EU social market economy and social pillar

This round-up blog post has a simple main purpose. It brings together a dozen recent entries, published between 23 February and 5 March 2017 on three blogs, in English (EN), Finnish (FI) or Swedish (SV), about the EU social market economy and the European pillar of social rights.

Överhusets inre marknad (SV)

House of Lords or European Single Market? (EN)

EU:n sosiaalinen markkinatalous (FI)

Erittäin kilpailukykyinen sosiaalinen markkinatalous (FI)

Social marknadsekonomi och socialklausul (SV)

European political parties on social market economy (EN)

Difficult European social market economy (EN)

Euroopan sosiaalisten oikeuksien pilarin aineisto (FI)

Ajankohtaista Euroopan sosiaalisten oikeuksien pilarin valmistelusta (FI)

Europeisk pelare för sociala rättigheter (SV)

Key trends behind a European pillar of social rights (EN)

The EU social acquis (EN)

Timetable

The discussion about an EU social market economy, a European pillar of social rights and “Social Europe” continues as one strand of the public discussion the European Commission invited us to join in the White Paper on the future of Europe COM(2017) 2025. We remember that the Commission promised a number of reflection papers with different ideas, proposals, options or scenarios for Europe in 2025, without presenting ‘definitive decisions’ (probably meaning legislative proposals) at this stage. The first topic mentioned was developing the social dimension of Europe (page 17).

The accompanying process paper (timetable) COM(2017) 2025 final ANNEX 1 scheduled the reflection paper on the social dimension for the end of April, after the recent 9 to 10 March European Council and EU27 summit and the upcoming 25 March 2017 EU27 summit with the Rome Declaration.

Ralf Grahn

Difficult European social market economy

Legal, political and economic scholars have encountered difficulties, when dealing with the treaty based aim of the European Union as a highly competitive social market economy.

Negative integration in order to remove or to lessen obstacles in the internal market and external trade can be promoted by harmonisation and the Court of Justice of the European Union, flanked by rules to ensure fair competition.

However, despite the kind words the Treaty on the Functioning of the European Union (TFEU) offers on social policy - Title X - the real powers lie with the member states, as illustrated by Article 153. The powers for positive integration (harmonisation) are weak in the EU we have today:

Article 153 TFEU

(ex Article 137 TEC)

1. With a view to achieving the objectives of Article 151, the Union shall support and complement the activities of the Member States in the following fields:

(a) improvement in particular of the working environment to protect workers' health and safety;

(b) working conditions;

(c) social security and social protection of workers;

(d) protection of workers where their employment contract is terminated;

(e) the information and consultation of workers;

(f) representation and collective defence of the interests of workers and employers, including codetermination, subject to paragraph 5;

(g) conditions of employment for third-country nationals legally residing in Union territory;

(h) the integration of persons excluded from the labour market, without prejudice to Article 166;

(i) equality between men and women with regard to labour market opportunities and treatment at work;

(j) the combating of social exclusion;

(k) the modernisation of social protection systems without prejudice to point (c).

2. To this end, the European Parliament and the Council:

(a) may adopt measures designed to encourage cooperation between Member States through initiatives aimed at improving knowledge, developing exchanges of information and best practices, promoting innovative approaches and evaluating experiences, excluding any harmonisation of the laws and regulations of the Member States;

(b) may adopt, in the fields referred to in paragraph 1(a) to (i), by means of directives, minimum requirements for gradual implementation, having regard to the conditions and technical rules obtaining in each of the Member States. Such directives shall avoid imposing administrative, financial and legal constraints in a way which would hold back the creation and development of small and medium-sized undertakings.

The European Parliament and the Council shall act in accordance with the ordinary legislative procedure after consulting the Economic and Social Committee and the Committee of the Regions.

In the fields referred to in paragraph 1(c), (d), (f) and (g), the Council shall act unanimously, in accordance with a special legislative procedure, after consulting the European Parliament and the said Committees.

The Council, acting unanimously on a proposal from the Commission, after consulting the European Parliament, may decide to render the ordinary legislative procedure applicable to paragraph 1(d), (f) and (g).

