Created: 21 February 2013

Francine Mestrum[1]

Western European countries still have the best developed and the most efficient welfare states in the world. They are looked at with envy by many people from less developed countries. Yet, these welfare states are threatened, and instead of serving as a model for other countries, it may well be that the population of the EU will soon learn what it means to live with less security. The reason is very simple. The huge public debt, a consequence of bank bail-outs, will oblige countries to more and continuing austerity programmes.

In this contribution, I want to summarize what is being prepared at the level of the European Union for Europe’s social future. There should be no misunderstandings: even if much of the work is done by the European Commission, it is fully in line with the wishes of the European Council, that is the national governments. The aim of this article, then, is not to blame the European institutions, but to show how the change of scale at which decision-making is done contributes to making the policy changes almost invisible. While trade unions and social movements are mainly working within their national democracies, their governments are preparing  a new social paradigm at the European level. Moreover, many of the social changes are hidden in other policies or programmes, such as the internal market, EU2020, etc.

I will start with an overview of the very limited poverty policies, then look and the emerging ideology on ‘social innovation’ for public services, and then examine the ‘social investment’ proposal the European Commission has just made public.

Anti-poverty policies

The European Union has no real competences for fighting poverty. Though the European Commission did develop some programmes in the 1970s and 1980s, it had to abandon them because of a lack of legal basis. The different treaties do not speak of ‘poverty’, but only of ‘social exclusion’ which has to be understood as ‘exclusion from the labour market’.

‘Poverty’ did pop up again in the Lisbon strategy of 2000[2], the policy document aiming at making ‘the European Union the most competitive and dynamic knowledge economy in the world’. It said that measures had to be taken for ‘decisive actions in order to eradicate poverty’. Poverty is also mentioned in the ‘Social Agenda’ adopted after the Treaty of Nice in 2000.[3]

No new legislation however was adopted and poverty reduction was debated within the context of an ‘open method of coordination’, a process in which the European Commission and the Member States develop ‘soft law’ but no binding measures.

In 2010, a ‘European Year for combating poverty and social exclusion’ was organised and a ‘European Platform against poverty and social exclusion’ was created. It will aim at improving access to work, social security, essential services (healthcare, housing, etc.) and education; helping to better use EU funds to support social inclusion and combat discrimination; social innovation to find smart solutions in post-crisis Europe, especially in terms of more effective and efficient social support; and new partnerships between the public and the private sector.[4] The main responsibility for fighting poverty remains however with national governments.

One other important measure has to be mentioned because it allows for directly helping poor people. Since the Common Agricultural Policy produced high surpluses in the past, a food distribution system was created in 1987 in order to give food aid to Europe’s poorest people. The system worked rather well, till someone noticed that there were in fact no agricultural surpluses anymore, and that it was not the objective of the CAP to engage in social policies. Again, lacking a legal basis, the system was stopped. In 2012 however, the Commission proposed to set up a ‘Fund for European Aid to the Most Deprived’.[5] It plans to spend 2,5 billion Euros over the next seven years for supporting material relief in terms of food, goods for homeless people and goods for materially deprived children. Its legal basis are the treaty articles on social cohesion and structural funds. Again, the Member States are responsible for using and distributing the funds. Since they are meant for the poorest people, one can predict they will go to food aid, mainly on a targeted basis. But this measure can be seen as a direct measure of solidarity from the European budget to the European citizens.

In the follow-up to the Lisbon strategy, a new programme ‘EU2020’ was adopted for smart and inclusive growth, and poverty reduction is one of its priorities. But although the European Commission proposed to reduce the number of Europeans living below the national poverty lines with 25 %, lifting over 20 million people out of poverty, the Council forgot the percentage and only speaks of the absolute numbers. This is a lowering of the ambitions, and, with the high rate of poverty growth in the EU at this moment, it could mean that 2020 shows a higher number of poor people than 2010.[6]

A last point that has to be mentioned, though it never was implemented, are the two council recommendations of 1992 on the convergence of objectives and policies of social protection and on common criteria concerning sufficient resources and social assistance in social protection systems.[7] The Council recommended its Member States to fix the amount of resources considered sufficient to cover the essential needs with regard to respect for human dignity and to guarantee these resources and benefits within the framework of social protection arrangements.

Social Innovation

The EU2020 programme mentions the importance of social innovation: to design and implement programmes to promote social innovation for the most vulnerable, in particular by providing innovative education, training, and employment opportunities for deprived communities, to fight discrimination, and to develop a new agenda for migrants’ integration to enable them to take full advantage of their potential.

