A social democratic programme for a globalised economy

Article by Poul Nyrup Rasmussen, PES President, published on 10 January 2006 in Handelsblatt. This article is also available in German.

Our world is changing. Europe faces increased economic competition, especially from South East Asia. Europe has an ageing population and falling birth rates. It has unacceptably high unemployment and disappointingly low economic growth.  There is a trend towards increased competition within the European Union as well as from outside the EU’s borders.

Against this background, neo-liberals claim that Europe can no longer afford current levels of social protection and workers’ rights. Some social protection – such as highly protective labour market regulations – are even said to hinder economic growth.  How should Social Democrats respond? Can there be a united Social Democratic response across Europe?

In fact, Social Democrats are united in our fundamental belief that the welfare states that we built up are not a burden, but the basis of our prosperity and social cohesion. Strong competitiveness and strong social security are not contradictions but pre-conditions for each other. Our competitiveness depends on our ability to maximize the potential of all of our citizens. Effective welfare policies are central to such an effort: maximizing life chances, whatever an individual’s socio-economic background, stimulating and supporting employability and access to high quality employment for women and men of working age. This is something neo-liberals do not understand, but is basic to Social Democratic principles.

Social Democrats utterly reject the idea that our welfare states are the cause of Europe’s problems. Europe’s most competitive economies – Denmark, Sweden and Finland – are those that offer some of the best social protection and workers’ rights.

But Social Democrats know that reform is needed. Reform is necessary to meet the challenge of globalisation, liberalised trade and an ageing population. With some 20 million unemployed across Europe it is clear something needs to be done.  The real question is what kind of reform? This is the debate that is raging in most European countries and within the European Union. 

Social Democrats firmly reject neo-liberal reforms aimed at rolling back Europe’s welfare states. Our aim is a new social Europe – an active and inclusive society with full, high quality employment. The goal is a strengthened and modernized ‘social Europe’ with individual national welfare states, different in organization but united by common principles and objectives, that can meet the social and economic challenges of the 21st century. Our welfare states can and should be reformed to make them better reflect the evolutions of our societies – such as the rise of lone parenthood or the imperative to integrate better ethnic minorities. We must achieve better social and economic outcomes from public policies and governance.

Giving people the chance to benefit from globalisation
I believe that the key to our modernization agenda in Europe will be to protect people rather than protect existing jobs. We must enable people to benefit from change through new forms of security and flexibility. Social Democrats must help people move from the jobs of the past to the jobs of the future.

‘Flexicurity’ – a combination of flexibility and security developed in Denmark and Sweden - is a successful Social Democratic approach to modernizing Europe’s economy and welfare states. It is about enabling as many people as possible to enter the workplace – to earn a living and contribute to society. It is about creating as short as possible a journey from the old job to the new job. It combines increased labour market flexibility with income support, training and personalised assistance to get back into work during periods between jobs.  Evidence suggests this approach is more efficient than the very strong employment protection adopted in some countries.

Social Democrats insist on more flexibility being accompanied by real improvements in security. Flexibility cannot simply mean making it easier to fire people. It also means making it easier for people to enter and remain in employment – whether through better child care facilities or anti-discrimination legislation, and always education and training. Governments and companies must work together to give people the new skills needed for tomorrow’s jobs. ‘Life-long learning’ must stop being a jargon phrase and become a reality for European citizens. 

For Europe to be more competitive we must use everyone’s talents and skills – we cannot afford to exclude migrants from the workplace or make it hard for many women to work. 
For this European countries must become more social democratic, not less.  Our societies must be more inclusive, giving better opportunities for new disadvantaged groups such as single parents and immigrants, in addition to traditionally excluded groups like the disabled. The rate of participation of young people, women, immigrants, and the over-50s in the workplace has to increase. In each case there are specific programmatic challenges.

Social Democrats must make it easier for young people to make the transition from education to work. Education and training, career guidance and work experience schemes all need to need to be more relevant. In some countries they need to be brought into existence. Companies need to collaborate with schools and colleges and with other ‘social partners’ such as trade unions and youth organisations to bridge the gap between education and work.

An ageing population need not be only a problem for the pension system or for health costs. Older people are healthier for longer and many want to remain in work or take on new roles in the community.  Although a lot of attention is focused right now in some countries on raising retirement ages, a more immediate problem is to raise the number of people aged 50s in work. Work has to be made more attractive to older workers with more opportunities for skills to be updated, and their experience better appreciated and valued.   

It is not acceptable that many European women must choose between pursuing a challenging career and having children. Public policies that enabled women to combine motherhood with work would tackle the shrinking workforce both now and in the future. Falling birth rates could be a thing of the past.   Research shows that working women in countries with low fertility rates would like more children, and would have more children if they had more security: improved parental leave, better childcare and an equal pay.

Getting more women into work means better education and training, but also more appropriate benefits and fiscal incentives. By investing in quality child care European countries can create jobs, improve the life chances of children and enable their mothers to work. Putting real effort into a drive for greater equality between men and women is also essential. The gender pay gap is a significant obstacle to making Europe more competitive.   

Sacrificing strong welfare states in the name of competition is self-defeating. An example of this is child poverty which is on the rise today in many European countries. Children who grow up poor are the most likely ones to fail at school. They are most at risk from growing up to fill the ranks of the low-skilled and unemployed. Europe can no longer afford to waste the potential of its citizens.

Investing in growth
But reform is not enough. The answer is not in ‘flexicurity’ alone. Massive investment is needed in Europe to kick start economic growth.  Reforms alone will not create the jobs Europe desperately needs. Public and private money needs to be put into research and innovation, upgrading skills and qualifications, child care, sustainable transport and renewable energy. I am not advocating a wild spending spree but focused, intelligent investments in tomorrow’s jobs. While most investment needs to be at regional and national level, the European Union needs to play a coordinating role – in order to maximise the synergies and spillover effects of new growth - and invest its own budget in cross-border and trans-European projects. In short, investment needs to be simultaneous and coordinated to have maximum impact. 

