, The United States of Europe, p l ‘This widely shared sense of the government’s social responsibility to everybody is another unifying force that makes Europeans feel they all belong to a single place – a place they believe, that is definitely not American.’ Reid, p.146. l But is this about being British (or French or Italian or Swedish etc) or about being European?

A European Good Thing? l Europe has built a distinctive economic and social model that has combined productivity, social cohesion and a growing commitment to environmental sustainability. (Kok, 2004: 7) l Preserving our European social model - our specific combination of market economy, welfare state and democracy - requires action not only at the European level but also at the global level. (Lamy, 2004:18)

COHESION FRAGMENTATION INCLUSION EXCLUSION Inclusion & Cohesion Vertical axis is about (in)equality Horizontal axis is about trust and ‘social capital’ Measures for vertical axis: Poverty rates (% below y% of median income); Income inequality (Gini coefficients, decile ratios) Meausures for horizontal axis: Level of social capital and trust; crime

COHESION FRAGMENTATION INCLUSION EXCLUSION Inclusion & Cohesion Fascism Millenarian egalitarianism (Bolshevism…Pol Pot…Taliban Claudillo dictatorships; China? Cyber populism

COHESION ANOMIE INCLUSION ÈXCLUSION Inclusion & Cohesion Fascism Millenarian egalitarianism (Bolshevism…Pol Pot…Taliban Claudillo dictatorships; China? Cyber populism Scandinavian social democracies Continental corporatism UK USA Settler demo- cracies Medi- terranean familism Representative democracies European Social Model

Social citizenship l Education, health, housing, income support… l Rights not charity l Baseline for participation in society l Financial costs (taxation) l Rights means obligations l Restrictions on diversity (‘thick citizenship’) Involves both inclusion and cohesion

Egalitarian Europe (1) Income distribution No European country has such a large proportion of its population with less than 50% of median income The US has a larger proportion of its population with more than double the median income, but here Sweden is the outlier

Egalitarian Europe (2) Attitudes to inequality ‘It is the responsibility of the government to reduce the differences between people with high incomes and those with low incomes’ (% agreeing) Legitimate income difference between ‘unskilled factory worker’ (income=100) and ‘Chairman of a large national company’

Egalitarian Europe (2) Attitudes to inequality SweGerAusNZCanUSA ‘It is the responsibility of the government to reduce the differences between people with high incomes and those with low incomes’ (% agreeing) Legitimate income difference between ‘unskilled factory worker’ (income=100) and ‘Chairman of a large national company’ ,114 Primarily about inclusion

Backbone state l Public realm »NOT market, NOT personal »Importance of state service (Beamte, service public, civil servant) l ‘This social capability is supported by a conception of the public realm whose underwriting of public science, public transport, public art, public networks, public health, public broadcasting, public knowledge and the wider public interest gives European civilization its unique character while offering many of its enterprises competitive advantage.’ (Hutton, 2002: ). l Simplest measure: state expenditure as % GDP Primarily cohesion

Economic Citizenship l Labour market regulation »Employment protection »Working time l Health and safety l Rights to information l Rights to representation »Trade union membership »Trade union coverage »Workplace representation (Betriebsrat, European Works Council) l Anti-discrimination »Equal pay (including pensions, benefits) »Equal opportunities (recruitment, promotion) l Work-life balance »Parental leave »Right to flexible working Primarily cohesion

Emergence of social Europe l 1956 Treaty of Rome »Retraining for those effected by industrial change l 1974 Social Action Programme »Response to enlargement; 1960s militancy »Employee rights, equal opportunities l Maastricht Treaty 1991 »Social Charter of Fundamental Rights of Workers l 1990s Delors promoting ‘European Social Model’ »‘A market economy, not a market society’ (Jospin) »Social expenditure to contribute to competitiveness »In parallel to single market programme l 2000 Lisbon Declaration –The Union has today set itself a new strategic goal for the next decade: to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion »An employment-based social policy »Intergovernmentalism (‘Open Method of Co-ordination’) and ‘Soft law’ »So ending European Social Model or reformulating European Social Model? l Europe 2020 »Smart growth with “smart sustainable and inclusive growth’ »Explicit inclusion targets

The EU and the ESM l Positive integration: »Creating a single European society »EU creates basic social and economic rights for all Europeans »BUT these are limited; most social rights depend on national welfare states l Negative integration »Creating a single European market »Removal national barriers to competition: Now very successful »BUT not a basis for a new European identity l The current crisis »Austerity programmes seen as ‘European’ and destroying welfare states!