A ‘Poldermodel’ For The EU?

frans van waarden

Frans van Waarden

National social policy programs across Europe have their roots in three different traditions of origin. There is the (partially British) liberalist regime, where programs are the outcome of supply and demand on markets; there is the (French) étatist tradition, where programs have been produced and are organized by the state; and there is the (Germanic) corporatist tradition, where they have been produced bottom-up by organizations of civil society, in several versions eventually supported – e.g. legally framed – by the state.

The corporatist tradition is found especially in Austria, Germany, Belgium, Switzerland, and the Netherlands, and to some extent in Sweden. These countries form the geographical ‘center’ or core of Europe where the inheritance of the medieval European guild tradition – the source of some of the earliest social programs – has persisted most strongly. Social insurance programs there were agreed, developed, and sometimes implemented out of, and in, close cooperation between associations of employers and employees, the so-called social partners. In some cases (Belgium and Sweden) benefits were paid out by trade unions. Health care was financed by ‘Krankenkassen’ and other similar health insurance cooperatives and was privately provided by associations such as ‘Arbeiterwohlfahrt’ and ‘Caritas’ in Germany, or protestant ‘diaconessenhuizen’ in the Netherlands. Affordable public housing was provided by socialist, catholic or protestant housing associations, while vocational training was and still is provided by the German and Austrian Handwerk organizations, having their roots directly in the guild-tradition. Such solid foundations of social policy programs in civil society have produced some of the most developed welfare ‘states’ around (here the term ‘state’ stands more for ‘nation’ than for ‘public authority’). And Germany is even in the liberal US and Britain admired for its well-developed association-based system of vocational training.

Notwithstanding the historical success of the corporatist model, European social policy tends to follow more the liberal and the étatist traditions. It leaves as much room as possible to the market. Whatever can be commodified should be. And if Europe interferes, it does so in the étatist tradition by public regulations, directives, and case law.

The rich European civil society-based tradition is ignored and many of its institutions at the national level have even been destroyed. Association-based health insurance, hospitals and housing corporations have been forced to commercialize and compete on care and housing markets with commercial enterprises; close cooperation between associations and national states in the provision of services has been forbidden, as undue forms of state support, considered unfair on open service markets where also enterprises from other member states should have access; and forms of close cooperation between national adversaries across the competitive – as well as the class-divide to supply such social services, or to finance or regulate them, have been considered illegal ‘restraints of trade’.

This destruction of self-organization by civil society has everything to do with the dominance of the neoliberal ‘supreme commandment’ and apparently highest value in the European Union, that of ‘competition über alles’. It holds for individuals as well as organizations and is first of all made possible by the ‘four freedoms’: the free movement of goods, services, capital, and – last but not least – labor, across the EU’s territory. Furthermore, it is reinforced by the ban on collusive practices. Cartels and other forms of cooperation between competitors are anathema. In principle this could have even affected trade unions. After all, they could be considered by some to be cartels of competing workers against ‘customers’ on the labor market. These principles and rules, firmly established in the Treaty on the European Union, the Treaty on the Functioning of the EU, and the Charter of Fundamental Rights of the EU, are meant to help reach the so-called ‘Lisbon goal’: That the EU should become the most competitive region in the world.

It remains to be seen whether that goal can be realized by placing competition so high in the European value hierarchy. And even if so – which is not likely as I will argue – then the price is high. Because in the process a rich and specific European heritage of social self-organization by civil society through cooperation rather than competition threatens to get destroyed.

To be sure, the values of freedom and equality are being served by placing competition so high in the value hierarchy. Freedom of establishment implies equal chances of individuals and corporations in markets. And a bright future seems to lie ahead if we follow such Social Darwinist ideas: The best, the brightest, the fittest will survive. In the market, as much as in sports, the court room, or academia. Free movement and competition of goods, services, capital, and labor may lead to higher quality and better service. And fiercer competition on prices, wages, and working conditions will reduce production costs.