3. A Member State may entrust management and labour, at their joint request, with the implementation of directives adopted pursuant to paragraph 2, or, where appropriate, with the implementation of a Council decision adopted in accordance with Article 155.

In this case, it shall ensure that, no later than the date on which a directive or a decision must be transposed or implemented, management and labour have introduced the necessary measures by agreement, the Member State concerned being required to take any necessary measure enabling it at any time to be in a position to guarantee the results imposed by that directive or that decision.

4. The provisions adopted pursuant to this Article:

— shall not affect the right of Member States to define the fundamental principles of their social security systems and must not significantly affect the financial equilibrium thereof,

— shall not prevent any Member State from maintaining or introducing more stringent protective measures compatible with the Treaties.

5. The provisions of this Article shall not apply to pay, the right of association, the right to strike or the right to impose lock-outs.

European social market economy reading

Already at the time of the Treaty Establishing a Constitution for Europe,

Christian Joerges and Florian Rödl discussed the social deficit of the EU, the genesis of the social market economy at the national (Germany) and the Europena level, as well as the limits of EU competences in the social field, in  “Social Market Economy” as Europe’s Social Model? EUI Working Paper LAW No. 2004/8 (25 pages).  

Klaus Dieter John discussed various forms of economic liberalism in the article The German Social Market Economy – (Still) a Model for the European Union? (8 pages)

In a December 2011 publication, the Swedish Institute for European Policy Studies (Sieps) let four authors discuss the lack of EU powers and the necessity (risk) to move towards a federal state, if Europeans want a social market economy: Giuseppe Bertola, Jörgen Hettne, Fritz W. Scharpf och Daniel Tarschys: Är EU en social marknadsekonomi? Sociala Europa – en antologi; SIEPS 2011:2op (88 pages).

Two of the contributions had been published earlier in English and are still available:

Scharpf, The Socio-Economic Asymmetries of European Integration (2010:10epa) och Bertola, Social and Employment Policy in the EU and in the Great Recession (2010:11epa).

Václav Šmejkal, Stanislav Šaroch: EU As a Highly Competitive Social Market Economy – Goal, Options, and Reality; Review of Economic Perspectives Vol. 14, Issue 4, 2014 (18 pages), another example:  

The paper is a combination of economic and legal -political analysis through which the authors try to answer three main questions: What is the contemporary meaning of the term “social market economy” in the both economic and EU-law academic theory? Can the EU within the powers conferred to it positively fulfill such an objective, or can it just approach it by weakening the still prevailing tendency towards liberalization and deregulation brought about by the construction of the EU internal market and by the promotion of its freedoms?

To round off the reading part, a few random excerpts from Floris de Witte, in The Architecture of a Social Market Economy; LSE Law, Society and Economy Working Papers 13/2015 (24 pages):  

This paper traces the evolution of the nature of the EU’s internal market, from its origin in the 1950s to its current redesign in the aftermath of the Euro-crisis. It suggests that the relationship between ‘the market’ and ‘the social’ has shifted multiple times throughout the Union’s history.  

In doing so, however, they overlook a number of institutional asymmetries, normative biases and legal implications, which mean that any attempt to create a ‘social market economy’ – as Article 3 (3) TEU commits the EU to do – is bound to be distinctively light on ‘social’ and heavy on ‘market’.

The third phase has started since the outbreak of the Euro-crisis. Increasingly, Union institutions are pushing towards social policy coordination and even harmonisation in the EU. The purpose of EU social policy here, again, is very different from the previous two phases. Social policy is now considered as an auxiliary instrument for the stabilisation of monetary and economic policy across the Eurozone. Diversity and national autonomy, on this view, are problematic.

