European Integration and the Welfare State
Two aspects need to be distinguished when we contemplate the relationship between European integration (i.e., the formation and expansion of the European Union and development of the European single market) and the Welfare State:
The European Social Dimension
A Brief Overview of European Integration - An Ever Closer Union
Since the signing of the TREATY OF ROME on March 25, 1957 the EUROPEAN COMMUNITY has undergone a remarkable transformation (See The European Union - A Guide for Americans for more information on the history and operation of the EU).
In the last four decades great progress has been made toward an ever closer union. This process has been sporadic but effective. Originally consisting of three separate communities (EUROPEAN COAL AND STEEL COMMUNITY, the EUROPEAN ECONOMIC COMMUNITY, and the EUROPEAN ATOMIC ENERGY COMMUNITY) and of SIX member states (Belgium, Germany, France, Luxemburg, Italy, The Netherlands), the organization merged into the EUROPEAN COMMUNITY (EC) on April 8, 1965. Subsequently, the EC expanded, first by three new members (Danmark, Ireland, United Kingdom,) in the 1970s, another three members (Greece, Portugal, Spain) in the 1980s, its most recent three members (Austria, Finland, Sweden) in the 1990s. Following the opening of negotiations with the countries of Eastern Europe and Cyprus in the late 1990s concerning future membership, the EU is expected to expand to more then 20 member states early in the 21st century.
The EC has not only expanded by adding new members (widening), but also by integrating economically and politically (deepening):
On April 8, 1965, the three Communities merged into the European Community (EC). On July 1, 1968, a Customs Union between all EC economies was completed.
On March 13, 1979, European Monetary System (EMS) became operational, which established the foundation for EUROPEAN MONETARY UNION (EMU) two decades later.
On July 1, 1987, the SINGLE EUROPEAN ACT entered into force. It established a single internal market based on the free movement of goods, services, labor and investments, and was completed by January 1, 1993.
On December 11, 1991, the EUROPEAN UNION TREATY (also known as Maastricht Treaty) was agreed upon. It entered into force on November 1, 1993, establishing the EUROPEAN UNION (including citizenship) consisting of THREE PILLARS: THE EUROPEAN COMMUNITY (EC), COMMON FOREIGN AND SECURITY POLICY (CFSP), JUSTICE AND HOME AFFAIRS (JHA). Against the objections of the United Kingdom, the Maastricht Treaty included, as an annex, the so-called SOCIAL PROTOCOL. All member states (except the U.K.) were subsequently authorized to have recourse to the institutions, procedures, and mechanisms of the Treaty for the purposes of implementing their AGREEMENT ON SOCIAL POLICY.
On June 18, 1997, work on the AMSTERDAM TREATY was concluded. Becoming effective two years later, this treaty revised and updated the Maastricht Treaty in several respects. It strengthened political cooperation among now 15 member countries in many areas, significantly expanding the EU's role in foreign and security policy, as well as in social policy. Moreover, the SOCIAL PROTOCOL was incorporated into the treaty itself. As the third major revision of the Treaty of Rome which is thus of the EU's constitutional framework, the Amsterdam Treaty also reaffirmed the fundamental values, rights and freedoms that serve as the foundation of the Union.
On May 2, 1998, 11 EU members qualified for MONETARY UNION and, subsequently for the introduction of the new European currency, the EURO.
On July 1, 1998 the new European Central Bank was inaugurated in Frankfurt, Germany.
On January 1, 1999 EMU was launched and the EURO became legal tender in 11 EU member countries ("Euroland"). By July 2002, all national currencies are to be withdrawn.
Explaining European Integration and EU Social Policy - Conceptual Issues
Theorizing about European integration and EU policy is an extraordinarily difficult matter and thus the nearly exclusive domain of "Europeanists." A growing group of scholars and experts, notably political scientists and economists, who study European Union politics. The technical and complex nature of their analysis prohibits a detailed discussion of their theories in this context. The following segment is by necessity a very simplified overview of some of the fundamental theoretical issues and concepts underlying European integration.
What is the EU? An International Organization? A Superstate? A Trade bloc?