What could be meant by it?

‘Social innovation’ is a brilliant idea that comes from progressive social forces working at the local level and trying to enhance solidarity between community members. It wants citizens to take responsibility for the services they need or want, such as child care, caring for the elderly, for disabled persons, for car sharing, for exchanging second hand articles, etc. There are indeed a lot of activities citizens can do without relying on the market or on pubic authorities. These actions will in most cases also help for empowering people and they can change the social relationships in a community.[8]

There are some caveats however. Since most of these tasks belong to the care sector, it is more than probable that the volunteering work will be done by women, thus creating once again a serious gender bias. Either women will have a third re-productive task in their community – next to their labour market and their household work – or, if they are not on the labour market, their work will be seen as ‘natural’ and obvious and will not be paid for.

Secondly, communities  are collectivities of people, with their inevitable power relations, with friends and foes, with good helping people and free-riders. It means that rules will have to be established in order to not discriminate. Furthermore, some of these activities directly touch on welfare state dimensions, based on rights. And this means that governments will have to clearly regulate and monitor, in order to guarantee these rights and to avoid  distortions.

When adopted by the European Commission however, one sees that other elements pop in:

“Social innovations are innovations that are social in both their ends and their means. Specifically, we define social innovations as new ideas (products, services and models) that simultaneously meet social needs (more effectively than alternatives) and create new social relationships or collaborations. They are innovations that are not only good for society but also enhance society’s

capacity to act.”[9]

There are three categories of social innovations: ‘grassroots social innovations’, a broader level in which the boundary between social and economic blurs’, and ‘the systemic type that relates to fundamental changes in attitudes and values’.[10]

Why address social innovation now? “Social needs are now more pressing … the fight against unemployment, ageing and climate change … most of the projected increase in public spending will be on pensions, healthcare and long-term care … At a time when resources are limited, new solutions must be found … These growing social needs together with budgetary constraints call for innovative public service models’.[11]

While the grassroots initiatives are taken on board, there clearly is a link with austerity policies and a hope that some citizens’ initiatives will substitute for welfare state rights and public social services will make way for markets: “By encouraging social innovation, policy-makers strive to pursue a triple triumph: a triumph for society and individuals by providing services that are of high quality, beneficial and affordable to users and add value to their daily lives; a triumph for governments by making the provision of those services more sustainable in the long term; and a triumph for industry by creating new business opportunities and new entrepreneurship”.[12]

The same ideas are also mentioned by non profit and profit organizations in their documents[13]. ‘What kind of social innovation should be promoted?’ asks Solidar very rightly.

In other words, from what is at origin a brilliant idea about solidarity and citizenship, can also come a dismantlement and commodification of social services, forgetting about the rights of people. Social business is strongly promoted by the European Commission and through the internal market policy, the door is already open for the multinationals of care, such as in the sector of the elderly.

This cannot be seen as a welcome development as it risks to make people more dependent on the market and quality services more dependent on the purchasing power of clients.

Social investment

A third element that has to be looked at, directly linked to the existing welfare states, is ‘social investment’.

The sources of inspiration for ‘social investment’ are the ideas on human capital, first proposed by Gary Becker and, in a somewhat different version by A.K. Sen and his ‘capabilities’. The idea is that human capital has to be developed in order to better adapt to the requirements of a knowledge-based economy, to take into account the new social risks, and the more precarious forms of contracts, especially for people with low or obsolete skills. Fundamentally, so the story goes, it is more about ‘preparing’ than ‘repairing’ , it is a shift away from passive welfare states where people get compensation for the losses they suffered, towards active welfare states where people get incentives to bounce back and return to the labour market.[14]

While the current proponents of social investment come from different ideological backgrounds – from neoliberalism, to ‘third way’ thinking and social-democracy, the authors of the book admit that it will not be easy to clearly differentiate from neoliberalism. All see ‘social investment’ as a new economic rationale for social policy provision, but the way and the extent in which they do so makes all the difference.

Neoliberalism apart, ‘third way’ thinkers will see unemployment benefits as unproductive social expenditure, while social-democrats will need them in order to protect human capital; the former will also see generous benefits as a moral hazard, while the latter will want to limit the risk of falling into poverty. Third way thinkers will push for the ‘activation’ of the unemployed and want them to take any job, whereas social-democrats will point to the lack of skills and want training and help with job searches.

As for the role of the state, social-democrats will want to recast social protection and therefore need an ‘empowering’ state.

