Fuente: © European Union
http://europa.eu.int

EU: Social Cohesion – a condition for growth?

/noticias.info/ Roundtable introduction at the 50th Anniversary of the Council of Europe Development Bank
Paris, 13 November 2006

Ladies and Gentlemen

It is always good to start a round table with a bit of disagreement, to provoke the debate and get the discussion going. On this occasion I am afraid that I will have to disappoint you, as I find myself more or less in complete agreement with what Jacques de Larosière has just said. Social cohesion and growth go hand in hand. They are mutually reinforcing. My main message this morning, however, is that the policies we need to promote social cohesion have changed. In the time I have available, I want first to take a brief look at the idea of the European Social Model and what experience teaches us; second to look at the policies we need today in the light of this experience; and third at the role of the European Commission and cohesion policy for which I am responsible.

Jacques mentioned in his introduction 'le modèle social européen'. This model is characterised by certain values – freedom, democracy, equality, solidarity and openness. And it is characterised by government intervention to reduce poverty and social exclusion, and to achieve a fairer distribution of income. The basic instruments include pensions, health care, social protection for the poor or disabled, and redistributive taxation. The first point I want to make is that while these are common features of the European Social Model, in reality the model varies from country to country, both in terms of what it does, and in terms of the impact it has on the economy. The weaknesses with which the model is associated – low growth, high unemployment, unsustainability in the face of demographic trends – are not experienced to the same degree in all economies. I want to mention just one aspect of what is often referred to as the Nordic model – the one which, to simplify greatly, is characterised by a high level of social protection, a high level of taxation, and at the same time strong economic performance. Analysis shows that the low incidence of poverty to be found there is not explained primarily by redistributive policies – be it through the taxation system or through social transfers – but by what we might call the amount of human capital which an individual brings to the market. In short, the higher the level of secondary education a person possesses, the lower the risk of poverty he or she faces.[1]

Globalisation not a new process

This leads me to my second point. While the aim of social cohesion remains valid, and while many of the achievements of the welfare state are worth preserving, the policies we need today have changed radically. Many of our traditional social policies and labour market policies were conceived in the very different economic context of the 1950s and 1960s. I am among those who believe that globalisation is not a new process, but I do believe that the speed and the extent of the changes we are witnessing today are unprecedented. As a result, it is often the case that the policies we have in place are no longer appropriate. They tend to protect the status quo, what we need are policies which allow our economies and our citizens to adapt rapidly and flexibly to changing circumstances. The European Union must become more competitive if it is to be able to derive maximum benefit from economic changes driven by globalisation. But we will not be competitive if we accept a fracture in our societies that excludes whole sections from productive employment. We must avoid the formation of the two categories of citizen that the Anglo-Polish sociologist Zygmunt Bauman has called "the global" and "the local", the former the often highly skilled workers of the knowledge economy that are the winners, and the latter the losers often unskilled and excluded from the formal economy and the opportunities created by the process of globalisation.

What then are the reforms which we need to put in place? I have just mentioned one which is the Nordic emphasis on developing labour potential and human capital. Equity can no longer be considered in terms of income distribution. It must be considered in terms of opportunity, and here education is essential. And I would add here that while in Europe we have done well on primary and secondary education this is not enough. If we want to be at the frontier of technological innovation – producing rather than absorbing inventions – then it is on our universities and research institutes that we will have to focus.

Second, our efforts also have to go into increasing activity rates. The key to greater social cohesion is to promote work. Just to add to Jacques' earlier statistics – the employment rate in the EU25 is below 65%. In the US it is 72%. On a yearly basis, the average worker in the EU 25 works 16% hours fewer than the US equivalent. We could have a long discussion on the extent to which this situation reflects a greater preference for leisure, or is the result of distortions in the market caused by tax and benefits systems. But it seems to me that this is a situation that will have to change in the face of demographic trends.

Third, the concept of 'job security' also has to change. What we need to offer our workers is the security that they will have a job, that they have the skills to move from one post to another. And we also have to ensure that the market is sufficiently flexible to offer them new possibilities. In short we must promote flexibility and adaptability, by seeking to protect people rather than protecting jobs. 'Flexicurity' is the rather inelegant word we use for an approach based on the view that flexibility and security are not contradictory, but complementary and indeed mutually supportive. To simplify greatly this approach, it means that a lower level of protection for workers against dismissals is combined with active labour policies which include not only unemployment benefits, but also a right, indeed perhaps an obligation for the unemployed for training. The aim ultimately, is to replace the concept of 'job security' with 'employment security'. I will come back to this.