One of the key questions European Union scholars have been trying to answer has been how to explain the process of integration. This is complicated by the fact that the EU is a political system sui generis, that is it is unique and bears little resemblance to other existing political entities. In the past, the EU was often compared with other International Organizations, such as the United Nations. But, unlike the UN, the European Union has institutions of government and the European Court of Justice, whose decisions override domestic law and constrain national sovereignty. Americans often think of the EU as a trade bloc not unlike the North American Free Trade Association, but it is abundantly clear the EU is considerably more. It not only has joint institutions of government, a constitutional framework, and common citizenship, but also a common central bank and currency. However, the EU is also not (yet) a federal system like the US or Canada because there are still many areas of public policy, especially in foreign and security matters, where EU member states stubbornly cling to pursuing their national interests when necessary. Thus the EU remains a hybrid form of governance in the sense that it shares aspects of other existing political systems but does not correspond to any one of them. Moreover, the EU is in the process of evolving and presents, therefore, a "moving target" to the prying eyes of scholars.
Pooling Sovereignty and Multi-level Governance
The EU has been described as a system of "pooled sovereignty" (i.e., the pooling of the national sovereignties of member countries), or as special type of a multi-tier system of governance. Multi-tier refers to the fact that governing (political decision making) takes place on different levels: the sub-national level (e.g., in a region or province), the national level (i.e., member states) and the supra-national (European Union level). While some issues are decided at the local and regional level (called "subsidiarity"), and others at the national level, most economic policy matters and a host of other issues are now decided at the European level. A federal system, like the United States, is also a multi-tier system of governance because the US constitution divides the powers between the state and federal government. The TREATY OF ROME, and its revisions in the treaties of Maestricht and Amsterdam, functions as a constitution of sorts for the EU.
Inter-Governmentalism and Supranationalism
The EU is different from federal systems in the sense that its "federal" level, that is the EU level, refers to two parallel arenas of decision making. There are EU institutions (the European Commission, the European Parliament, the European Court of Justice) that are truly supra-national. This means their decisions and policies reflect the interests of the Union as a whole. Then, there are other EU institutions, such as the European Council, that are strictly inter-governmental. That is they reflect the interests and strengths of the various member governments/states. In short, EU policy making has been shaped both by INTER-GOVERNMENTALISM AND SUPRA-NATIONALISM.
Explaining European Integration
European integration remains difficult to explain. The process has been fraught with many set-backs and complications. From the start, it seemed puzzling why countries would voluntarily join an organization that ultimately restricted national sovereignty and diluted the power of member governments. While overcoming post-war poverty and the need to compete with the US and Japan may help to explain the closer cooperation among European countries, it does not make clear why the integration has proceeded to the level it has today.
While there are several theories explaining integration and EU policy formation (See BIB.), one has stood out: The theory of NEO-FUNCTIONALISM, originated by Ernst B. Haas in his classic work The Uniting of Europe (1958), has undergone many variations. It central argument is that integration is a process whereby political actors in several distinct national settings are persuaded to shift their loyalties, expectations, and political activities towards a new center, whose institutions possess or demand jurisdiction over the pre-existing national states. The end result of a process of political integration is a new political community, superimposed over the pre-existing ones.
Simply stated, once member countries had joined to form the community, the newly established institutions changed the perspectives, thinking, and behavior of politicians and bureaucrats in ways not foreseen prior to accession. Moreover, steps to integrate the national economies in some area had unintended but cascading consequences in other areas. For example, agreeing to the free movement of goods and people in the single market has had consequences in many other areas such as the right to residency and the right to work anywhere in the EU, or the mutual recognition of pension claims, the mutual recognition and equivalency of degrees, licences, and certification processes. All these steps required additional modifications in matters unrelated to the original area of integration. Once such "spill-overs" had gone far enough and political actors had invested sufficient political and economic capital ("sunken cost"), it became politically impossible and economically impracticable to pull back out again.
In this way, neofunctionalists were able to explain why countries would continue to pursue integration beyond the point where it was in their immediate self-interest. Traditional International Relations theory had argued that countries join international organizations and alliances only to the extent that the benefits (e.g., more security in military pact, or lower transaction costs in free trade bloc) outweigh the costs (loss of sovereignty, constraints on action) of such a move.
