The European Project: Dismantling Social Democracy, Globalising Neoliberalism



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Bonefeld (2002: 127) accurately describes “an institutionally ‘embedded’ and legally regulated economic liberalism” at EU level. All of the above constitute mechanisms, not of defending or extending the European social model, but rather of undermining it. While the EU does not prohibit public ownership per se, it prohibits many of the features that make public ownership useful i.e., it limits market distortions, whereas the very point of much public ownership was precisely to distort the market and ensure outcomes that the market would not otherwise deliver (McGiffen, 2001: 78).

Sociologist James Wickham summarises the situation as follows:


“increasingly the Commission has been removing national barriers to competition within the EU, sometimes even opening up markets, such as in postal services or electricity supply, which hardly existed before... Increasingly too, public services such as transport are being ‘opened up’ in the same way, partly by rulings of the European Court of Justice... Finally, the Commission has been clamping down on national state aid to companies... Far from protecting the European Social Model from globalisation and/or Americanisation, the EU is at the moment busily undermining it” (undated: 15, 2).
As stated by Wahl (2004: 38), “the EU is today the conduit through which the neoliberal social and economic model is being institutionalised in Europe”. There are, of course, counter tendencies and tensions (and these latter are discussed more fully later in this paper). Those who see the persistence of social democracy within the European project point, for example, to the ongoing popularity of terms such as ‘social cohesion’ and ‘social inclusion’ within EU discourse. Thus, for example, the ‘Lisbon Agenda’ adopted by the European Council in March 2000 reads as follows:
“The Union has today set itself a new strategic goal for the next decade: to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion”
The claimed commitment to social cohesion (see Atkinson, 2002) was followed up at the Nice Summit in December 2000, where it was agreed that each member state would prepare a national action plan every two years on progress in combating poverty and social exclusion. The Commission would then monitor and prepare progress scorecards for each country on the basis of indicators such as poverty, inequality and unemployment. This process is now ongoing, but there is no element of compulsion here – the Commission can ‘name and shame’, but it cannot impose fines or take Member States to court for failure to prepare or fulfil a plan. Unlike competition policy, limits on state aid to business, and the Stability and Growth Pact, social cohesion policy is not legally and institutionally embedded into the structure of the European project.
At the same time the Lisbon Agenda can be drawn on to support the extension of neoliberalism, as is evident in Irish Finance Minister McCreevey’s announcement, in the context of discussing the Agenda, of a campaign “to prioritise regulatory reform in a concerted effort to seek more flexible European product, capital and labour markets” (cited in Humphreys, 2004b). Proposals to create a new Commission vice-president for competitiveness have caused European trade union leaders to charge that the social dimensions of the Lisbon Agenda are being downgraded (Brennock, 2004).3
The EU’s role in globalising neoliberalism
Rather than globalising the social model, as Habermas, Derrida and Murshed (see above), have advocated, the EU is internally dismantling that model. Furthermore, it is indeed engaged in a process of globalising policies, but these are neoliberal rather than social policies. For example, the EU (along with the US and other actors) has signed up to a ‘stability pact’ for south-eastern Europe, point 10 of which involves:
“creating vibrant market economies based on sound macro-economic policies, markets open to greatly expanded foreign trade and private sector investment, effective and transparent customs and commercial/regulatory regimes, developing strong capital markets and diversified ownership, including privatisation, leading to a widening circle of prosperity for all our citizens; fostering economic cooperation in the region and between the region and the rest of Europe and the world, including free trade areas” (cited in Engel-Di Mauro, 2002: 128-9).
Further afield, at the WTO talks in Cancún, Mexico, in September 2003, the EU pursued an aggressive strategy designed to maximise market access for European companies, whilst clinging stubbornly to high levels of protection for European agribusiness (Jawara, 2003; Staunton, 2003).
The previous year – on 4th July 2002 – the EU tabled requests under the worldwide General Agreement on Trade in Services (GATS) to 109 countries; each such request involves asking the government of the country concerned to open certain, specified service sectors up to competition from EU firms. The requests largely originate from the European Services Forum (ESF), a European business lobby group (Corporate Europe Observatory, 2003).4 While these requests were not initially made public, leaked documents obtained by the World Development Movement (WDM) led that organisation to draw conclusions about the EU’s negotiating stance, as follows (WDM, 2003):


  • The EU is targeting the poorest countries in the world in its pursuit of services market access for European companies. Mozambique, for example, has received six sector requests.




  • The EU is targeting countries where “effective non-market based delivery systems are in operation” (WDM, 2003: 2), precisely because such not-for-profit systems limit the commercial opportunities available to European service exporters. Bangladesh’s water sector has been targeted, for example, putting at risk workers’ cooperatives’ involvement in water supply and sewerage services in the city of Dhaka.




