Research Findings

The class biases of European integration and the rise of winner-take-all dynamics in Europe

April 3, 2018

Over the past decade, Europe has stumbled from crisis to crisis. The conflict-ridden management of the continent’s troubled currency union gave way to discord over migration issues, from the freedom of movement within the continent’s Internal Market to the mass influx of refugees from Syria. Most recently, uncertainty over Britain’s decision to exit (Brexit) the European Union has taken center stage.

The series of calamities seems unending, and each episode seems to be the next step in the progressive disintegration of Europe’s established political economic order.

In addition, populism of an exclusionary bent has made a nasty comeback in the polls, and support for social democratic parties has fallen rapidly. This has made it practically impossible for progressives across the continent to offer viable alternatives to center-right governments.

Observers worry that the continent might have lost its capacity to maintain the egalitarian societies and socially embedded markets that have long informed arguments for social democratic reforms in the United States.

What are the lessons from recent developments? How should social scientists respond? What is the way forward for political activists?

In a recent paper I explore contemporary challenges to institutional reproduction and social citizenship in Europe, focusing on the dynamics of transformation transnationally and within two countries, Germany and Denmark.

The analysis shows how class conflict remains central to contemporary European politics, even if it presents itself differently today than during the 20th century.

Scholars would arguably benefit from a greater appreciation of the role that class politics play in institutional evolution today. As much comparative political economy scholarship has focused on the preferences of companies and individual voters, the conflict between labor and capital has taken too much of a back seat.

Activists, moreover, should note the continuing importance of organized labor in the politics of social security, which is best reflected in unions’ efforts to renew their strategies to adapt to a changing environment.

The class biases of regional integration

European integration has come with clear class biases, making it an integral part of rising winner-take-all dynamics in Europe. It has been an important driver behind the growing assertion of capitalism over democracy, as well as of the tendency for the interests of business and finance to trump those of broader populations.

The EU’s approach to resolving the Eurozone crisis was emblematic of this in its prioritization of capitalists over workers.

While monetary union originally featured a no-bailout clause, European heads of state broke with this provision in early 2010 when they sought to calm concerns in the financial markets about Greece’s ability to service its government bonds.

This decision was helped by the fact that a Greek bailout indirectly propped up the Northern European banks that held most of the Southern European debt. Having already bailed out their own domestic banks earlier in the crisis, Northern European governments were not keen to do so again, at least not publicly.

As a result, so-called “haircuts” for investors in Greek debt were only introduced after 2013, when Northern banks had reduced their exposure to Southern European debt.

Moreover, the moral discourses used by European policymakers to rationalize their actions actively downplayed the systemic causes of European imbalances and put the adjustment burden largely on workers, particularly in the European South.

Little attention was paid to the role played by deflationary and pro-cyclical monetary policy, or to the absence of automatic fiscal stabilizers on the European level. Policymakers rarely clarified that current account deficits in the South were the flipside of surpluses in the North, or that they resulted from holding down wages in the North. Neither was there much acknowledgment by European leaders that the incomes generated by Northern lenders to the South were in part a compensation for assuming default risk.

Instead, policymakers framed the debate in terms of “irresponsible” Southern nations that were portrayed as “deficit sinners.” This rhetoric shifted blame away from capitalists and undermined cross-national solidarity among working populations.

A change in the dynamics of policy feedback in European integration has played a key role in strengthening these class biases. During the 20th century, European integration deepened via self-reinforcing (or positive) policy feedback. Initial steps toward integration generated the need for further ones. The logic of functional spillover from one area to the next allowed member states to address collective action problems that initially seemed intractable, but could be addressed as preferences shifted over time.

The decision to widen the European Union and to introduce a common currency without significant fiscal integration, however, strengthened self-undermining (or negative) feedback dynamics in the 21st century. Rather than moving beyond narrow national interests and strengthening social policy instruments on the European level, policymakers sought to control countries’ behavior, putting them on a tight regulatory leash that outlawed new government deficits and debt, whatever the outcomes of elections might be.

Dual threats to domestic institutional reproduction

The reproduction of social democratic institutions has also been challenged on the national level, even in countries like Germany and Denmark, which have long been seen as standard bearers for socially embedding markets with strong welfare institutions.

While Germany’s cooperative labor relations have been frequently invoked as a best practice in the United States, Denmark has attracted attention among other wealthy democracies for its combination of economic flexibility with social security, often labeled “flexicurity.” Yet both countries are now engulfed in centrifugal politics that have made it difficult to sustain inclusive social contracts.

Retrenchment and drift have led to the erosion of institutional standards. Retrenchment represents the curtailment of rights and cuts in transfers programs. Drift refers to the failure to update institutions to changing circumstances.

The declining power of unions as the voice of workers has played an important role in the two countries’ recent trajectories. With a shift in the power balance away from corporate interests extremely unlikely, the prospects for comprehensively shoring up social democratic institutions are pretty bleak.

Yet, this does not mean that organized labor is unimportant. As among the largest membership organizations in society, unions have at times successfully resisted retrenchment. Moreover, they have taken steps to combat drift by renewing their programs and repertoires of action.

In both Germany and Denmark, unions have play central roles in new market-embedding initiatives, mobilizing the public for the introduction of a minimum wage in Germany and pushing to expand continuing training rights in Danish collective bargaining.

Both cases also illustrate the importance of discourse in defending social democracy. Just as in the 1920s and 30s, when Swedish social democrats sought to build a “people’s home,” the success of reforms today depends on a well-articulated vision of the public interest. A broadly shared sense of purpose remains central to sustaining social solidarity today.

Read More

Tobias Schulze-Cleven. “A Continent in Crisis: European Labor and the Fate of Social Democracy.” Labor Studies Journal 2017.

Image: Friedemann Wagner via Wikimedia Commons (CC BY-SA 3.0 DE)

No Comments

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.