Social policy differentiation throughout the EU, to put it as simply as possible, disrupts both the operation of the internal market and the operation of the economic and monetary union. (page 17)

In blunt terms, the current architecture of the EU simply cannot support a ‘social market economy’ – which comes with far-reaching implications for the stability of the Union’s market and polity.  (page 18)

The legitimacy of their answer presupposes that it is answered through a representative and democratic process. Allowing apolitical institutions to answer such questions will almost inevitably lead to these being answered as if they are regulatory questions.  (page 19)

In the absence of a sufficiently thick political sphere on the European level, any attempt at socialising the EU’s market will be doomed.  (page 21)

A ‘social market economy’ may simply be beyond the capacity of EU law to produce.   (page 22)

Despite the talk about the future of Europe, do we see the EU institutions forging the powers for these representative and democratic processes at the European level?

European social market economy questions

After looking at the asymmetries, I want to finish this blog post by referring to the intelligent questions posed by Stefan Collignon in the web journal Social Europe: How To Create A Real European Social Market Economy; Social Europe 3 February 2015:  

The single most important contribution to revive Europe would be starting a wide debate about who are the winners and losers in the single market; who are the extractive elites that resist a fair distribution of advantages and privileges? How is the idea of sovereignty (mis)used as an instrument to protect these elites? What mechanisms must be designed to create a fair system of distributing the net gains from integration? How can one overcome the veto power and “agency capture” of national governments by local pressure groups? The European social market economy – with new institutions – must emerge from these debates. Without them, it will fail.

Ralf Grahn

European political parties on social market economy

If the treaty based aim of the European Union is a highly competitive social market economy, how do the political parties at European level deal with this objective?

I skim a few documents with political principles from the main Europarties.

The 2012 manifesto of the European People’s Party (EPP) begins by presenting the values of the party, then concludes:

The only political system in which these values can thrive is in a pluralist democracy, in which citizens accept responsibility. The best economic concept to safeguard them is the Social Market Economy based on environmental sustainability in which competitiveness and entrepreneurial freedom are balanced with social justice. The appropriate framework for this is a strong European Union, which provides the best answers to the challenges of our times.

The 2011 declaration of principles of the Party of European Socialists (PES) does not mention the words ‘social market economy’, but the elements seem to be there:

A society based on our values means a new economy that embodies them. Values-driven growth, means that environmental sustainability, human dignity and well being are fundamental to wealth creation. This new economy must foster social progress that raises living standards, secures homes and creates jobs. The public sector plays an essential role in this new economy.

The election manifesto (2014) of the Alliance of Liberals and Democrats for Europe (ALDE) offered classical liberal fare: to develop the single market, competitiveness and free trade in order to solve social challenges.

According to the Reykjavik declaration, the Alliance of Conservatives and Reformists in Europe (ACRE) is committed to the spread of free commerce and open competition, in Europe and globally.

Without using the words ‘social market economy’, the 2014 election manifesto of the European Green Party (EGP) emphasised a social Europe:

Europe must be built on a foundation of social justice and yet, for an increasing number of people, social hardship has become the reality. European Greens believe in policies that tackle growing levels of inequality and are adamant that there should be no second-rate citizens in the EU. It is therefore essential that social impacts such as inequality and poverty are taken into account.

The political document from the 2016 Party of the European Left congress (EL) rejects the liberal treaty aims and politics of the European Union, but the word ‘social’ crops up everywhere.

***

According to this rough outline of principles (not practical politics), the European People’s Party seems to the only main Europarty to tie itself to the mast of a social market economy.  

The Party of European Socialists and the European Green Party seem to prefer other terms to promote their vision of a social Europe.

Out of 751 MEPs, the EPP Group has 217, the S&D Group 189 and the Green Group 51 (457 MEPs in all).

ALDE (68) and ACRE (74) proclaim functioning internal and global markets, rejected by the European Left (52).

Ralf Grahn

House of Lords or European Single Market?

Is there a difference between the internal market defined by the EU treaties and the internal market the respected European Union Committee of the House of Lords campaigns for?