But can European countries really win a global competitive struggle based on low production costs? Against countries like China, which seem to have an infinite labor supply? In order to prevent such an all-out race to the bottom the EU has attempted to complement negative integration – abolishment of barriers to free trade – with some positive integration: Common regulatory standards for respectable wages and working conditions, environmental friendliness, etc. But as Fritz Scharpf has emphasized, negative integration is easier done than positive integration in the EU.

Furthermore, what are the most competitive countries according to the World Competitiveness Index, annually produced by the World Economic Forum (WEF) and ranking 144 countries? In its 2012-2013 report among the top were Switzerland (1), Finland (3), Sweden (4), the Netherlands (5), and Germany (6), ahead of the US (7), the UK (8), Hong Kong (9), Japan (10), Canada (14), Australia (29) and China (29). The North-Western European countries are not particularly the low-wage and poor working conditions countries and neither countries that are nurturing a very liberal economic ideology. But they are typically the countries with a long-standing corporatist tradition. They have in common that they complement competition with various forms of cooperation between competitors and other adversaries.

Take the Netherlands for example. For decades it has been among the top ten in this WEF list. This tiny country has, notwithstanding very limited soil for agriculture, managed to become the world’s greatest greengrocer. According to UN international trade statistics  the Netherlands is responsible for 12.4% of global trade in fresh, frozen, and simply conserved vegetables. It even exports tomatoes to California! And exactly this highly productive and innovative sector exemplifies the Dutch model of organized cooperation between three types of adversaries in markets, as it is traditionally organized in various producer-cooperatives and associations. There competitors and social partners cooperate to compete, globally.

First, competitors cooperated ‘horizontally’, in trade unions, trade associations, and even cartels. Up until 1998, when the EU banned it, the country was considered a ‘cartel paradise’. Cartels were in principle allowed, unless proven to be harmful. In order to determine that, they all had to be registered in a cartel register.

And even that champion of neoliberalism, the OECD, had to admit in its 1993 report on ‘the unusual Dutch case’ that ‘collusive agreements’ are not always as destructive as economists like to predict. Though ‘many sectors of the economy are enmeshed in a web of restrictive agreements, regulations and barriers to entry’ as it wrote, it had to acknowledge that ‘the economy has apparently suffered less from this situation that other countries with weak competition policy’ and ’prices are not obviously higher than in most other countries’, while ‘the social consensus may have had a beneficial impact on overall economic performance’.

Second, there was ‘vertical’ cooperation between private transaction partners, i.e. (organizations of) buyers and of sellers cooperated. This concerned not only suppliers and customers of goods and services in longer product value chains, but also labor. Trade unions and employers associations have a long history of relatively peaceful ‘social partnership’, i.e. in addition to cooperation across the competitive struggle there was also cooperation across the historical class struggle.

The third form of cooperation was between organizations of private market parties and public authorities. The latter provided both passive and active support for private market regulation: Passive in the form of tolerating such self-organization and self-regulation; and active in the form of financial support for associations or ‘extension’ of their private regulations to the status of public law. Such happened e.g. with the book price cartel and many sectoral wage agreements. Also, the food sector was organized in statutory compulsory trade associations, much like the German, Austrian, and Swiss chambers. They were all considered to be in the public interest: The interest in production of sufficient Dutch language books, of joint innovation in agriculture and food, and in social peace between employers and employees.

The three-stage cooperation – first between competitors on one side of the labor market, then between these associations on both sides of that market, and then between these and the state – produced the mainstay of social policy programs: Regulated wages including a minimum wage, rules on health and safety at work and on working hours and paid holidays, pension plans, and social insurance schemes against the risks of unemployment, sickness, disability and old-age.

This cooperation between economic adversaries has a long history. In the more distant past in guilds. More recently in – partly statutory – trade associations and trade unions. In addition to regulations they have also produced sectoral collective goods, such as vocational training, joint basic research, or collective generic advertising for the sector. A symbolic example was the association of six bicycle lenders on the small North Sea island of Ameland. Together these six financed the placement of simple manual bicycle pumps – tied to poles – across the island, thus making it more attractive for people to rent and ride a bike.

