Progressive Agenda A more dynamic welfare state for a more dynamic Europe The welfare state is one of the greatest achievements of the past century. José Luis Rodríguez Zapatero vol 4.3 } progressive politics { 3
Progressive Agenda José Luis Rodríguez Zapatero A more dynamic welfare state for a more dynamic Europe José Luis Rodríguez Zapatero Europe made a different choice than the US in terms of leisure versus hours worked, and therefore decided to work less but in a more productive manner. During the last days of October, the British Presidency invited all Member States to discuss the challenges that globalization poses to the European Social Model. This was an open and no doubt fruitful dialogue: a necessary exchange of views about concepts and final goals, before the discussion about the means to achieve these goals could proceed. Crucial issues on the table were related to the modern concept of social justice, and the policies that Europe needs in order to combine competitiveness, growth and social cohesion. These are all crucial questions for the 21st century that our citizens want us to answer, and this is why I personally welcome the initiative launched by Tony Blair. The welfare state is one of the greatest achievements of the past century. It emerged as a response to the risks of the industrial era and in the framework of the nation state. Today these risks have evolved and globalization is limiting the room for manoeuvre of individual countries. Together with globalization, ageing and technological change, the viability of the traditional welfare state as it was developed in postwar Europe is also being challenged. While I admit that these are new developments that impose new constraints to our models, I would like to challenge the argument that the European welfare state is an impediment to economic competitiveness. There are no theoretical or empirical reasons to maintain that those countries with more developed welfare states are necessarily less competitive. First, the impressive performances of Nordic countries in all competitiveness indexes demonstrate that this argument is far from true. In fact, there are aspects related to the provision of health insurance, education, unemployment protection and pensions where the public provision of welfare is clearly more efficient than its private counterpart. Second, if we look at the evolution of per capita GDP in the last 30 years, we can see that the inability of Europe to reach US per capita income levels is not the result of a poor performance in terms of productivity per hour (which was in fact higher in Europe than in the US), but rather a question of hours worked. Europe made a different choice than the US in terms of leisure versus hours worked, and therefore decided to work less but in a more productive manner. Third, if we measure competitiveness in terms of imports and exports, we see that Europe has performed better than is often supposed. For example, in the last decade, Europe has systematically 4 } progressive politics { vol 4.3
had a trade surplus while the US has had a continuous deficit. This can either be the result of different choices in terms of consumption and savings (the US consuming and importing and Europe saving and exporting), or the result of more competitive European products. In fact there seems to be evidence of both effects, with European market shares in world trade well above those of the US during the whole decade. And finally, it is important to note that competitiveness in world markets and per capita income are not the only valid measures to account for the level of well-being that citizens enjoy in Europe with respect to other citizens in other parts of the world. There are alternative measures that have to do with the quality of life, where Europe always scores above its competitors. For example, Europeans enjoy a higher life expectancy, a more equal distribution of income, and a more protected environment, than in other parts of the world. This does not mean that Europe is not in need of reforms. Clearly, European economies have to be more productive and more flexible. We have to reinforce our comparative advantages in high value-added products, and we need to multiply our investment in infrastructure, research, innovation and education. The road map depicted by the renewed Lisbon strategy is the one to follow. But if we want our citizens to come with us on this journey, we should avoid negative messages and threats of dramatic scenarios unless we do something in response to globalization. On the contrary, messages must be positive. When we blame globalization for welfare reforms that were needed anyway, we must be aware of the negative attitudes that these arguments generate against globalization. Therefore, those of us who are convinced that a better welfare system for our citizens is perfectly compatible with further European integration and more globalization, should start sending the following positive messages. European citizens need to hear more often Europe is in good economic shape in many areas, and that it is fully committed to undertake reforms and implement new policies in those other areas where it is lagging behind. It needs to be explained that globalization is only accelerating those changes which would have taken place anyway. Globalization must then be interpreted as a window of new opportunities; a new process that is creating new risks but which will also demand a renewed impulse to a new form of welfare provision, more efficient, more dynamic and to the benefit of more citizens. In this context, we progressive Europeans must put in place a policy agenda for globalization and the modernisation of our socioeconomic models that combines three crucial elements: Flexicurity in the market; Dynamism in the State; and Cooperation within globalization. Flexicurity in the Market If Europe wants to continue acting as a major economic player in world markets, it has to reinforce its internal market and European economic policy cooperation between Member States. As further integration of European markets takes place, their efficient functioning will require higher flexibility, and we must be keen to provide it. At the same time, as integration progresses, flexibility increases and globalization accelerates, Member States will be required to guarantee new forms of welfare provision to their citizens, a question which should also be at the top of our agenda. Globalization must be interpreted as a window of new opportunities. vol 4.3 } progressive politics { 5