While some of the ideas in ‘social investment’ can certainly be interesting and valuable, they also imply the risk that social protection rights  which are not directly useful for the market, are being ignored.[15]

According to Esping-Andersen, social investment is not a substitute for social protection. ‘Social promotion’ and ‘social protection’ should be understood as the indispensable twin pillars of the new social investment welfare edifice.[16] That is why social investment cannot come cheap and cannot be the answer to the shrinking public budget.

The European Commission and Social Investment

On February 20th 2013 the European Commission finally  released its proposals for a social investment package.[17] What do we learn from it? In this first and brief analysis, I want to emphasize four points.

First, the proposals have to be put in the framework of EU2020 and aim to promote economic, social and territorial cohesion as well as to combat social exclusion. These are fundamental objectives of the EU, identified in the Treaty. The document continues with a reference to the Charter of fundamental rights and with a quote from Barroso, the Commission’s president, saying that the countries with the most effective social protection systems are also the most competitive ones.

However, there is a crisis with growing risks of poverty and of social and market exclusion. Individuals and society as a whole bear the costs of unemployment, poverty and social exclusion. Moreover, our welfare systems are confronted with the consequences of demographic change and of the financial and economic crisis. Social policies cost, on average, 29,5 % of GDP in the European Union. Public budgets are under pressure and there are structural labour market shortages. That is why, so the document says, there is a need to modernize social policies and optimize their effectiveness and efficiency, as well as the way they are financed. In short, we have to invest in human capital.

Welfare states have three functions, according to the European Commission. To-day, they are defined as social investment, social protection and the stability of the economy. Which means that social protection is only one of the objectives and that the economy is directly integrated into ‘welfare states’.  The social protection dimension even gets a semi-economic colour: it should help to preserve human capital. This is a major change compared to the past, when, up till the 1990s ‘guaranteeing incomes’ was the first objective, after which it became ‘making work pay’. Even if the European Commission states that the three functions have to be combined, this is a serious weakening of the protection element of welfare states.

The document also repeats the most important argument of ‘social investment’: it is meant to ‘prepare’ people to confront life’s risks, rather than simply ‘repairing’ their consequences. This is less obvious than it sounds. If we look at the five traditional branches of social security – family allowances, labour accident insurance, pensions, sickness insurance and unemployment benefits – we see that in only one case one can speak of ‘repairing consequences’ and that is in unemployment benefits. In social assistance we have guaranteed minimum incomes in most countries. So, apart from having campaigns for preventing labour accidents and recommendations for a healthy living – which are not mentioned in this Commission document  and which we already have – one has to conclude that the ‘preparation’ only aims at avoiding unemployment benefits and social assistance.

Secondly, many other points in the document seem to indicate that social investment is not meant for everyone, it is not a universal welfare state, it more looks like poverty reduction policies. ‘Support should be better targeted to those in need at the time they need it’.[18] This sounds like the promotion of selective policies. ‘Some cash benefits and social services are poorly targeted and do not reach the people in need of assistance’.[19] ‘Universalism and selectivity need to be used in an intelligent way’.[20]

This doubt seems to be confirmed by the many references to Roma people, homelessness and the focus on children, in order to ‘break the cycle of disadvantage’.[21]

Thirdly, there is a very clear attempt to privatize as many of the social services that remain in the European Union. Here, all references to ‘social innovation’, social business an social entrepreneurs, corporate social responsibility as well as micro-finances are repeated. And it is also clear this has but one objective: to lessen the burden on public budgets.

However, some public money that will not go to public services anymore will be going to social business: member states should provide social entrepreneurs with support schemes; additional financing can be found through public private partnerships; there are European Social Enterprise funds to improve access to finance; ‘social impact bonds’ can be envisaged in order to incentivize private investors to finance social programmes by offering returns from the public sector … if this is not privatizing social services with the help of public funds, then what is it?

Fourthly, the European Commission wants to play a role in implementing this agenda. But where some civil society organisations had asked for a ‘social pact’ to compensate for the ‘fiscal pact’, they will see that this social policy proposal will become part of the elements monitored by the European Commission in the framework of the ‘European Semester’. This is presented as ‘support’ but it can also be seen as ‘surveillance’: ‘the stronger economic governance and enhanced official fiscal surveillance, must be complemented by improved policy surveillance in the social areas which over time contributes to crisis management’.[22]

What is needed? ‘Available resources have to be used more efficiently and effectively, through simplifying, better targeting and considering conditionality’.[23]


‘The social investment package aims at reorienting Member States’ social policies towards social investment where needed.’[24]

In fact, the document does not talk of social protection and of social security. It briefly refers to pensions and health care and to other initiatives taken at the European level, which are all oriented to privatization and ‘cost-efficiency’.

