Reinforcing our ambitions: How to answer the present financial end economic crisis? – What scope of action for the social partners?

 

“Reinforcing our ambitions: How to answer the present financial end economic crisis? – What scope of action for the social partners?” was the topic of a seminar organized by HIVA from 6 to 7 September 2009 in Leuven, Belgium, in the framework of the EZA project on the financial and economical crisis.

1.     Situation of the project: the EZA integrated action programme on financial and economic crisis and the labour movement

1.1 Motivation of the project

For decades, concern about the creation of a social Europe built on a social market economy has inspired the European social movements to critically assess economic development and policy with a view to realis­ing full employment and adequate social protection.

Stimulating growth and employment, accommodating industrial change and preparing for new indus­trial development, promoting social inclusion and maintaining and completing sustainable and adequate social protection have all been points of concern for the EZA in numerous grass roots projects or more coordinated initiatives at the European level. This common wisdom was conceived in a context of rela­tively prosperous economic and social development, in recent years sometimes accompanied with the illu­sion that full employment had been realised again, and sometimes also with the illusion that the financial markets could overcome the upcoming challenge of the ageing population. The financial crisis and its fall­out, with the deepening economic, employment and fiscal crisis, changed this world overnight and took away all our illusions. 

The workers are not responsible for the direct and indirect causes of the present financial and eco­nomic crisis. However, they do risk being hardest hit by its consequences. For this reason, the workers’ movement and civil society nevertheless want to take on responsibility for containing the consequences and finding ways out of this crisis.

 

1.2 Ambition of the project

 

Since the onset of the financial and economic crisis, there has been an ongoing debate within the EZA group of social organisations concerning how to cope with the causes and consequences of the crisis, how the member organisations, each from their own perspective, can contribute to the political debate, and what the alternative strategies are for overcoming the crisis. The EZA started within regional partnerships (see annex 2) as to what strategies should be followed and what choices are to be made. The EZA asked HIVA in this context to prepare a position paper on what strategies should be prioritised for a workers’ movement. This position paper puts to the fore a mix of traditional but solid policy strands, reconfirming the choices made by social movements in the past, but without any promise that no difficult choices will have to be made within a deteriorated context in the future. Re-regulating the financial markets, rediscovering fiscal sta­bilisation policy, reinforcing labour market and industrial policies, and maintaining high levels of social protection are the choices put forward. The position paper also embodies a rediscovering of the canon of European social values.

In the workshop of the partners of the EZA coordinated project, the position paper was confronted with the opinion and plans of the members of the three regional networks (see programme in annex 3).

The scientific conference (see programme in annex 4) was intended to deepen the insight into these strategies by con­fronting the audience with expert opinions not only from the academic scene but also from the social and political world.

The conference was open to participants from the member organisations of the EZA at the European level, and to all those interested in the potential of the European social market economy and in both new and timeless economic policies for coping with the current worldwide financial and economic crisis.

This conference was part of the Athenian Policy Forum conference series, with which we share a common history since 1992 of organising conferences to stimulate further scientific debate on economic integra­tion and its policy implications.

2.     Outcome

The seminar and conference started from a position paper prepared by HIVA on the facts and figures on the economic and financial crisis worldwide and in the EU and how to overcome this crisis.

Evidence was provided how the financial crisis emerged as a stock market crash and a crisis of the financial institutions and financial markets from 2007 and especially 2008 on , but was followed by an economic crisis that deepened in 2009, an employment crisis from 2009 on and probably persistent for many years since then and finally a fiscal crisis putting public finance (deficit, debt) in peril for years also.

How to answer this financial, economic, employment and fiscal crisis? That was the second part of the position paper of HIVA, and further documented in the conference. Financial regulation, industrial policy, employment policies, (Keynesian) deficit spending and social protection are put forward. The financial and economic crisis was caused in of world of deregulation and dominance of market mechanisms. The remedies imply greater involvement of the state. It is a rediscovering of the role of regulation and the social market economy.

In the seminar evidence was provided by the social movements of 10 member organisations how the crisis hits those regions, and highlights some of the strategies to overcome the crisis. Those topics are further developed in the regional conferences, supported by three regional coordinators.

In the conference five experts presented their view on strategies to get out of the crisis.