Progressive Agenda José Luis Rodríguez Zapatero We need a new welfare state more dynamic in its internal functioning, and which acts as an external dynamiser for economic and social actors. The only way to combine these parallel demands for higher flexibility and growing welfare is by means of a creative combination between ex ante deregulation and ex post social protection. Flexicurity is the term applied to this type of combination that has worked so well in Nordic labour markets in the last decades. It is based on two elements: few regulatory constraints to hire workers, and generous unemployment and education programmes to activate labour rotation and replacement. The first element of this virtuous policy combination has worked considerably well to offer strong incentives to employers and international investors, and the second element has guaranteed social inclusion and participation. This optimal combination proves that growth and equality, efficiency and equity, or flexibility and security, can go together. We must be creative enough to expand this type of policy from labour market policies to as many areas as possible. A More Dynamic State In order to do so, we need to transform our main policy tools. A new role for the public sector and the welfare state will be also crucial in this respect. We need a more active and dynamic welfare state, both in the way it spends and in the way it regulates. We need a new welfare state more dynamic in its internal functioning, and which acts as an external dynamiser for economic and social actors. This Dynamic State should place at the forefront of its theoretical discourse the value of dynamic equality. As a consequence, the primary objective of the welfare state of the twenty-first century should be that of combating the social inheritance of disadvantage. 1 This is why this Dynamic State should concentrate its efforts on policies for the training and growth of human capital. It should also put more emphasis on preventive policies than on reactive ones, choosing investment over subsidies, and activation over protection. As a result of this normative recalibration, 2 this Dynamic State would be better equipped to cover the new risks that our citizens face in the new century. These are not only the old risks that the traditional welfare state used to protect (such as unemployment or old age), but those new risks associated with atypical unemployment, social exclusion, the obsolescence of professional skills, and above all, the non-availability of adequate training opportunities throughout life. This Dynamic State should empower its citizens to adapt themselves to a world in constant change because this is the way to guarantee that equality of opportunities and freedom of choice are durable principles. We must be conscious that a reorientation of our spending policies towards investment in education and research, investment in children, mothers and young people is the correct set of policies to tackle at once the longterm challenges posed by globalization and ageing. Together with spending, we need to recalibrate our legislation as well. The Dynamic State should then reduce its administrative burdens on businesses and must transform itself into a facilitator for citizens initiatives. It has to be aware of the complications that it can create for private initiative in some areas (in order to avoid them), but it also has to exploit its great power to act as a catalyst in many other areas. 6 } progressive politics { vol 4.3
Cooperation within Globalization Flexicurity in the markets and dynamism in the state are two crucial ingredients for a recipe to take advantage of the opportunities created by globalization. Nevertheless, their application at the national level will only have limited success if the purpose is to make the European Social Model a viable model in the era of globalization. This is why together with national reforms, decisive action at the European level is also needed. At the European level, we must agree on the new Financial Perspective and on the Internal Market for Services. We must also move towards policies that help close the existing technological gap between different Member States, and to integrate fully the European Education System. Only by means of a fully integrated market, will Europe be competitive in the global economy. Together with these actions, Member States need to strengthen economic policy coordination in those areas which are of national competence. And decisive steps must be taken to apply the national reforms necessary to comply with the renewed Lisbon Strategy. These simultaneous actions at the European and the national level are crucial to reactivate the European economy and to demonstrate that our mixed models of market and welfare are as competitive as any other in the world. European common values will then be again considered as an asset (not an obstacle) in the globalized world. Globalization is about free and fast trade of goods, services, and capital. And the world should find Europe at the forefront of these processes in the coming WTO negotiations. But globalization is also about sharing economic risks and prospects among the citizens of the world. This is what motivates migration flows, and Europe must respond to them as well. A first step in this direction would be to create a new common European immigration policy based on four lines of action 3. In addition to this new common policy, we should celebrate a new EU-Africa Conference for the multilateral dialogue on immigration. If all these joint actions succeed, we will all succeed. Cooperation within globalization is the key to turn the current pessimism into realistic optimism. This will renew the consensus about the merits of the European formula of reconciling economic performance and social cohesion, and this will give us the chance to speak to the world with much greater legitimacy. Once we reactivate our economy, Europe should then position itself as a reference leader in the governance of globalization, to ensure sustainable development and build a decent and more equal world for the generations to come. José Luis Rodríguez Zapatero is Prime Minister of Spain. Only by means of a fully integrated market, will Europe be competitive in the global economy. 1 See Esping-Andersen Against Social Inheritance, 2003; and, Esping-Andersen, Gallie, Hemerick and Myles Why we need a New Welfare State, 2002. 2 For the concepts of functional, distributive and normative recalibration, see the work by Mauricio Ferrera, Modernizing the Social Model: Stepping-up Reforms, Improving Coordination, 2003. 3 These four lines of action are: 1) a technical improvement in external frontiers; 2) a new impulse to the repatriation agreements with neighbour and third countries; 3) the inclusion of immigration issues in the external policy of the Union; and, 4) the search for additional financial assistance to the countries that channel migration routes. vol 4.3 } progressive politics { 7