Finally, there is the issue of public expenditure. The above reforms entail increases in expenditure on education and on research and development. This will be facilitated to the extent that pension systems are reformed, and here I believe that the only long-term solution is to extend working lives.

Involve Member States in structured priority setting

Many of the levers for these reforms are in the hands of the Member States. The Commission is nevertheless playing a substantial role. I want to look at two areas where the Commission is active. First, the Commission is playing a key role in building a consensus on the benefits of economic reform and in sharing of experiences and best practice. This was the original aim of the Lisbon agenda for economic reform. This Commission has re-launched the agenda with a clear focus on growth, jobs and competitiveness, and involving the Member States in a much more structured process of priority setting, reporting and exchange of best practice. The new Social Agenda launched by my colleague Vladimir Spidla at the beginning of 2005 is very much part of this. It aims to maintain the European social model, while bringing it up to date and seeking to ensure that it is sustainable in economic terms on the basis of the sort of reforms I outlined above. Take the issue of 'flexicurity' which I mentioned above. It seems a plausible policy response in today's rapidly changing economies. But around this table we are all aware that in areas such as labour markets, a "one size fits all" approach to policy will not work. It is against this background that the Commission and the Finnish Presidency organised the Informal Tripartite Summit in Lahti in October.

This was the first opportunity for the social partners to provide input and to exchange experiences on flexicurity at the European level. They will follow this up with a report to the Commission as input for the Communication on flexicurity which we are planning for the first half of 2007. The Commission is leading similar processes on issues such as demographic change, on the reconciliation of working and family life, and on labour law in general.

Let me turn now to European cohesion policy. In October, the Council adopted the Community Strategic Guidelines for Cohesion Policy for the period 2007-2013. These Guidelines confirm that cohesion policy should become the principal mechanism at Community level for delivering the renewed Lisbon agenda of growth and jobs. Member States have agreed to focus their Regional and Social Fund investments over the next 7 years on 3 broad priorities; making Europe, its regions and cities more attractive places to invest, to work and to live; encouraging innovation, entrepreneurship and the growth of the knowledge economy by developing research and innovation capacities; creating more and better jobs, improving the adaptability of workers and enterprises, and increasing investment in human capital. These priorities are fully in line with the policies I mentioned earlier. And I can confirm to you that the strategies which Member States are currently submitting to us reflect these priorities extremely closely.

I want to conclude by stressing just three more points.

Promote convergence

First, the very nature of Cohesion Policy is to promote the convergence of the poorer off regions of the Union. It is far from being simply an instrument of redistribution or support – though the concentration of funds on poorer regions clearly plays that function. Rather it is a policy which is designed to give new dynamism to these regions. The priorities we have identified should allow them to discover or to unleash the comparative advantages which they possess, and to put themselves on the path of sustainable development.

Second, I stated earlier that the EU is now – or should be – at the world technological frontier. To be there and to remain there we need more investment in research and development – this is why the Commission has set the ambitious target of 3% of GDP in 2010, up from just under 2% today. Cohesion policy, more than ever before, will contribute to this objective.

I have already mentioned the importance in this context of investing in human capital, but my third point is that the real challenge is to create the capacity to convert ideas into reality. We need to find ways to convert our research and development into new products, patents, and jobs; we need to create the micro and macro-economic conditions for innovation-based growth. And it is my aim that the new generation of cohesion policy should create “innovating regions”. By this I mean business-incubators, technology transfer networks, early stage financing funds and science parks – projects where small amounts of public investment are used to address market failures that inhibit innovation; projects that bring together public and private partners in a way that creates potential for excellence. It is clusters of this type which are necessary to promote sustainable growth in the future, and it is policies to promote them which ultimately contribute to improved social cohesion in the Union.

I hope in my intervention that I have shown you that cohesion and competitiveness are two sides of the same coin and that I have given some food for thought for the roundtable that follows.

[1] Globalisation and the Reform of European Social Models, Andre Sapir. Bruegel, September 2005. notas_de_prensa_archivo