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1 ADDRESSING GLOBAL INEQUALITY: IS THE EU PART OF EQUATION? Draft chapter submitted for publication in: Patrick Diamond (ed ) The Next Phase of Globalisation: Capitalism and Inequality in the Industrialised world I B Tauris forthcoming Frank Vandenbroucke University Amsterdam1 ABSTRACT If globalization leads to increasing inequality economically most advanced nation states if we want reverse this trend is then part solution? Or problem? argue that our discussion these questions can be impaired by intellectual amalgamation determinism understanding Europeanisation signal pitfalls work Milanovic Rodrik other influential scholars: however thought-provoking their accounts are potential role should move beyond such International competition technological demographic changes sociological ideational shifts all put pressure on welfare But difference between trajectory continental European one hand US UK shows so far national institutions policies played a crucial mitigating impact Sixty years ago integration was premised neat division labour: important aspects economic policy would become supranational social could safely left hands Prima facie labour seemed tolerably well many notwithstanding number early critical observations about EU’s fabric Member States today’s no longer sustainable: reason monetary unification another heterogeneity after enlargement Revising requires political contract at level sustains risk-sharing common objectives Agreeing raises issues sovereignty solidarity shared values but possible without getting trapped paralyzed trilemma democracy integrated markets However indicate way forward need coherent conception ‘European Social Union’ KEYWORDS Globalization Europeanization Europe Union thank Jonathan Zeitlin comments an earlier version 2 Addressing global inequality: equation? debate legacy they ‘The force globalization’: unsatisfactory account Are doomed live with steadily inequalities because under siege ‘force globalization’? ceaseless recurrence ‘winners losers globalization‘ mantra debates certainly feeds into pessimistic idea Readers Branko Milanovic’s Global – outstanding academic bestseller often quoted may come same depressing conclusion even analysis multifaceted his relatively open Why that? problem book it lumps together complex set developments related technology international openness balance power notion: ‘globalization’ explicitly defends arguing change ‘wrapped around each other’ ‘trying disentangle individual effects futile’ whilst ‘endogenous globalization’ Hence ‘technology mutually dependent cannot separated any meaningful sense’ (Milanovic 2016 p 110) mutual interdependence drivers not denied conflating them single ‘force’ analytically politically unhelpful mature ‘the ‘endogenous’ considerable differences levels trends hard explain Yet center stage anyone who interested politics Moreover accept affect backdrop identify tackle specific as trade its distributive financial regulation migration tax-and-benefit systems collective bargaining least aim formulate practical solutions We deny overarching background condition nor ‘openness’ have adverse distributional consequences through tax different forces play This complexity probably explains why empirical studies assess limited explanatory variables (such trade) do find much evidence A study tested large variety econometric models vein concludes ‘skeptical bold claims globalization’s effect state’: ‘Globalization exert very modest influence policymakers always been develop see extent which approach relies various factors concept useful compare Bourgignon’s inequality’: there denying contributes within Bourguignon (2015) carefully distinguishes mechanisms 3 influenced diverse mix pressures aging population instance exerts greater than or mediated channeled domestic actors how choose address those process’ (Brady et al 2005 pp 945 944) recent avoids focusing sole manufacturing imports from South income North finds clear ‘inequality effect’ decreases significantly degree wage coordination state generosity across countries It ‘move relative importance inequality’; ‘theories intersection ’ (Mahutga 2017 183) new major report World Report 2018 provides antidote deterministic has increased nearly regions decades speeds fact among when share similar development highlights divergence particularly extreme Western United had 1980 today radically situations projects wealth up 2050 scenarios In future ‘business usual’ continues will further increase Alternatively ‘if coming follow moderate over past reduced case also substantial progress eradicating poverty’ (Alvaredo 17) words within-country dynamics tremendous eradication poverty serve beacon rest For sure face challenges cracks experience signals ever authors refer ‘Europe’ institution: stands region regional estimated only mildly compared National factor Report; whether existence equation discussed does either lacunae addressed cohesion: optimistic view order discuss first understand past: did contribute factor? Whilst scientists difficulty establishing simple significant relationship some researchers two simultaneous trends: decreasing research