Social investment, according to this document is mainly concerned with poverty and social services. ‘Support’ and ‘cash benefits’ will become selective and conditional.  Compared to the academic writing on social investment, this is a very poor translation of the original concept. It is far beneath ‘social democratic’ and even ‘third way’ thinking on social protection. The academic proposals also led to many questions, but they had a real potential of becoming part of a broad social protection. It is difficult to reach the same conclusion with this ‘package’. This proposal confirms a trend that was noted earlier and was introduced by the World Bank in 1990: away from social protection, which can be delivered by the market, to poverty reduction, which is now also provided by ‘social entrepreneurs’.

If countries do not follow these proposals, they will receive kind and less kind ‘recommendations’ in the framework of the ‘country specific recommendations’ of the European semester. Social security benefits will remain under stress and it is more than probable they will slowly be dismantled, because of ‘fiscal deficits’. Support for the poor, with social services, will become selective and conditional and be largely privatized.  No human rights are mentioned in this text. And we know how very poorly social rights are treated in the Charter.[25]

The European Commission does not work in a vacuum. It knows what the Member States can accept and what the European Parliament will want to see amended. But we know what is being prepared, and there is little chance that the general philosophy of the text will be fundamentally changed.

The European Commission also knows it cannot touch on social security and labour organization directly, since it has no competences to do it. But the European Council can and already did. This social investment package is another example of how by shifting the decision-making process to a higher level, national Member States and their social movements are in fact side-lined. Even if they agree with the proposals, they can blame the Commission for ‘imposing’ these policies.

How will trade unions and social movements react? How will leftwing parties react? Where is the alternative? We all know our welfare states do indeed need a serious modernization, since our economies and our societies have changed a lot in the past 50 years. A status quo is no longer sustainable. What we need, especially in times of crisis is more protection, not less, more state guarantees, not less, and a re-orientation of the economy, not a further privatization.

[1] Francine Mestrum is Dr in social sciences, working on social development, globalization, poverty. She coordinates the global network of Global Social Justice (

[2] European Council, Conclusions of the Presidency, Lisbon, 23-24 March 2000.

[3] European Commission, Communication on ‘An Agenda for Social Policy’, COM (2000) 379, 28 June 2000.

[4] European Commission, European Platform against Poverty and Social Exclusion: a European Framework for Social and Territorial Cohesion, COM (2010 758 final, 16 December 2010.

[5] European Commission, Proposal for a Regulation on the Fund for European Aid to the Most Deprived, COM (2012) 617 final, 24 October 2012.

[6] European Council, Conclusions of the Presidency, 17 June 2010.

[7] Council recommendations 92/441/EEC and 92/442/EEC, 24 June and 27 July 1992.

[8] See note 5.

[9] European Commission, Empowering people, driving change. Social Innovation in the European Union, Bureau of European Policy Advisers, Brussels, 2011, p. 9.

[10] Id., p. 10.

[11] Id., p. 8-9

[12] Id., p.9

[13] See ‘Innovative practices in Europe’, EASPD; ‘Delivering positive change. How social services contribute to smart, sustainable and inclusive growth’, Social Services Europe; ‘Facing New Challenges: Promoting active inclusion through social innovation’, Solidar Briefing.

[14] Morel, N., Palier, B., Palme, J., “Beyond the Welfare State as we knew it?”in Morel, N., Palier, B., Palme, J.(eds.), Towards a social investment welfare state? Ideas, policies and challenges, Britstol, The Policy Press, 2012.

[15] Mestrum, F., On the risks of social investment,

[16] Esping-Andersen, G. et al., Why we need a new welfare state, Oxford, Oxford University Press, 2002.

[17] European Commission, Toward Social Investment for Growth and Cohesion – including implementing the European Social Fund 2014-2020. COM (2013) 83 final, 20.2.2013.

[18] European Commission, 2013, p. 3.

[19] Id., p. 5.

[20] Id., p. 9.

[21] European Commission, Recommendation, Investing in children: breaking the cycle of disadvantage, C(2013)778 final, 20.2.2013.

[22] European Commission, 2013, Social Investment, p. 21.

[23] Id., p. 8.

[24] Id., p. 21.

[25] Mestrum, F., The Rise and Fall of the European Social Model, onSearchSearch …Interesting links


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