Introduction: Welfare Markets, Democracy and European Integration

As the latest crisis of financial capitalism which broke out in 2008 in the USA put the European banking sector in turmoil, its rescue by public funding caused public debt to skyrocket in the overwhelming majority of European countries. Since then, the policies of austerity implemented across Europe have strongly targeted the welfare state(s). Of course, countries receiving financial assistance from the so-called Troika (the European Central Bank, the European Commission and the International Monetary Fund) have experienced the most radical debasing of their social model as drastic cuts in public spending was a condition for their financial rescue. In Greece and Portugal, this has notably translated into large-scale privatization plans which included the sale of companies in the sectors of energy, transport and post as well as public infrastructures such as ports, railways or motorways. In Italy, 120,000 schools teachers have been laid off since 2008, and public funding of universities has dramatically decreased. Vulnerable economies in Central and Eastern Europe have taken drastic measures; like in Bulgaria, where the budget for hospitals fell by 24 % in 2009 with many public hospitals being closed or privatized. A total of

380,000 people lost their right to free healthcare as a result of changes in the Public Health Act adopted in January 2010 (PSIRU 2011). In Ireland

© The Editor(s) (if applicable) and The Author(s) 2016 A. Crespy, Welfare Markets in Europe, Palgrave Studies in European Political Sociology, DOI 10.1057/978-1-137-57104-5_1

too, the austerity plan adopted in response to the bank crisis has brought about a degradation of healthcare services and the adoption of a plan for privatization of the sector by 2016. But the debasing of welfare services has not only affected the most vulnerable economies in Europe. In the UK, a country which is not directly involved in the salvage of the euro, the government has implemented a major plan of austerity since the conservatives came to power in 2010. The viability of the National Health Service (NHS) has been hotly debated and is cause of much concern, as creeping privatization has been ongoing over the past years. The funding of schools is equally problematic as needs increase. Even Germany, the economic hegemon of the European Union (EU), adopted the ‘package for the future’ in June 2010, the largest austerity plan in the post-war period. Similar concerns about the sustainability of public funding of healthcare and education under austerity are being debated. France, under the socialist President Francois Hollande, first resisted austerity. The creation of

60,000 jobs in the Education nationale was a main theme of Hollande’s presidential campaign, and the French government has assured that this would not be questioned. In 2014, the government nevertheless adopted a plan foreseeing €50 billion cuts in 2015-2017, including €20 billion from the funding for healthcare and other social expenses. In Belgium and France, public funding of culture or public broadcasting has been significantly reduced. Besides the consequences of ‘fiscal consolidation’, some problematic aspects in the liberalized network industries have been more salient as the crisis hit societies. The price of energy, in particular, has significantly increased in proportion to stagnating or decreasing wages. Similarly, the affordability of housing has become problematic in many European countries, thus putting pressure on social housing policies. In a nutshell, in the vast majority of European countries, people have witnessed a significant deterioration of welfare over the past five years or so. This is due mainly to the dramatic decrease of available public resources, but the problematic effects of ongoing marketization also raise issues with regard to the quality and affordability of services for citizens. In the face of increased pressure from the markets, international financial institutions and the EU to tackle the brutal increase of public debt, EU countries have responded mainly in two ways: cuts in public spending leading to retrenchment and cuts in investments, on the one hand, and the further marketization of funding and/or provision in an increased number of policy sectors, on the other. The creeping privatization of healthcare is certainly one common trend across the continent. But marketization affects most areas, including education and social care. Against this backdrop, this book asks, how did we get here?

In order to understand the situation which characterizes welfare in Europe today, one must take a step back and look at the broader developments which have affected public services over the past three decades. Welfare services are understood here as an encompassing notion covering all services which are deemed essential with regard to public interest and social cohesion (communications, transport, energy, post, culture, education, health and social care, housing, etc.) provided by public, private or mixed undertakings.1 While these services would be defined as services publics in French or offentliche Daseinsvorsorge in German, it amalgamates three distinct notions in English, namely the provision of public utilities, services relating to what is understood as the welfare state, and the public sector (run directly by the government). Every term reflects a particular conception of the Statei and historically rooted institutional and legal systems ruling the provision of such services (Dyson 2009). In order to encompass the multinational diversity of welfare services in Europe, a new term has been coined in the EU treaties and law: SGI, which can be further defined as ‘economic’, ‘non-economic’ or ‘social’. As explained in the following chapter, political struggles have crystallized in the issue of the definition(s) of such services. In spite of national specificities, the main trend across national boundaries has been a process of marketization; that [1]

is a re-commodification through the transformation of social relationships between providers and citizens redefined as customers. This often implied the introduction of competition between providers that pursue profit making. At first sight, the EU seems to have only a tenuous link with welfare services. Like the bulk of social policy, they remain the prerogative of states, and are thus shaped by national politics and budgets. Yet, as this book argues, EU integration has acted as a catalyser with regard to the marketization of welfare services. The neoliberal restructuring of capitalist economies that occurred at the global level and translated differently was filtered by individual national trajectories. Notwithstanding, regional integration in Europe has shaped policy making in the realm of welfare services in significant ways, especially through EU competition law and liberalization directives. In the face of the current crisis, the EU only provides marginal financial or regulatory support for sustaining quality welfare services, but exerts significant pressure on national governments left with reduced resources due to the enforcement of austerity.

