A couple of months ago, three experts on social protection published a document titled ‘The EU needs a Social Investment Pact’.[i]

Whether the authors refer to the European Union as an institution or to its national member-states is not quite clear. The EU does not have real competences for social policy, except for issues linked to the labor market and in order to fight ‘social exclusion’. In the EU, as well as for the World Bank, this ‘exclusion’ only refers to the labor market and is not synonymous with ‘poverty’.





The proposal looks very positive and can be seen as an attempt to solve the difficult question of the ‘modernization’ of the existing welfare states in order to be more in line with societal developments. Trade unions and other social movements very rightly are worried about the many neoliberal proposals that have been made and are likely to undermine the welfare states. But modernization is necessary because the male breadwinner’s model of 50 years ago is no longer relevant, people live longer, women participate in labor markets, people have different jobs during their life time, the informal labor market is growing, more flexibility is asked for, etc., etc.

Two different ways of thinking, then, have to be taken into account. On the one hand, there is a legitimate demand for modernization. On the other hand, there are legitimate concerns because of the neoliberal attacks on the welfare states. The proposals for ‘flexicurity’, for the ‘modernization of labor law’, the draft directive on working-time or the demands for delaying retirement beyond 65 are indeed worrying. Worker’s resistance is inevitable.

Many attempts have already been made to change the perception of social protection measures: they are not ‘social costs’ but an investment. Children with access to health services and to education will become healthy and skilled young people the society and the economy need. Most probably they will become productive workers on the labor market.

In this new contribution, the authors stress a series of major points in order to convince all those who still have doubts. They refer to Esping Andersen, one of the most important scholars on social protection today. He stated that ‘social investment’ cannot be a substitute for social protection and that a minimum income is a critical pre-condition for an effective social investment policy. Austerity, so it is said, can threaten social investments.

All these elements should be reassuring, though the question remains whether the future reality is going to be that positive.

Return on investment

A first point which has to be noted is that a social investment pact clearly puts social policy at the service of the economy. It thus clearly supports the new social paradigm which the EU and its member states have been introducing. It also is totally compatible with the more explicit statements of the World Bank in its poverty reduction strategies. The conceptual tools do not allow for doubts: social investments give a ‘real return’, it ‘generates dividends’, it is a ‘stabilizer’ for the economy, the ‘human capital’ is being enhanced. The links with the ‘employability’ and the ‘activation’ of the Lisbon process are clear. ‘It pays off’, as was said at a recent European conference on poverty.

This is new indeed. In the past, the main objective of social protection was said to be ‘guaranteeing income’. To-day it is ‘making work pay’,  a totally different perspective. ‘We cannot afford low labor market participation’, according to the authors. Why not? Obviously, it is a desirable aim to give all people a good place on the labor market, but how to do it when there are no jobs available? The jobs that were lost during the crisis will not come back, as the authors say. But as a collectivity, we have not become poorer these past decades, on the contrary. So what is the problem? Should we not reflect on a possible shortening of working time or on a better distribution of available jobs?

Social investments can also be problematic. How to look at pensions? Who wants to invest in old people? Those who want to see them as consumers? Yes, but does this compensate for the high health costs of the elderly? In France, questions are put publicly on the too high medical costs of older people, because indeed, these are not productive investments.[ii]

Or look at education. Does the State have to invest in all possible subjects and programs or should it limit its expenses to those subjects which are useful for the economy? Do all young people need the opportunity to study sociology, sinology or anthropology, even if one knows that there are not enough jobs for all those who obtain a degree? Do young people have to pay themselves for their studies, or should some topics simply be abandoned? In her new book[iii], Dambisa Moyo is very clear about this: surely, all young people have to learn to read and write, according to her, but for ‘talents’ who want to learn more, it should be possible to find major companies to teach them higher mathematics.

Maybe this means that a social investment pact could be very useful in third world countries where social services and social protection have disappeared due to the neoliberal structural adjustment programs of the past thirty years. Maybe they can be a starting point for more social protection and for going beyond poverty reduction. Bur for countries like those of Western Europe with a strong social protection, they could mean a spiraling down of protection mechanisms. A good example is the famous minimum income, a promise made by the European Council in 1991 and repeated by the European Commission in 2008. But today, the European Commission even refuses to make a proposal. A pre-condition for a social investment pact?

Social-democratic topping

Ten years ago, when Vandenbroucke, one of the authors and former minister of social affairs in Belgium, was working actively to prepare the European poverty policies, I asked him if there was no risk that would happen in the EU what had happened with the World Bank poverty reduction policies. Could they not become a substitute for the larger social protection? His answer was no. Poverty policies can only be successful when there is also a good social protection, he rightly said.

To-day we know that most social protection mechanisms in third world countries have nevertheless been dismantled. In a lecture given by Vandenbroucke in 2010 he said: ‘An implicit strategic choice Belgian policies have made these past decades has been to focus on a minimum protection for the most vulnerable … however positive it would be to strengthen the insurance principle, I think it would be difficult’.[iv]

Today, once again, Vandenbroucke tries to promote a neoliberal policy with very valuable social-democrat principles. But chances are real that exactly the same is going to happen again. The economy and the labor market are considered as natural givens which cannot be changed but to which people have to adapt. When talking previously on ‘new social risks’, the typical example was the higher rate of divorces which often led to social problems for women. But now, ‘the productive potential of citizens has to be mobilized in order to mitigate new social risks, such as atypical jobs, long-term unemployment, working poverty …’ Should people adapt to this new reality, or should we try to change it? This is the core question of neoliberalism.

People’s resilience has to be strengthened, according to the authors. Social policy becomes a productive factor. Clearly, this social investment policy puts people and their social protection at the service of the economy. We should not overlook the ‘growth potential of this policy’. The ‘social investment pact is embedded in a pro-growth budgetary policy’. People at the service of growth, and social policy at the service of the economy. Should we not reverse this reasoning?

The authors claim they want to ‘reconcile social and economic goals’, but their approach is not compatible with Keynesianism which strengthened the purchasing power of people in order to support the economy and which made the economy produce growth and profits in order to pay for social policies. It was a positive and reciprocal interaction. But with social investments, this becomes a one way street.

‘The social investment pact should be embedded in a vision of social progress for the 21st century’. What does this progress mean? The authors do not tell us.

This proposal is totally compatible with the new policies of the European Union which subordinate everything to growth and competitiveness. People are no longer protected against the market but are encouraged and even obliged to participate in the market. Is this not also the meaning of the latest proposal in Belgium to have housewives with adult children work in the care sector?

The authors claim that the social investment strategy and the protection strategy are two complementary pillars of an active welfare state. But what this protection means is not clear. The authors say they are afraid of austerity policies of the European Commission which may threaten the social investments. But is it not protection which risks disappearing first?

The activation of unemployed people, a flexible labor market, life long learning, all these beautiful principles can benefit workers. Our welfare states need indeed to be modernized. We need more than just passive income protection. But the new social investment paradigm points in a totally different direction. Social movements should urgently present positive alternatives.

[i] Vandenbroucke, Hemerijck & Palier, The EU needs a Social Investment Pact’, OSE Paper Series, Opinion Paper No 5, May 2011.

[ii] Le Monde, 22 September 2011, p. 12.

[iii] Moyo, D., How the West was Lost, Allen Lane/Penguin, 2011.

[iv] Vandenbroucke, F., Strategische keuzes voor het sociale beleid, Lezing voor de medewerkers van het CSB Herman Deleeck, Oostende, 26 januari 2010.