Much is made about the virtues of ‘Social Europe’. Higher standards of living, broad and deep welfare support, lower working hours, a better work/life balance: these are just some of the advantages of living in Europe cited by commentators. Back in 2004, Jeremy Rifkin published The European Dream: a paean to Europe’s embrace of a more human and environmentally friendly sort of capitalism. In previous posts, we’ve been critical of the notion of ‘Social Europe’. There is a sense in which the rise of ‘Social Europe’ coincides with the rise of a distinctively anti-social society.
There are different aspects to this emergent anti-social Europe. One is the way in which Europe’s growth model rests upon the ability of national governments to contain wages. Wage moderation – and with it declining or stagnant levels of household disposable income – is thus the flipside to the “success stories” of countries like Germany and the Netherlands. A previous post cited the high levels of flexible employment in these bastions of ‘Social Europe’, in contrast to surprisingly lower levels of flexible employment in post-Thatcherite Britain. Here we can look at the figures for household disposable income. Though variations exist, there is a striking difference between the ability of core Eurozone countries to contain wage increases and the wage increases seen in the now crisis-ridden peripheral economies of Greece and Ireland. There is only so much these figures can tell us but they are at least part of the story of contemporary European political economy. The minimal increases in household disposable income in Germany are striking. Household income in the Netherlands fell in 2002 and 2003, falling 2.4% in 2003.
The ability of national governments in Europe to impose cuts on household incomes has become a determining factor in the European growth model. We see this today in the context of the Eurozone crisis where the negotiations between unions, employers and governments are critical to the resolution of the sovereign debt crisis. This is the case in Italy today: the European Central Bank recently wrote to the Italian government, stressing that its buying up of Italian bonds was based on a quid pro quo that would see the government in Rome push through its planned austerity budget. The Financial Times warned yesterday (16/08/11) that the success of these plans depended upon unions and professional associations acting “responsibly”. Susanna Camusso, leader of Italy’s largest union, the CGIL, has said she may recommend a general strike in opposition to the planned cuts. The ECB and the Italian government are pushing for a replacement of fixed national labour contracts with flexible company level contracts. Given the transformation of Italian corporatism into a mechanism for guaranteeing union compliance with government programs, and the history of successfully using Italy’s membership of European Monetary Union as a reason to moderate union demands, there is a good chance the CGIL will back the government’s plan. This might please the markets but it would be another step away from a properly social Europe.