Mr. Lannoo from the CEPS think tank describes how the crisis in the financial markets in the USA contaminated the European financial institutions and undermined their solvency. In view of their relative importance (compared to national economies) the banking problems became a systemic risk for the national economies so that the national authorities need to interfere. This has been done, but at a substantial cost for public finances. It became also clear that international coordination was required and that adequate institutions were missing.

Prof. Moesen (Catholic University of Leuven) explained that market regulation cannot function without government regulation. The economic crisis requires also additional public intervention. The sooner the later this will call for new taxation (environment and energy taxes, taxes on speculation) and new debt instruments (for instance a central borrowing vehicle for states).

Mr. A.Watt from the European Trade Union Institute describes the depth of the unemployment crisis that is following the financial and economic crisis, but illustrates also that new ways of labour market measures and industrial policy are thinkable: temporary unemployment to keep the work force attached to the firms, subsidizing the demand for certain product categories (environment friendly cars for instance). They all will come at a higher public cost.

Prof.Konings (Catholic University of Leuven) demonstrated that despite the economic crisis, the globalisation invites for a new industrial policy. New emerging industrial countries and changes in transport costs generates new types of economies of scale and will result in new types of localisation of activities. The advantages of ‘agglomeration’ will lead to a further concentration of activities. Former policies to spreading economic activities over the territory will become less feasible. New strategies to stimulate the periphery will be needed, concentrating on for instance mobility and communication infrastructure.

Prof. Geeroms (Europe College Bruges) documents the adequacy of the European common and national interventions to overcome the crisis, but also the magnitude of the burden. It will be larger and more lasting than expected, and is hitting the European economies at a moment that the expected risk of the greying population needed to be answered. ‘Le monde va mal’ is perhaps the best summary of the state of the world economy after the crisis.

Prof. Pacolet (Catholic university of Leuven) underlined that the European Welfare State, containing substantial public employment in all kind of activities on one hand and all kind of income support within the social security on the other hand, was demonstrating its efficiency in coping with the economic crisis and dampening its effects. On top of that he illustrates that certain ‘private’ solutions for the social security as private and funded pensions, promoted before the financial crisis, need to be reconsidered with the knowledge obtained after the crisis. He concludes that there are less arguments and even less room for funded private pensions and more arguments for a rediscovered pay-as-you-go pension system.. The crisis taught us that the welfare state as an important element of the European model of a social market economy is not only a way out of the crisis but could perhaps even helped us to prevent the crisis.

Mr. Yves Leterme, former and present Belgian Prime Minister and at the time of the conference Minister of Foreign Affairs develops further this model of a  European social market economy, the so called Rhineland model. Compared to the Anglo-Saxon model of the free market and the upcoming Chine model of a centrally planned capitalistic model, the Rhineland model or social market economy (including also the Scandinavian model) promotes the market economy but socially corrects it by introducing social-economic democracy, public spending and social security (privately or publicly organised), solidarity and subsidiarity and responsibility. It is based on participation, stake holder ship and not only share ownership, long-term vision and not short term profits, progress for all. Its is enshrined in a social protection system the materialises a ‘canon of European social values’. The social performance of an economy based on those principles is beyond any doubt superior to other models. It is proving, in this era of a new worldwide ‘great economic and financial crisis’ to be a more stable strategy for further growth and progress.

The position paper and the PowerPoint’s of the invited speakers are available on the web pages of EZA and HIVA.

3.     Enhancing social dialogue

The conference and preparatory work on the position paper related with the economic and financial crisis and how workers movements can react on it, aims at reinforcing the social dialogue. As could be observed already from the participation in the Leuven conference (participation from social partners, extensive coverage of the results in the review of the Economic Council of Belgium), the information was intended to prepare not less than 12 grass root organisations member of EZA to continue the debate in three regional networks and conferences, and coordinated by EZA directly. The aim of that horizontal project was to provide information on different approaches and advice on how to safeguard jobs within the European Union, and on how to support workers during this crisis.

The information of the Leuven Workshop and Conference, provided by several academic experts, was to be confronted with the grass root experience in the member states, and in that way aimed at developing approaches and recommendations for labour unions, workers’ organisations and the European Commission on how to better protect workers. It was a moment of deepening the information, before a broadening of the debate was launched. The outcome of the latter process, as we can monitor at the end of that project, has proven to be successful. The topics  put forward on the conference has proven to be timely, and at the core of the European social and economic dialogue since then.