Single Market Act background

During the preparatory stage leading up to the Single Market Act SMA, actors and students had access to materials, notably:

The study by professor Mario Monti: A new strategy for the single market at the service of Europe’s economy and society (9 May 2010; 107 pages)

The European Parliament resolution of 20 May 2010 on delivering a single market to consumers and citizens P7_TA(2010)0186, based on the IMCO report drafted by Louis Grech  

The consultation paper (green paper) from the European Commission:

Towards a Single Market Act

For a highly competitive social market economy

50 proposals for improving our work, business and exchanges with one another

Brussels, 11.11.2010 COM(2010) 608 final/2 (45 pages)

In addition, more than 800 contributions to the public consultation, conclusions of the Council of the European Union and the European Council, as well as three late resolutions by the European Parliament vied in order to influence the communication:  

   

Single Market Act

Twelve levers to boost growth and strengthen confidence

"Working together to create new growth"

Brussels, 13.4.2011 COM(2011) 206 final (26 pages)  

Re-launching the Single Market

The European Union Committee of the House of Lords - @LordsEUCom on Twitter - has a long track record of clear and informative reports on strategically important EU subjects.

On 4 April 2011, less than two weeks before the publication of the Single Market Act (SMA), the House of Lords, European Union Committee, issued its 15th Report of Session 2010–11:

Re-launching the Single Market; HL Paper 129 (63 pages)

Much of the text is admirably readable on the earlier development of the common market, later officially the internal market, but most often - perhaps aspirationally - referred to as the single market in English.

Published so close to the SMA communication from the European Commission, the report from the UK select committee was less of a contribution to the EU Commission and more of a British policy paper on how to deal with internal market issues in the future.  

The EU Committee was honest enough to discuss (pages 14-17) the “historic compromise” Mario Monti had proposed in order to get market fundamentalists and proponents of a social model to join forces in order to re-ignite the single market. The EU Committee rejected this approach (page 17):

36. The relationship between the economic and social aspects of the EU is complex and politically charged. While the social aspect is important, we believe that it should not be seen as trade-off against market liberalisation. Any proposal on either aspect should be treated strictly on its merits. The case should be made separately for the economic benefits of the Single Market, especially given the urgent need for all Member States to stimulate growth in the aftermath of the financial crisis.

37. We believe a more fruitful approach is that advocated by the European Parliament Committee on the Internal Market and Consumer Affairs, in regarding citizens simultaneously as entrepreneurs, workers and consumers, and therefore as beneficiaries of the Single Market. Member States and the European Institutions should make the case strongly that it presents an opportunity rather than a threat.  

Britain seems to have a long tradition of national consensus regarding a single market designed for enterprises. Market reforms lead to jobs and economic growth, which decreases resistance to functioning markets. A dynamic labour market with high employment brings in more taxes for public services and requires less income transfers to compensate for unemployment.

Social market economy

Correct as these assumptions may be, I wonder if the EU Committee and Britain more generally have not evaded presenting the development of European Union as agreed among the member states through treaties, recently the Treaty of Lisbon, which entered into force 1 December 2009.  

Increasingly individuals, in various shapes and roles, are seen as the beneficiaries of EU legislation and actions.

A few quotes from the preamble of the Treaty on European Union (TEU), which acts as the sextant for navigating the union:

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CONFIRMING their attachment to fundamental social rights as defined in the European Social Charter signed at Turin on 18 October 1961 and in the 1989 Community Charter of the Fundamental Social Rights of Workers,

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DETERMINED to promote economic and social progress for their peoples, taking into account the principle of sustainable development and within the context of the accomplishment of the internal market and of reinforced cohesion and environmental protection, and to implement policies ensuring that advances in economic integration are accompanied by parallel progress in other fields,

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RESOLVED to facilitate the free movement of persons, while ensuring the safety and security of their peoples, by establishing an area of freedom, security and justice, in accordance with the provisions of this Treaty and of the Treaty on the Functioning of the European Union,

The union’s compass is nowadays Article 3 TEU, which sets out the main aims of the EU.  The Lisbon Treaty set the internal market on a new course, encapsulated as a “highly competitive social market economy”, more focused on the individual, in Article 3(3) TEU:

3. The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance.

It shall combat social exclusion and discrimination, and shall promote social justice and protection, equality between women and men, solidarity between generations and protection of the rights of the child.

It shall promote economic, social and territorial cohesion, and solidarity among Member States.

It shall respect its rich cultural and linguistic diversity, and shall ensure that Europe's cultural heritage is safeguarded and enhanced.   