underscores perceived inequality-enhancing dampened high exhibited small economies 4 stabilized strong corporatist Belgium Netherlands According Beckfield studied 13 net decrease total (i e measured pan-European perspective constitute country) circa 2000 (Beckfield 2009 501) scholars looking wrong place focus globalization: ‘It structures capitalist societies Europe’ 2006 980 level) addition he emphasizes correctly my type process scale refocusing attention establishes correlation rather causation UK’s correlates drastic 1980s Beckfield’s data; Margaret Thatcher? honest answer seems me say what happened EU: Europe’s since 1958 counterfactual scenario Common Market Interestingly opposite narratives were present debates: Let briefly elaborate narrative transpires sometimes implicitly documents accompanying preparation project founding fathers signatories Treaty Rome convinced prosperous inclusive retrospect summarize belief follows: • Economic stimulate growth participating allow less developed catch thanks access market targeted support so-called ‘cohesion policies’: convergence machine where unions parties sufficient redistribute benefits fairly There agree standards Countries ahead socially hindered policy: internal cohesion short fathers’ credo based articles faith clearly distinguished: convergence-through-integration member cohesion-in-convergence immediately add second article (cohesion-in-convergence) undisputed fifties consensus harmonisation question heart 333 results contrasted Tober Busemeyer positive association 14 time period 1999-2000 5 1956 Ohlin Spaak prepared launching Community (International Labour Organisation 1956) Bertil believed wages expenditures involved mainly productivity; hence fear downward allowing free added diminish states’ competitiveness corrected adapting exchange rates Thus describing union insignificant caveat followed suit formulated hindsight terms slightly benign interpretation motives deeply exactly dominant doom-mongering Their reconstruct here think European-level except security entitlements (granted states) mobile citizens (citizens included circle) They mind: supranational; Consequently EU-level initiatives seen attractive necessary sustain Below sustainable today: while worked 20th century 21st underlying optimism naïve history proven until halfway decade century: catching-up went spectre ‘race bottom’ materialize moderately That assessment underrate side successive enlargements depending indicators span review episodes actually diminished already mentioned above reference Over last model started show predating 2008 crisis spinning write ’to degree’ developing link areas notably safety health incorrect dimension project; became player anti-discrimination Research published Lefebvre Pestieau (2012) Goedemé (2017) Eurofound (2015 2017) suggests spans during disposable household incomes half 2000s i following Eastern Central An implicit 1995 2010 whole EU15 must Eurofound’s 2014 6 several states: ‘cohesion-in-convergence’ applied crack spectacular fissure emerged crisis: stopped north south Monetary tearing apart Since (a of) Eurozone self-sustaining upward attribute somewhat benignly advent initial sustainable; enlarged constitutes needs found impressive stream scholarly Fritz Scharpf out main authors: thesis economy gradually more ‘market liberal’ asymmetric bound function Given constellation treaties negative market-making prevail market-correcting policies; Court Justice prefer liberalization (Scharpf 2009) combines incompatible socio-economic 2016) too schematic offers insights comfort statistical provide real explanation longer-term socio-demographic shaping before austerity concur Maurizio Ferrera contribution volume dimension; calls ‘a reframing classical dominated deficit institutional construct asymmetry (…) composite component thus inherent tensions weaknesses imputed Likewise instrument solution remedy (Ferrera 50) Dani represents strand pessimism regard He considers drive towards Single ‘hyperglobalization’ exacerbates democratic Martinsen assumption causal exists legal rulings shape dimensions care She contra Scharpf’s determinist references supporting contention likeminded authors’ 2017a note 6-7 7 catches deems increasingly difficult scaled back Rodrik’s contains healthy warnings: him jump readily imposes upon kinds domains Elsewhere overstretch functionalist arguments active challenge rules functionally relevant (for Market) legitimate aspirations What ‘needed’ ‘imposed’ depends fundamental (Vandenbroucke 2017a) On analytical framework famous ‘trilemma’ rigid capture both record 8 Undoing worst options compelling argument priori judgment intermediary exist extended sufficiently goal-setting key respect subsidiarity sacrificing prerogatives Admittedly basic features selective informed end demise democracies mobilize instruments done Politically uphill battle deep successful yet equality qua institution To rise needed three domains: completion organisation fair mobility taxation; well-placed promote investment human capital generally upshot remain ‘Social true Welfare scene emphasize nature bottom distribution erosion Much nowadays top One overlook distribution: signalling gradual redistributive capacity Germany Sweden Denmark writing work; Paradox (‘For teething problems viewed great success considering down path building remains cautionary tale (Rodrik 2011 220) Straight Talk Trade: Ideas Sane Economy: ‘Macron late entertain fiscal EU’ 78) 88 Sabel (2018) poor actual functioning (and WTO) Crucial explaining increases homespun silver bullet cross-border interaction blamed culprit completely absent Individual refers situation households it’s metric ‘household income’ determinant risk individuals participation members lives measure indicator called intensity’ Around middle people living low intensity confronted 54% whereas 5% sizable divide heightened By 2015 considerably; conversely remained polarisation risks starting Simultaneously witnessed employment Europe: take higher ‘work-poor’ (by mean intensity) returning pre-crisis hollowing middle: medium (but high) lower Compared 2007 ‘very rich’ poor’ reinforcing play: work-poor households; combination types goes long non-elderly pattern homogeneous 2004 combined Poland despite These trajectories explained driver; differs country principle sets poverty-risk countries: tax-and-transfer generous employment; ii role: lone-parent (say lone mother holds part-time job) couple children partners partner works full-time employed); iii zero segment job quality jobs contractual 9 earnings lose earned associated ‘activation turn’ public emphasised incentives increased: enhanced accompanied activation gap employed unemployed grows imply concern abandoned ‘high road’ quantity count; full valorisation Also adequate protection; substitutes emphasis ‘investment’ ignore protection traditional ‘protective’ functions Observations decreased point minimum poverty; certain countries) ‘glass ceiling’ benefit Minimum indeed mobility: fears dumping unwarranted sectors competitive ‘low-wage’ employers enforcement context posting workers result grey blatant cases exploitation All considerations advised wages; return below insurance contrast sketched previous section sharply southern northern design flaws (EMU) wake issued statements viability consider diversity accommodated; referred example Schelkle proposes contrasting perspective: organising enhances sharing allows 10 effective device complete ‘completing union’ mean? insight gained prominence Commission’s thinking EMU existing ceiling reduction’ Cantillon colleagues publications Herman Deleeck Centre Policy suggest remainder conclude well-functioning ‘insurance unions’ centralize management banks unemployment exception driven Banking Commission now argues stabilisers; achieve re-insurance schemes Another option scheme supports hit cope revenue spending 11 wit automatic stabilisers times simultaneously protected happenstance: purchasing downturn therefore ‘automatic stabiliser’ par excellence Existing opt downright centralisation (like Canada Germany) demand reinsurance really combine decentralisation insurance) rational behaviour reasons First pooling resilience against shocks applies symmetric value per se create externality; properly insures itself helps neighbours Therefore stability entails cluster principles stabilisation State: benefits; coverage schemes; segmentation leaves poorly insured unemployment; proliferation relations insurance; individuals; constitution budgetary buffers good bad fortiori imperative quid pro quo equipped systems; implementation ‘stability-related’ implies States’ necessarily flat denial Schelkle’s valorizes diversity; ‘convergence’ (not: uniformity) ‘some’ (in domains) corollary Already 1990s reform justified 1997 Employment Strategy emphasized supply-side flexibility: agenda flexible interwoven opportunities ‘enabling’ See (2017a) 25-26 (2017b) 13-16 ‘flexicurity’ nutshell adds ‘stability’ desideratum ‘flexibility’: avoidance stable coordinated (space forbids latter here; flexibility focused equipping skills action: devices Stability typically protect vulnerable individuals: stabilises protects intrinsically action Enabling protective creating resilient tackling becomes positively Investment Both education fighting expand (higher) make rightly tune Report: ‘[If] Harvard purposes rich returns four exceed manifold college nothing changed apparent endowments attain equalize schools produce better and/or fiat impossible dictate firms give equal pay regardless remaining sensible educational best parental importantly 222) fits tradition assurance aims putting bar opportunity accepted goal complacency: affected Rinaldi 2015) faced double challenge: boost competence addressing issue bring competences broader egalitarian conditions society OECD illustrates convincingly transmission mechanism according human-capital (OECD While outcomes backgrounds widens high-inequality disadvantaged struggle overall investing starts life cycle reducing families 12 child long-term EU-wide Obviously just money; reforms system recognise huge comprehensive training excellent recommendations modernisation carry weight highest decision-making setting budget priorities During suffered highly (Bouget 2015; Hemerijck counter evolutions priority afforded perceptible tangible Commission’s own country-specific (CSR’s Semester’) surveillance procedure With reinforce ‘human capital’ Juncker Plan Fernandes currently suffer insufficient promotion visibility amongst actors; financing loans post-2020 third pillar Fund Strategic Investments (EFSI) devoted pillars infrastructures innovation SMEs evaluation projects’ (using like acquisition inclusion) use CSR’s insist measures And ensure Europe’s consistent governments accommodate adopted respond structural (particularly consideration margin budgets doing so) Finally ready offer commit themselves strategies tight constraints : ‘reform commitment packages’ (as proposed 2017b) Fair immigration practices Gulf (welcoming foreign en masse discriminating respects harshly) reduction generalized nevertheless shift direction differentiating citizen status: ‘Allow legally defined mild treatment local labour’ 154) departure organized 60 intra-EU right movement EU; moreover non-active below) non-discriminatory reside congenial outside regulates (which non-Europeans residents) controversial witness British finally triggered Brexit pause wants maintain defend believe merit Milanovic; albeit distinction drawn citizens; guarantee basis ideal citizenship contingent (see 2017b 2017c argument) freedom logical goods services freely borders restricting questioned grounds fairness Second Polish worker enjoys rights Belgian working justifies generates contributions government non-discrimination tolerate unbridled taxation territory Such form ‘posting’ creates (since employer posted employee working); delineated notion reciprocity sense: states; including circle host circles justification attached allowed area abuse thorough undesirable (notably regulated markets) supply) reforming demanding vis-à-vis realm provision prime Different traditions wages: authorities exclusive domain determined covered regulation: decent apply universally exceptions protection: don’t precarious hyper-flexible limits precariousness board municipalities immigration: safeguard universal non-mobile Pillar Rights turning realities Europe; alternative reconciled coexistence made ‘earned citizenship’ Historically tension bounded granting dependents) exclusion inactive regime assistance dichotomy tenable granted residence throughout ‘as unreasonable burden State’ Dion Kramer sketches continuity evolution situates “neoliberal communitarianism” ‘combines communitarian neo-liberal individual’s responsibility membership community’ labels ‘neo-liberal’ ‘it expressed ‘earning’ convert community cultural values’ (Kramer 277 272) sees dangers current expanding pushed confines taking notes reading Europeans oblige restrictive means avoided possibility exclude non-nationals compassion dominate assistance) duty vulnerability 15 complementary logics legitimately conjointly: 1) Economically depend ‘earn’ involuntary inactivity (unemployment illness) regulations fully 2) simply rely (or her) choice: nationality determines foremost responsible Under bond citizen’s ‘unreasonable burden’ ‘unreasonable’ whatever causes dependence complimentary consistently: ‘fair mobility’ taken My concerns non-EU (‘third country’) nationals residents sits uneasily aspiration ‘second-class’ migrants enjoy natives intra-European exhaust organize external happenstance subjecting second-class difficulties Conclusion: undergo links pursue agreements opted extension third-country 16 exact moot doubt objectives; agreeing w 2017d) coincidence historical legacies entities primary purpose organise interpersonal redistribution borders; States; Solidarity necessitates More practice removed top-down one-size-fits-all policy-making core summarised systemic guide substantive via general leaving ways operational definition Model’ resist captured definitely Sweeping analyses helpful respect: mobilizing creativity paralyze ‘systemic support’ Coordination corporate prominently sceptic redress inequalities: Kuznets wave taxes transfers Here solid regressive surge placed 17 References Alvaredo F Chancel L Piketty Th Saez E G Zucman (coordinators) Lab J (2006) Integration Income American Sociological Review Vol 71 No December 964-985 (2009) Remapping Net Effect Regional Total Journal Comparative Sociology 50 (5-6) 486-509 Bouget D H Frazer Marlier S Sabato Vanhercke Study Policies Network (ESPN) Brussels: Princeton Oxford: Press Brady Seeleib-Kaiser M (2005) State Affluent Democracies 1975-2001 70 921-948 R T Politics 16(4) 536-557 Converging diverging societies? 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Political Constraints Approach Age Massachusetts Together: Less Paris (2011) Markets Democracy Can’t Coexist Trade Economy Ch Sovereignty Complex Interdependence: Some Surprising Indications Compatibility Lever Satz (eds) Matter: Asymmetry KFG W Costs Non-Disintegration: Case In: Chalmers Jachtenfuchs & Joerges End Eurocrats’ Dream: Adjusting Diversity (pp 29-49) solidarity: euro experiment Vision Summit Consortium ): Redesigning Ways Gütersloh 38-77 Gütersloh; Structural versus competition: ECFIN paper 065 Directorate-General Financial Affairs Brussels 20 19 speak Rainer Bauböck Should free? EUI Papers RSCAS 2017/60 9-12 (2017c) Basic conundrum ACCESS EUROPE 2017/02 01 August (2017d)