European Social Democracy and the Third Way: Convergence, Divisions, and Shared Questions

Abstract

Taking a long-term view of social-democratic history, Donald Sassoon argues, convincingly, that we witness ‘an unprecedented, Europe-wide convergence of the parties of the Left’ (1998: 92).1 There is convergence of a short-term nature too. Read a sample of the European literature on the welfare state published over the last five or six years by centre-left policy institutes, parties and scholars. You may start with the report issued by the British Commission on Social Justice (1994), and end by reading the chapters on the German welfare state in the report of the ‘Zukunftskommission’ of the social-democratic Friedrich Ebert Stiftung (1998). Despite important national differences, you will be struck by the recurrence of the following fixed points: 1) Welfare policy cannot be reduced to employment, but employment is the key issue in welfare reform. Moreover, the nature of the employment objective has changed. ‘Full employment’ as it was conceived in the past in most European countries, underlying traditional concepts of the welfare state, was full employment for men. The social challenge today is full employment for men and women. This is linked to the transformation of family structures and our conception of women’s role in society. 2) The welfare state should not only cover social risks as traditionally conceived (unemployment, illness and disability, old age, child benefits) but also new social risks (lack of skills causing long-term unemployment or poor employment, lone parenthood) and new social needs (namely, the need to reconcile work, family life and education, and the need to be able to negotiate changes within both family and workplace, over one’s entire life cycle). 3) The ‘intelligent welfare state’ should respond to those old and new risks and needs in an active and preventive way. The welfare state should not only engage in ‘social spending’, but also in ‘social investment’ (e.g., in training and education). 4) Active labour-market policies should be higher on the agenda and upgraded, both in quantity and in quality, by tailoring them more effectively to individual needs and situations. Active labour-market policies presuppose a correct balance between incentives, opportunities and obligations for the people involved. 5) It is necessary to subsidize low-skilled labour by topping up low-skilled workers’ pay, or by subsidizing employers, combined with decent minimum wages. 6) Taxes and benefits must not lead to a situation in which individuals (or their families) face very high marginal tax rates when they take up a job. This problem of ‘poverty traps’ is particularly acute with benefit systems that are too selective, as in the UK. Yet ‘unemployment traps’ exist in other welfare systems as well, although to a lesser extent. 7) People who work part-time or in flexible jobs should be adequately integrated in and protected by the social security system. 8) Such an ‘intelligent welfare state’ needs an economic environment based upon both a competitive exposed sector and the development of a private service sector which is not exposed to international competition and in which low-skilled people find new job opportunities. Continental Europe typically lags behind in the development of the private service sector. Wage subsidies for low-skilled people can also be instrumental in this respect. KeywordsWelfare StateEuropean Central BankFull EmploymentWelfare ReformSocial InvestmentThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.