  • EU requests constitute attacks on the principle and practice of public service provision. Again, the water sector is an example – the state-owned water company of Honduras has performed successfully in recent years, but would find itself exposed to potentially ruinous competition if EU requests are acceded to. The EU ‘Water Initiative’ (EUWI) in general is orientated towards creating business for the European multinationals – including Suez, Vivendi, RWE-Thames and SAUR – that dominate the water sector worldwide (Hall, 2003)




  • EU requests for binding commitments to the liberalisation of services undermine democratic policy making (by taking aspects of economic policy making out of the realm of political debate once the binding commitment is entered into). For example, India was able to evict Enron from its activities in the state of Maharashtra in 2001 for environmental and other reasons, but a binding commitment to liberalisation of the energy sector (which is one of the EU’s requests to India) might render such actions illegal in the future.




  • EU requests seek to restrict countries’ abilities to regulate foreign investment. Examples include the EU request to Malaysia to drop its current cap on foreign equity participation in its insurance sector, and to Brazil to end its restrictions on profit repatriation.

The countries targeted may choose to refuse the EU’s requests (see Chanda, 2003), but this does not alter the fact that the EU is seeking not to limit or restrain globalisation, but to extend and deepen it. This is also evident in the trade negotiations being pursued by the EU since 2002 under the Cotonou Agreement with the 78 African, Caribbean and Pacific (ACP) countries with which the EU has traditionally had special trade and aid relationships (previously formulated under the framework of the Lomé Convention). The EU now seeks to establish Economic Partnership Agreements (EPAs) involving the establishment of reciprocal market access arrangements with these countries on a regional basis. The organisation Traidcraft (2003; see also Hurt, 2003) has documented the negotiating stance adopted by the EU vis-a-vis these EPAs, including:




  • Demands for liberalisation of public procurement in the ACP states (allowing EU firms to bid for public works contracts there and not allowing ACP governments support or prioritise local contractors);




  • Movement towards liberalisation of all service sectors, beginning in 2006 i.e., an even more ambitious approach than the GATS one of tabling sectoral requests (see above);




  • And pressure to ensure European firms receive at least as favourable treatment as local ones in the ACP countries, meaning that ACP governments would not be allowed discriminate in favour of locally owned firms or require European companies to abide by special conditions with regard to local employment or procurement.

These processes may have yet further to go. The EU draft constitution aims to make trade policy on health, education and cultural and audio-visual services subject to qualified majority voting (QMV) at the Council of Ministers, ending the existing practice whereby EU countries opposed to the liberalisation of trade in such services could exercise a veto (Young, 2004). These traditionally sensitive markets may therefore be opened up – both inside and outside Europe – in the same way as is happening already for other service sectors (see above).


The European state and corporate power
Far from representing a social model, the European project is actively dismantling that model within its own borders and seeking to globalise a neoliberal vision of world order, especially in its dealings with poorer countries. It is important to note that European regionalism in the form of the EU is not the only, and sometimes not even the most important, conduit for the dissemination of neoliberal policies. A study of the electricity and telecommunications sectors found that much liberalisation would have occurred within Europe even without European integration, mainly because there were often pressures for such policy changes at the national level (Levi-Faur, 2004). Indeed, the policies that came to be embedded within the EU tended to reflect these national-level preferences rather than vice versa. At the same time, the Commission in particular did play a role in the liberalisation of these sectors in, for example, Italy and in the accession countries, more so in the case of electricity than of telecommunications.
Because the EU largely serves a neoliberal agenda set by the interests of capital, this does not mean that it is always and everywhere the driving force behind that agenda. National-level policies and/or corporate lobbying (such as by the European Services Forum) may be more influential. On the other hand, this also does not mean that there is a straightforward relationship between corporate preferences and EU policies. The US Foreign Sales Corporation issue provides an interesting example. The European Commission took the US government to task at the WTO over what was deemed to be an illegal subsidy to US exporters which placed EU companies at a competitive disadvantage (conferring particular benefits on large US corporations including Microsoft, Boeing and Motorola). But a study by Hocking and McGuire (2002) found that the Commission was not necessarily responding to complaints from European companies, though Airbus did lobby on the issue. Many European companies, especially those whose activities spanned the Atlantic, had mixed feelings on the issue and feared that the Commission’s complaint to the WTO could spark a damaging trade war, as indeed it may now do (Power, 2004; www.ireland.com, 1st March 2004). Hocking and McGuire (2002: 466) conclude:
“The Commission launched the FSC Case without much, if any, consultation with European business... The relative autonomy enjoyed by states on deciding which cases to bring and pursue does not support the more extreme arguments that governments are mere messengers at the WTO for corporate preferences”.
In part what is at issue here is the institutional desire on the part of the Commission, in cooperation with the governments of some Member States, to assert Europe’s identity and role as a global actor, even at some cost to business. However, the fact that the Commission is adopting a fairly moderate and compromise-orientated approach to the resolution of the FSC issue shows that costs are never irrelevant (Irish Times, 14th February 2004). Ultimately, “the increasingly dense set of EU-US corporate links” (Hocking and McGuire, 2002: 467) will likely prove the decisive factor in bringing about a settlement.

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