EU Policies and the Transformation of Capitalism

Welfare Services and the Rise of Neoliberalism

The provision of public utilities and services has been one of the areas most affected by the neoliberal restructuring of the European economy. Undeniably, the rise of services in the economic structure of developed countries has been a major development of capitalism since the industrial revolution. The principles underlying the provision of public goods and services have been deeply affected by this transformation. While significant variation across countries persists, Europe has been witnessing a common and ongoing process of marketization in a large number of public utilities and social services sectors. This means that these services are increasingly provided by markets, and no longer by public authorities themselves. Correspondingly, they have been increasingly submitted to the rationales of competition and profit making. However, the State still remains responsible for the regulation and, in case of serious market failure, for the allocation of these services. Thus, developments affecting the provision of public services epitomize the neoliberal restructuring of the European economy. This process, which has been accelerating since the 1980s, has been underpinned by the principles of ‘liberalization, privatisation, commodification, regulatory reforms, and delegation to non- majoritarian institutions such as “independent” regulatory agencies and central banks, plus individual responsibility, competition, and enterprise’

(Schmidt and Thatcher 2013b). These reforms have gone hand in hand with a belief in the desirability of intensifying free trade on a global scale, and the rejection of state interventionism and Keynesian demand-side policies, as well as with major welfare state and labour market reforms (Hay 2004).

The Single European Act of 1986, which paved the way for a common European market, implied pursuing the opening of national markets, and subsequent suppression of the traditional monopoly on the part of national ‘historical’ operators in a number of sectors such as energy, telecommunications, broadcasting, transport and post. These changes have been shaped to an important extent by the case law of the European Court of Justice (ECJ), which had to rule on conflicts between national regulation and the principle of free competition that underpins the whole project of market integration in Europe (Baquero Cruz 2005). In EU secondary and primary law, the concept of SGI has emerged in order to deal with the provision of public utilities and services across Europe. Meanwhile, it remains a changing and contested legal category (van de Gronden 2009).

Whether stemming from public or private providers, welfare services today represent a substantial part of the economic activity in Europe, generating about 26 % of the EU’s Gross Domestice Product (GDP), occupying 30 % of the workforce and attracting about 6 % of all investments (CEEP 2010). From a global perspective, the EU is home to very competitive firms in these sectors. For that reason, SGI have been seen by European decision makers as a major driver for improving the competitiveness of the European economy, both internally and externally. On the one hand, the liberalization of utilities and social services sectors within the European market has been considered as a way to increase the productivity of large firms in the network industries (telecommunications, transport, energy). On the other hand, it has been part of the process of welfare states’ reform, especially as far as social services are concerned. In that perspective, competitive European firms would then be able to enter foreign markets outside of the EU under the auspices of the provisions for services liberalization promoted by the WTO. All in all, modernization through market liberalization and privatization has put the boundaries between the State and the market into question.

From the point of view of national societies, the liberalization of SGI did not proceed without drawbacks. As research has shown, productivity gains in the liberalized sectors mostly occurred at the expense of employment levels, while levels of employment and pay conditions account for a decrease (Flecker and Hermann 2012). Service quality and affordability often turned out to be problematic a few years after the opening of sectors to competition, especially as far as less privileged households are concerned (as opposed to the big industrial consumers). When services provision is transferred to the private sector, it is often difficult for public authorities to design regulatory policies in a way sufficient to preserve the public interest (Petretto 1998). Furthermore, the EU institutions have failed to live up to their claimed objectives in respect of fostering inclusiveness and consultation when designing policies in the realm of SGI (Clifton and Diaz-Fuentes 2010). Most interestingly perhaps, scholars have shown that the marketization of welfare services is not sociologically neutral. While better-off and educated citizens are relatively satisfied by a broader choice of services, even at higher prices, this is not the case for citizens with lower income and cognitive resources (Van Gyes et al. 2009).

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