The purpose of this book is not to map policy developments and market-oriented reforms undertaken by national governments or to provide a top-down account of Europeanization which would trace the (differentiated) impact of EU integration on various sectors and/or in various European countries. Nor does it attempt to assess the efficiency and relevance of marketization by looking at policy outcomes. Rather, this book looks at the marketization of welfare services as a matter epitomizing the tensions between capitalism, democracy and EU integration at the turn of the twenty-first century. Regional integration in Europe has strongly disrupted what Maurizio Ferrera (2005) called ‘the boundaries of welfare’ by opening national spaces for the purpose of market making while supranational forms of ‘welfare making’ have remained largely embryonic. As the following chapters of this book show, the marketiza- tion of welfare has continuously generated resistance and contestation from within societies. Such resistance has been mostly expressed at the local and national level. Yet, as relevant policies have increasingly been enforced from the EU level, contentious citizens and organizations have sought to address and influence decision makers in the EU institutions. The politics of welfare services is therefore an area that shows how social conflict is dealt with in a traditionally technocratic supranational system of governance. The issue of how the EU deals with contestation over political and social change has crucial implications for its legitimacy as a political order.

This puzzle calls for going beyond established disciplinary boundaries between political economy, neo-institutional approaches to European integration, and the sociology of contentious politics. It is inspired by scholars who look at how EU integration shapes the inextricably intertwined development of capitalism and democracy in Europe (Scharpf 1999; Schmidt 2006; Schafer and Streeck 2013; Schmidt and Thatcher 2013a). Fundamentally, the book therefore addresses the following questions: What has been the role of the EU in the marketization of public services? And to what extent has contestation mattered in that regard? The originality of this research is therefore to investigate both EU policy making in relation with welfare services and the contentious politics surrounding them. The book traces the history of the marketization of welfare since the launch of the internal market programme in the late 1980s until today’s era of austerity. It especially investigates three key contentious debates which occurred in the decade between the mid-1990s and the mid-2000s, namely the debate on the regulation of welfare services at supranational level through an EU Framework Directive, mobilization against the EU Services Directive adopted in 2006, and the protest campaign against the General Agreement on Trade in Services (GATS) adopted by members of the World Trade Organization (WTO). It is argued that the EU acted as a catalyser for the marketization of welfare services partly, but not only because of its institutional (and legal) features. This echoes the well- established argument that the institutional setup and working of the EU exhibits a structural asymmetry which favours pro-market forces (Scharpf 1999, 2010; Hopner and Schafer 2010). Another crucial part of the story, though, is that resistance to marketization could, to a large extent, be contained. Thus, besides an institutional approach to EU policy making, a sociological approach is used to investigate politicization, especially coalition building and discursive framing: this helps to explain how EU policies and politics have been conducive of continuous marketization. While the advocates of regulated capitalism (mainly left-wing political parties, associations, Non-governmental organization (NGOs) and unions) could occasionally hamper neoliberal policy making, they lost the battle of ideas over the long term, and the marketization agenda could never be stopped or reversed. In a nutshell, this book argues that the EU is inclined but not bound to be neoliberal due to structural factors. The prevailing of promarket policies is also due to the fundamental political and ideological weakness of the coalitions of actors promoting a more regulated capitalism as a means to foster social cohesion. Today, marketization and austerity are two sides of the same coin, as the lack of public resources to fund welfare services is regarded by most European decision makers as a main justification for pushing the marketization of welfare further.

  • [1] While recognizing that terminology issues have been part of the political struggles under study, thebook does not seek to take a position on this matter. The term ‘welfare services’ has several advantagescompared to other notions. It is sufficiently broad to encompass a whole range of services but lessbureaucratic than the ‘indigenous’ notion of services of general interest (SGI) forged in EU law. Thelatter will nevertheless be used in reference to EU policy making. The notion of welfare services doesnot reflect any particular culturally biased conception and does not presuppose whether these servicesare or should be provided by public authorities, the private sector or mixed organizations and arrangements. Moreover, the term ‘welfare’ indicates that, traditionally, such services have been a key component of the welfare state in Europe. However, while most authors in the field of social policy andcomparative welfare state reform tend to focus on benefits (unemployment benefits and pensions inparticular), this book makes a contribution on the issue of services. This is particularly importantinsofar as the future of the welfare state is arguably perceived as increasingly oriented towards theprovision of services as opposed to cash transfers, as the debate on social investment suggests.
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