Jocellyn's Blog

Social policy and EU

According to theory of Alesina, Angeloni and Schuknecht from 2005, EU should prefer centralization in some politics and decentralization in others. This is explained by the economical trade-offs between gains and costs. In some cases (like international trade), it is more economically profitable to involve the EU, and in some other cases (like culture), it is better to retain the national level, because the costs of heterogenic preferences are too huge.. This paper brings the reason why social policy is one of these areas, which are better governed at the national level. It is mainly because of the different models of social policy, which are based on common values and which are adapted to state’s capacity to deal with social issues. This is also linked with economic issues.

The benefits of getting larger are economic advantages (cheaper public goods, bigger market), safety (better chance to defend the state), redistribution, insurance for regions and internalization of externalities. I will focus on the economic benefits and redistribution and insurance, which I call social benefits. “Costs of many public goods are lower in larger countries, where more taxpayers can pay for them”. In the case of social policy we can imagine, e.g. costs of health care could be lower if we centralize it among all the European states. Everyone would be contributing to the same system.

In case of the second issue, redistribution is one of the main tools of social policy! It compensates for inequalities that are perceived as too large and which prevent a dignified life for all the citizens. The reasons for redistributing are mainly to regulate unfair inequalities made by the market, and to ensure some level of protection to all. Insurance means possibility for the larger countries to help it’s own regions if they need it. If we governed social policy at the EU level, we could redistribute across all the nations states, but it would mean serious economic threat as I explain bellow.

I argue that social policy should stay in the competence of national states, especially because of the different cultural and historical roots of social policy. There are 3 main types of social policies in Europe, the Anglo-Saxon, Continental and Nordic style. Each of them is based on shared values and principles of those countries. Differences between these approaches can be huge, but still each of them is a legitimate approach (that difference could be e.g. helping people according to their previous contributions contra helping people no matter how did they contribute or how did they become poor).

But this is also an economical issue. If we tried to establish one common social policy for everyone, we would struggle with a different abilities of countries to take care of their citizens and their different financial options.

Let’s take a look on social policy expenditures of EU member states. In 2007, Slovakia spent only about 17% of it’s GDP on social policy. On the other hand, Denmark spent 29%. If we set a uniform social policy, what would it look like? If we would make it according to high Nordic standards, wouldn’t it mean a serious threat to economic stability for countries like Slovakia? And if we try to adapt social policy according to poorer countries, wouldn’t it mean a fall in the level of social protection for the other states? We cannot uniform social policy across Europe without threat to the economy for some, or without decreasing quality of existing social policies for others.

Alesina and others say that the EU involvement is not desirable because of high standards of social protection and strong difference in preferences. They compare this theoretical model with results of their survey focused on real EU involvement; and also conclude that EU have much stronger impact on social protection, employment and health policies than it should have.

I agree social policy should not be centralized from the EU perspective. High involvement perceived by the authors could be explained as an EU effort to ensure some basic protection to all based on human rights. For example, Single European Act from 1987 speaks about harmonization of social policy (not unification), Amsterdam treaty from 1997 fights against discrimination based on gender, race or religion and Lisbon strategy from 2000 tries to modernize European social policy and fights against social exclusion. But we still have different national social policies concerning social protections. These policies are based on national values and historical roots as I described above, thus I do not think that it could ever change. It would mean not only wiping off culture heritage of nation states, but also a huge economic problem, since each and every member state has a different capacity how to ensure social policy.

In sum we can say that social policy should remains in the hands of member states although some level of EU involvement is necessary. The benefits of centralization of social policy are clear. It is economically and culturally almost impossible to have one uniform social policy for all, because of the specific nature of different models and because of the large discrepancy between member states capacity to provide it.

References:

ALESINA, Alberto, Ignazio ANGELONI a Ludger SCHUKNECHT. What does the European Union do?. Public Choice. 2005, 123:3-4, 275-319. ISSN 0048-5829. DOI: 10.1007/s11127-005-7164-3. < HYPERLINK “http://www.springerlink.com/index/10.1007/s11127-005-7164-3” http://www.springerlink.com/index/10.1007/s11127-005-7164-3>

ALESINA, Alberto. The size of countries: Does it matter?. Journal of the European economic association. 2003, 302 - 316.

Social Expenditure Database. OECD [online]. [2007]. http://www.oecd.org/social/socialpoliciesanddata/socialexpendituredatabasesocx.htm



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