As a rhetorical slogan, “Social Europe” is enjoying a greater political profile – in terms of inclusion in almost every declaration on economic policy by the European Union – since the “glory years” of Jacques Delors’ Presidency of the Commission. Measured by the actions being taken by EU Member States the reality is very different. The financial and economic crisis means that governments throughout the Union – even in the Nordic strongholds of progressive social commitments – are looking to reduce budget deficits at the expense of existing standards of social and welfare provision. In some cases the roll back of social standards is on a scale not seen since the Second World War.
The European Trade Union Confederation (ETUC), has been a long standing partner with the EU institutions in pressing for key objectives notably:
- fundamental social rights, including freedom of association and the right to strike;
-social protection and wealth redistribution measures;
-social dialogue and consultation with workers;
-social and employment regulation;
-state responsibility for full employment, services of general interest, and economic and social cohesion.
But the ETUC is now sufficiently alarmed at what is happening that it has called an EU Day of Protest and Action on September 29.
The crisis has triggered a major policy debate between those who argue for immediate and radical reductions in budget deficits – even at the expense of long standing social and welfare standards – and those who insist that the big cuts in public expenditure should be delayed until there are clearer signs of economic recovery. The evidence for sustained economic recovery is scant to non-existent at present. Indeed a growing number of experts are warning of a very weak, jobless recovery, or even a “double dip” recession.
There is however, a deep issue at stake if defence of decent European social standards is to be placed at the heart of policy making and not to become an increasingly powerless lobby at the margins of the debate. For that to happen the European Union must surely break with an almost exclusive emphasis on GDP as the be all and end all of economic policy objectives. The time has come to replace GDP with a far wider, more socially and environmentally responsible measure of economic progress.
This, of course, is a far less radical demand than might be supposed. The European Commission has been debating how to change the measure of economic growth for several years and has come up with concrete possibilities. More recently a report for the European Parliament has issued an impressive series of options for actually replacing GDP or adapting GDP indices with measures to reflect sustainability, social cohesion and broader human welfare.
A series of broadly similar studies – notably that by Professor Joseph Stiglitz – have also begun to shift the centre of debate among policy makers. But although the first serious work on this issue was initiated by a Swedish European Union Presidency more than a decade ago, no concrete decisions have been put to the EU Council of Ministers. It is not even clear to what extent serious efforts to negotiate a compromise have been undertaken in Brussels with Member State governments.
We are living through no mere passing economic difficulties but a truly systemic crisis in the world capitalist system. The European Union has every interest in leading the way for a global agreement on profound, structural reforms to the international financial, economic, and regulatory system. Progress is, however, proving worryingly slow. The cogency and political impact of the case for specific reforms would be greater if they could be argued within a new, more enlightened paradigm of what kind of economic system we are aiming to achieve.
It may be objected that merely replacing GDP with a broader measure or measures of economic progress would weaken the case for growth and job creation. It is far more likely that bringing in measurement of sustainability and social cohesion to the heart of policy making would highlight the enormous investment opportunities which exist to ensure that we build an economic capable of confronting climate change and tackling social inequality. Moreover if Europe takes the lead in developing a human economic infrastructure it can market its expertise to the world.
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Very interesting piece John. But are there any signs that either the Commission or any of the member state governments are seriously thinking about adopting a broader measure than GDP? Even Sarkozy, who got Stiglitz and Sen to develop a new indicator, does not seem to use it.
We require a change of culture but it is hard to see how this can be achieved.
Clearly we need to move beyond an exclusive focus on GDP (or GDP per head) as the key welfare measure. It is vital, though, that any alternatives (or complements) are in accordance with people's preferences. Imagine an indicator that gives equal weight to GDP (per head), inequality and carbon emissions. That would accord with many progressives' view of a sensible extension. Yet in 2009 such an indicator would have pointed to an improvement in welfare (GDP falls, but both the inequality and emissions indicators increase). This would have been soout of kilter with people's perceptions that it would have dscredited such a (desirable) policy change. I give this rather stylsed example to show the complexity of the issue. (Henning, it also lets Sarkozy off the hook, a bit!)
Maybe it's less a case of putting all sorts of indicators into one figure – a well-being index – and much more important to convince people that one needs to look at more than one figure (GDP). The necessary figures are all there as far as I can see. We just need to convince people to take them into consideration.
My impression is that the intellectual case for replacing or at least qualifying GDP as a coherent measurement of economic/social progress is overwhelming and barely contested.
Henning: the Commission has produced a major paper setting out the case for these changes. I suspect that – no surprise – the Member State finance ministries will be dragging their feet within bodies such as the Economic and Monetary Committee which would have to react to these proposals before they go to ECOFIN ministerial council.
Andrew: You may be right that might be short term fluctuations in the response of indicators for both sustainability and social cohesion. But at present the longer term trends are so appalling that there is little prospect of measurement of progress revealing unexpected narrrowing of income/life opportunity prospects between poorer and better off groups fort some time. Equally most measurement of sustainability seem most unlikely on present policy mix to show much progress.
Richard: I take your point that governments may be readier to add parallel indicators to GDP than to replacing it. I think this would, however, weaken the point of the exercise which is to shift the centre of gravity of the economic system decisively in a new direction.
As if it was planned we have a Jeffrey Sachs column today on Gross National Happiness and its application in Bhutan.  ;http://www.social-europe.eu/2010/08/growth-in-a-buddhist-economy/