The European Union urgently needs to improve economic policy coordination. It is absurd that Europe has one currency and one market but 25 uncoordinated national economic policies. 

New life needs to be breathed into the European Union’s ‘Lisbon strategy’ which aims to turn Europe into a more competitive and dynamic knowledge-based economy. This will be done not by focusing only on economic reform but also by having the courage to strengthen ‘social Europe’ and environmental sustainability. A greener and more inclusive economy will be a stronger European economy. Europe will never succeed by competing with China on low wages or poor social and environmental standards – it has to take advantage of higher skills, better motivation and greater innovation.
 
Europe must give a strong signal of its long-term commitment to environmental sustainability. An increase in renewable energy is vital in the face of climate change and the inevitably diminishing supplies of oil. A long-term commitment to reducing greenhouse gas emissions and reducing the consumption of energy must be given so that industry understands where to invest. We should not be afraid of good environmental law. While sections of industry complain about the proposed EU chemical law known as REACH, I remain convinced that industry will benefit from new markets for safer products and increased consumer confidence.  Europe can build a ‘smart’ economy that decouples economic growth from the excessive consumption of natural resources.  In the long run this approach will pay off economically.     

Completing Europe’s single market will also be important. Social Democrats believe that a single market in services could create many new jobs but the current draft Directive is flawed and has outraged trade unions in many European countries. Concretely, a way has to be found to protect essential services from unnecessary and unwanted ‘lowest cost’ competition.  

For Europe the way forward must be to combine investment in economic growth – to get Europe back to work and more competitive – with reform to modernize our economy and our welfare states, our ‘social Europe’. Not one, not the other but both together.

Reforming globalisation
Some people talk about globalisation as if it were an ‘act of God’ – like an earthquake or a hurricane. But globalisation is a man-made phenomena which Social Democrats firmly believe can – and must - be managed for the benefit of everyone. Here I believe European Social Democrats have a unique role. Our ability to combine a free market economy with an inclusive society in the coming years and decades will be watched carefully throughout the world. Many neo-liberals are keen to pronounce ‘social Europe’ dead. Workers from China to Brazil are hoping it is a dynamic model that brings hope and eventually benefit to them. That is why decent work must become a global objective for all global policies and institutions: from the EU’s development aid to the WTO negotiations. Let us not be duped into thinking that this is a protectionist tactic promoted by rich Europeans. Ordinary people – from Burkina Faso to Estonia - will not share in the benefits of globalisation unless they can make a decent livelihood in decent conditions.

Social Democrats have sympathy with the critics of globalisation who point to the damaging effects of unregulated free trade, but we cannot agree that trade liberalization is a bad thing. We believe that increased trade has the potential to lift millions of people out of poverty. But in order to do that it needs to be a fair, multi-lateral, rule-based system – with the right objectives, including decent work for all. We must reform the World trade Organisation so that it plays this role. 

I went to Hong Kong last month to take part in a meeting with WTO Director General Pascal Lamy. At the meeting I joined trade unionists in calling for basic labour standards – including the abolition of child labour - to be part of the WTO’s objectives. Mr Lamy’s reply was that he had a mandate from the WTO member governments to work with the International Monetary Fund and the World Bank – but not to work with the International Labour Organisation. I appreciated the honesty of his answer, and recognize the challenge it has set us.

The work of the WTO should reinforce and not contradict the work of other international agencies. There needs to be a forum for the WTO and UN agencies - from the ILO to the WHO – IMF, World Bank and secretariats of international environmental agreements to work together towards common goals.

Global governance must also become more effective in achieving the goals we set ourselves. The Millennium Development Goals are an ambitious target which are very far from being met. Developed and developing countries need to hugely increase their efforts to achieve them.  With 3 million deaths last year alone, AIDS has had a far more devastating effect on innocent lives and suffering societies than all the atrocities of the world’s terrorists. Our response has hardly been overwhelming.

Social Democrats should address the scandalous lack of democracy at the global level. While many are keen to criticise the ‘democratic deficit’ of the European Union – where decision-making should be more open, transparent and with more democratic involvement – few complain about the total lack of citizen participation in global institutions. Yet millions of people care passionately about ‘make poverty history’ and World AIDS Day. A vote every four or so years for your national Government is hardly an acceptable level of social dialogue in our globalised world.

Finally, European Social Democrats could be more confident in promoting the EU, despite its flaws and difficulties, as a model for peaceful regional co-operation. It is absurd to compare the US approach to bringing peace and democracy to Iraq to the EU’s method for achieving the same in Turkey as I have heard some people do. Nonetheless, the EU’s system of co-operation – with its social, environmental and economic rules and solidarity between countries - has succeeded in bringing prosperity and stability to many former dictatorships. For Social Democrats this is a far more attractive model than a simple free trade zone offering few tangible benefits to its citizens.

Conclusion
A Social Democratic programme for a globalised economy starts with modernising and strengthening our welfare states – allowing for greater economic  flexibility and ensuring all people benefit from the new opportunities.

Reform must go hand in hand with national and European investment  in jobs and growth and better European coordination of economic policies.

At a world level, economic globalisation must be managed better with the WTO working alongside the global financial and UN bodies.

Democracy must be extended within the European Union, and even more importantly, to a global political dialogue involving citizens as well as Goverments.

Poul Nyrup Rasmussen is President of the Party of European Socialists and former Prime Minister of Denmark (1993-2001).