In my inaugural lecture 20 years ago I used dykes as metaphor for such market regulations, thus introducing in passing the term ‘polder model’.[1] Just as dykes around a ‘polder’ create reliable dry spaces in which life is possible and investments of farmers sensible, so can market regulations create an orderly social space in which it is safe to invest and where there is ‘space for competition’. And just as Dutch dykes have been the result of deliberation, cooperation, and concertation between competing landowners and farmers ever since the 11th century, so were private market standards the result of cooperation and concertation between competitors in markets.

The Netherlands has not been alone with such market standards. Quite a few other European countries have similar institutions that regulate markets and create sector-specific collective goods. I referred already to the German, Austrian, and Swiss Handwerk associations, which organize the vocational training systems in these countries, linked to the famous ‘made in Germany’ brand. Membership is compulsory for all SME firms in the sector/region and these collective goods are provided by both compulsory dues payment and provision of traineeships by the member firms.

In a way such statutory trade associations can be compared to municipalities. Whereas the latter have a territorial domain and create order in physical space, the former have a sectoral domain and create social order there. Both levy compulsory taxes and provide collective goods for their domain. And in both their ‘citizens’ have voting rights.

The EU, by overemphasizing competition in the market, is overlooking the positive sides of its opposite: Cooperation in the market. Markets need institutions, not only to maintain competition, but also to regulate and structure markets, to inform potential transaction partners, to set product quality standards thus reducing information problems for customers and creating trust in the market, and to collectively engage in research, innovation, information dissemination, and in organizing market competition as with cooperative auction halls. Entrepreneurs do not only need to experience fear – as provided by competition – but should also see sensible opportunities – as provided by regulatory institutions, that can stabilize expectations.

Curiously enough, the EU does not particularly encourage competition between member states. What is good for business and labor is apparently not so for countries. The ideal of the integrated European market is a level playing field, leveling or equalizing regulatory and institutional conditions across European markets. Many EU regulations, directives, and case law aim to reduce the ‘variety of capitalisms’ found in Europe. This variety, based both on regulations and regulatory styles of implementation, is frowned upon. But why not let the most efficient institutional framework prove itself by ‘surfacing’ in competition between such ‘varieties of capitalism’?

In short, if the EU ever wants to realize its goal of becoming the ‘most competitive region’ in the world, it might be wise to recognize the potential contribution of sectoral self-regulation, self-organization, and self-production of collective goods like vocational training, collective research, or mutual quality control. And in order to do so to mitigate the gospel of unrestrictive competition and make more room for cooperation between adversaries. Rather than ‘competition über alles’, the slogan might better be ‘cooperation countenanced’.

Precisely this could be the meaning of a ‘poldermodel for the EU’: To balance competition against cooperation between adversaries in the marketplace, as the Dutch have done successfully for over six centuries. The resultant forms of self-regulation could form the ‘dykes’ that make transactions – involving trade, production, work, income, and investment – in the polder, protected by those ‘regulation-dykes’, a more sensible enterprise. At the very least, the EU could be more tolerant to such varieties of capitalism that depart from the neoliberal ideal. By thus nurturing a diversity of capitalisms rather than striving for convergence towards the neoliberal ideal, the EU would also be more true to its official motto ‘In Varietate Concordia’, meaning ‘Unity in Diversity’.

Such tolerance, recognition, or even stimulation of self-organization by civil society could also produce eventually a more ‘Social Europe’. And not only in its provision of social protection and social services – as safe dykes around the market – but also by thus encouraging the participation of bottom-up formed organizations of civil society in the creation, regulation, and implementation of social programs. After all, social and societal organizations do form that ‘Social Europe’ themselves.

References

[1] See for the text of that inaugural lecture the recent English translation with an added evaluation of the changes over the last 20 years: Frans van Waarden (2013)  ‘(Will and) Did the Netherlands breach its Dykes?’, in Annette Zimmer (ed.) Civil Societies Compared: Germany and the Netherlands, Baden-Baden: Nomos Verlag,  pp.219-246.

This essay is part of the EU Social Dimension expert sourcing project jointly organised by SEJ, the ETUCIG Metall, the Hans Böckler Stiftung, the Friedrich-Ebert-Stiftung and Lasaire.