The Future of the European “Social Model” in the Global Economy

Abstract

This article examines the prospects for European welfare states in the context of globalization. It begins with a critical review of the globalization arguments. While there is some evidence that external constraints make life harder for policymakers seeking positive-sum outcomes, it is the combination of national debt and spending limits, plus domestic tax resistance, that really count in making expenditure-based social and employment policies more difficult in certain countries. In understanding the constraints and opportunities that will shape Europe's welfare future, globalization—crudely understood—is therefore much less influential than many suppose. While EMU has radically diminished national autonomy in exchange rate, monetary policy, and fiscal policy, there are also beneficial consequences for social policy and broader economic management. On the employment and social policy side, initiatives required to match greater “flexibility” with sustained security are now at the top of the EU agenda, and mechanisms for diffusing best practice across Europe are being put in place. Within this framework, European welfare states must place more emphasis on “dynamic equality,” being primarily attentive to the worst off, more hospitable to incentive-generating differentiation, and actively vigilant with regard to the “openness” of opportunity structures.