A social market economy, social progress, social justice and protection, economic and social cohesion, solidarity, just to name a few key words.

Not only for businesses and money, Article 26 TFEU aims for the free movement of goods, persons, services and capital.

Addressed to the member states as well as the EU institutions, Article 4(3) TEU lays down the principle of sincere (loyal) cooperation, encompassing both active and passive obligations regarding the objectives of the union.

The Charter of Fundamental Rights of the European Union, legally binding on the EU, reminds us of various rights of humans (not only corporations and property), relevant to the internal market.

Horizontal clauses

Article 18 Treaty on the Functioning of the European Union (TFEU) prohibits any discrimination on grounds of nationality.

In addition, Title II of Part One contains a number of provisions having general application (horizontal clauses), some of which are relevant to legislating for the internal market and to the application of its rules.

Here I am going to quote the social clause, which calls for integrating these aspects into EU legislation and administration:  

Article 9 TFEU

In defining and implementing its policies and activities, the Union shall take into account requirements linked to the promotion of a high level of employment, the guarantee of adequate social protection, the fight against social exclusion, and a high level of education, training and protection of human health.  

Politics is often partisan, but given the Treaty of Lisbon, is it legitimate for a member state deliberately to bypass a loyal presentation of the treaties or to try to exclude social aspirations from the creation of a dynamic single market, defined as a social market economy?  

Forgetting social

On 18 March 2011 the UK prime minister David Cameron and eight other EU heads of government sent a letter (reproduced in the HL Paper pages 60-62) to the president of the European Council Herman Van Rompuy and the president of the European Commission José Manuel Barroso, calling for the delivery of the full and untapped potential of the Single Market.

The letter remains a valuable reminder of concrete priorities just ahead of the SMA  in order to create more pan-European markets, but the prime ministers - including three Nordic ones - did not find a kind word to say about social aspects or the reasons for business regulation.

Social market economy: And they twain shall be one flesh.   

Ralf Grahn

Mario Monti (2010): A new strategy for the single market

We are on the reform trail.

The free movement of goods, persons, services and capital and the comprehensive prohibition of all discrimination on grounds of nationality, are means to achieve a highly competitive social market economy. The internal market, which now consists of 31 countries with a total population of 515 million, is often (aspirationally) called the single market.

When we want to study the development of the internal market during this decade, the obvious time to start is Europe Day 2010 and the document to read is the study by professor Mario Monti: A new strategy for the single market at the service of Europe’s economy and society (9 May 2010; 107 pages).

Rereading Monti’s report brought back the image of the  “historic compromise” he wanted to forge among dedicated market proponents and reticent players (here from page 9):

The new comprehensive strategy outlined above should be seen as a "package deal", in which Member States with the different cultural traditions, concerns and political preferences could each find elements of appeal important enough to justify some concessions, relative to their past positions.

In particular, Member States with a tradition as social market economies could be more prepared to a new commitment on fully embracing competition and the single market, including a plan with deadlines on putting in place the single market in areas where it is still lacking, if Member States in the Anglo-saxon tradition show readiness to address some social concerns through targeted measures, including forms of tax coordination and cooperation, while there is no need to pursue tax harmonisation as such.

The magic treaty formula of a highly competitive social market economy was evoked already in the mission letter by José Manuel Barroso, the president of the European Commission.

Monti sketched opportunities for dynamic reform and remedies for social concerns at a strategic level, not only general enough but also penned finely enough to remain astonishingly fresh today.

Since the  margins available for budgetary stimuli were very limited, Monti reminded all actors that making the single market more efficient was Europe's best endogenous source of growth and job creation.

While summing up his proposals, Monti recalled that the member states had made the bold decision to share the same currency (page 107):

That requires, at the very least, a high degree of sharing effectively a single, integrated, flexible market, a prerequisite for an optimum currency area and a vector for improvements in productivity and competitiveness.

Finally, he called for the single market to be placed as a key item on the agenda of economic government, “the latest expression of the EU’s ambition to control its economic fate”.  

Ralf Grahn