Spill-Overs and Joint Decision Traps
Central to neo-functionalism is the concept of SPILL-OVER. In a multi-faceted process such as European integration at the center of which lies a complex political system, political decisions tend to spill-over from one area of operation into another. Action in one area begets action in another area (functional spill-over), sometimes as a result of unintended consequences. Furthermore, decision making is gradually moved up to the supra-national level to increase the decision capacity (political spill-over). As new states join the Union, they too are encompassed into the decision making process (geographic spill-overs). Some have also talked about cultural spill-overs in the sense that the expectations and loyalties of (national) elites shift to the higher political entity. For example, when the EU member countries decided on the free movement of persons, goods and services, it was clear that this was only feasible if certain barriers to mobility in the form of legal and social restrictions were to be removed. In short, changes in one area spilled over into another. Likewise, the creation of the single currency required political action and enormous adjustments in many other areas.
Since the history of the EU is, however, as much a record of political accomplishment as it is one of gridlock and paralysis, some scholars have explained aspects of EU policy formations in terms of JOINT DECISION TRAPS (which is directly opposed the concept of spill-over). The EU is a political system in which the powers of the central government are very limited and, thus, fairly weak. The constituent member governments not only continue to exercise original governing powers at the lower tier, but their consent is needed even for further federal legislation. It is, thus, the interlocking competencies, not a division of competencies, which characterizes such a system of multi-tier governance. As a result, policy formation requires elaborate compromises and enormous side-payments to appease all who share in the decision making process. Sub-optimal policy output, inefficiency, and gridlock are necessary political consequences of a political system where different decision-making bodies representing different interests can block joint policy outcomes.
The Evolution of European Social Policy
The evolution of EU social policy in its various aspects takes no exception to the development of other EU policy areas. Scholars have explained their success and failure by pointing to concepts such as neo-functionalism, spill-overs, and joint decision traps. While it is as of yet not clear what the European social dimension will look like in the years to come, we can state with some certainly that the process of developing a supranational social policy will be different from the processes by in which the national welfare states evolved. At the national level, European welfare states expanded after WWII usually under the leadership left-of-center governments. This process entailed essentially two, respectively three, major actors in the form of labor and business (and the government). The very construction of the European Union, as a treaty-based multi-tier system of pooled sovereignty and interlocking competencies ensures that many more actors will play a role in the formation of a social Europe. Member states, national actors, sub-national actors (regions), national and functional interest groups (unions, corporations) as well as supra-national political forces will all seek to advance their interests hoping to maximize their payoffs and shift the cost of social policy to respective other groups. Member states will have little interests that a European social policy would duplicate successful national programs or threaten carefully constructed national arrangements between interest groups. Members will, however, want the EU to step in where national systems are sub-optimal or where the national economy experiences a competitive disadvantage vis-a-vis other members due to more elaborate social regulations of the former. Since welfare states vary across Europe, both in the way benefits are delivered and contributions to social programs are levied, constructing a social Europe will in all likelihood require elaborate compromises and side-payments to appease the most important interests and most powerful actors involved.
The Effects of "Social Europe" on the National Level
The expansion of social policies at the European level in the wake of the single market and ever more integrated economic policies will undoubtedly also lead to corresponding changes in national welfare systems. To the extent that member states cannot avoid accepting that supra-national arrangements will have some negative impact on their national systems, they will seek to modify their local policies in order to neutralize this disadvantage. For example, Germany has traditionally relied on contribution-based social insurance schemes in which the contributor acquires claims to monetary benefits (a regular pension check, unemployment money, or a reimbursement for medical bills). In a Europe with no restrictions on residency, German pensioners can retire in sunny Spain and, thus, decide to spend their retirement money outside Germany. From the perspective of the German state, this amounts to a cash transfer from Germany to Spain, and the money is thus lost to the German economy. In response, Germany's recently established social insurance intended for the care of the elderly awards cash benefits no longer to the patients but to the German care givers. If a German contributor wants to take advantage of this program, he or she will thus need to remain in Germany.
In other cases, member states will be powerless to prevent people from taking advantage of the erosion of national control over rule-making. While the Netherlands restrict the number of doctors from practicing in a given area in that country, nothing can stop a Dutch physician from opening a practice across the border in Germany which caters specifically to Dutch patients. Moreover, since national welfare systems can no longer privilege their own citizens, but must treat the citizens of every other member state like their own, governments would want to avoid becoming a magnet for Europeans from other member countries with lower standards or less-developed social systems. For all these reasons, developments at the European level will have a profound impact on the national level. At the very least, we would expect that national programs and policies will become ever more similar to avoid negative competitive pressures.
