For a smarter and fairer socio-economic model in 21st century Europe
Winning essay of the Re-Inventing Europe 2014 competition.
In 2000, the Lisbon Strategy was setting the goal for the EU to become within ten years “the most competitive and dynamic knowledge-based economy in the world”. After it failed to meet its objectives, it has been replaced with the Europe 2020 strategy focusing on five key targets to achieve “smart, sustainable, inclusive growth”. While some are likely to be reached by 2020, e.g. in the realm of energy and climate, the persisting economic crisis challenges the overall chances of success of the strategy, especially in relation to employment and poverty.
Although the origins of the crisis cannot be directly attributed to wrong policy choices done at the EU or national level, its effects have deepened existing structural weaknesses more than they have created new ones: excessive public or private debt, divergence between desindustrialisation on the one hand and growing consumption on the other, rising social inequalities caused to a major extent by changes in wealth distribution and access to capability enablers such as education, healthcare, housing and mobility.
Contrary to popular belief, these weaknesses are not the fruits of wild liberalism or evil capitalism but primarily the outcomes of certain public policies which have for decades given to both companies and households perverse incentives. For example, fossil fuel subsidies amounting in the EU about 70 billion euros a year have contributed to deepen energy dependence on external suppliers and to transfer to them wealth at loss. The French state alone spends yearly 20 billion euros to support home ownership even if it encourages the apparition of asset bubbles and reduces geographic mobility, with negative consequences on employment as demonstrated by the “Oswald paradox”.
If the EU is serious about delivering “smart, sustainable, inclusive growth”, it must go much further than setting quantitative goals or financing projects and infrastructure. Pumping more public money into the economy will not be enough to make it recover, despite the theses of some political parties. Degrowth is not an acceptable solution either as it is very unattractive for most European citizens and will make the EU even weaker on the international stage. “Unleashed” growth in the American style is for its part very unlikely to be sustainable or inclusive and is only feebly, if not at all, positively correlated with higher quality of life.
The EU and its Member States should overhaul their policies in order to accelerate the development of a functional economy, mainly based on services and flows rather than goods and stocks. By extending the responsibility of producers beyond the sale to integrate optimized use, maintenance and disposal, this model sets proper incentives to:
- reduce consumption of natural resources – often imported ;
- optimize the use of existing goods – at a moment, the average car spends 95% of its time idle and thus purposelessly freezes rare space in cities as well as a lot of raw materials ;
- create long-term relationships between consumers and producers whose more service-oriented business will create “smarter” jobs closer to the places where goods are actually used, i.e. in Europe, generate more added value and make revenues more predictable.
Concretely, this requires from the EU and Member States:
- a redefinition of tax policy, including social security schemes and import duties, to shift the burden from labour and other flows, which generate most wealth, to stocks like property and virgin natural resources. As foreseen by the OECD in its Policy challenges for the next 50 years, this move would not only limit the possibilities of tax escape and be friendlier for the environment but it would as well contribute to reduce social inequalities ;
- a greater planification role for EU, national and local public authorities in infrastructure policy to avoid wasteful duplication and foster mutualisation with adequate “rights of access” and interoperability norms for service providers and users, for instance in the cases or urban logistics platforms, cell phone towers, optic fiber networks or automated banking machines ;
- the development of a new branch of rights attached to citizenship to ensure that the already on-going process of concentration of ownership or gateway functions, especially in the realm of immaterial goods (Google, Amazon, Facebook, Apple…), does not lead to the emergence of arbitrary discriminations – between users – and blockades – regarding content – that can deprive citizens of their effective rights of access to culture, information or services essential for freedom of speech and participation in public life ;
- a new legal, fiscal and administrative framework for bodies belonging to the social economy in order to encourage the transfer of asset ownership and management competences not only to multinational corporations but also to local, democratically governed cooperatives, e.g. on the model of German Baugruppen in the housing sector.
“Smart, sustainable, inclusive growth” is not utopian, nor are these proposals. Many of these trends are actually taking place already, and the role of political leadership is to give them coherence and adequate tools for development while at the same time limiting their potentially detrimental consequences.