Where Now for European Social Democracy? - Policy Network

Where Now forEuropeanSocial Democracy?

WHERE NOW FOREUROPEANSOCIAL DEMOCRACY?

Published in 2004 by Policy Networkinfo@policy-network.netwww.policy-network.netCopyright © 2004 Policy NetworkAll rights reservedISBN 0 1-903805-03-1 paperbackProduction & Print:Asset GraphicsDrury House, 34-43 Russell StreetLondon WC2B 5HA

Policy Network is an international think-tank launched in December2000 with the support of Tony Blair, Gerhard Schröder, GiulianoAmato and Göran Persson following the Progressive GovernanceSummits in New York, Florence and Berlin. Policy Network’sobjective is the promotion and cross-fertilisation of progressivepolicy ideas among centre-left modernisers. Policy Networkfacilitates dialogue between politicians, policy makers and expertsacross Europe and democratic countries around the world.The Friedrich-Ebert-Stiftung (FES) is part of Germany’s system ofpolitical foundations. It is committed to the principles and basicvalues of social democracy, and operates in more than 100 countriesworldwide to provide a platform for debate on political and socioeconomicissues. The London office of the FES was established in1988 to foster dialogue and promote better understanding in British-German relations, mainly by means of seminars and reports onpolitical trends in both countries.The French organisation A gauche, en Europe was co-founded byDominique Strauss-Kahn (former French Minister for the Economy)and Michel Rocard (former French Prime Minister). It brings togetherindividuals from different political as well as cultural background,who all share the view that an intellectual renewal is necessary forthe reformed Left and that such an effort only makes sense if itoccurs within a European perspective.v

AcknowledgementsThis collection of essays was prepared for a trilateral seminar on thefuture of social democracy co-organised by Policy Network, theFriedrich-Ebert-Stiftung and A Gauche, en Europe. The event, heldin London on the 26th and 27th of February 2004, brings together 15progressive politicians, thinkers and policy-makers from each of thethree countries involved: France, Germany and the United Kingdom.We would like to thank Joanne Burton and Katerina Rudiger inthe Policy Network office for their help in organising this event.David Levaï and Ruth Ziegler also deserve thanks for co-ordinatingthe visiting delegations from France and Germany respectively.We hope that this seminar will be the first of many similargatherings. The discussions triggered by the contributions containedin these pages should be considered the starting point of an ongoingdebate on the future of social democracy. We would like to thankthe authors for their commitment and interest in this project.Special thanks are also due to Francesca Sainsbury and NathanielCopsey, who tirelessly edited and translated the publication. Withouttheir dedication this pamphlet would never have been possible.Matt Browne, Director of Policy NetworkOlivier Ferrand, Secretary General of A Gauche, en EuropeFrançois Lafond, Deputy Director of Policy NetworkGero Maass, Director of the London Office of theFriedrich-Ebert-StiftungLondon, February, 2004vii

ContentsAcknowledgementsviiNotes on the Contributors 1Preface 3Tony BlairIntroduction 5Peter MandelsonVisions and ValuesWhat is a just society? 11Dominique Strauss-KahnRediscovering the need for vision 23Sigmar GabrielPermanent reformism: the social democratic challenge of the future? 31Patrick DiamondGrowth and ProsperityIs the Lisbon process lost? 43Angelica Schwall-DürenGrowth policies for Europe: Is there a common social democratic agenda? 49Jean Pisani-FerryLisbon: A missed opportunity for European social democracy 57Roger LiddleThe New Politics of InsecurityThe place of security in progressive politics 75David BlunkettFreedom in security: A social democratic vision 85Brigitte ZypriesSocial insecurities 93Marisol TouraineEndnotes 101ix

Notes on the ContributorsTony Blair is the British Prime Minister.David Blunkett is the UK Home Secretary. Previously, Mr Blunkett(1994) was appointed as Shadow Secretary of State for Education,and in 1995 this position was expanded to include employment aswell as education. In May 1997 Mr Blunkett was appointed to theCabinet in the post of Secretary of State for Education andEmployment.Patrick Diamond is a Special Adviser in the UK Prime Minister's PolicyDirectorate. He was formally a Special Adviser at the NorthernIreland Office. He writes here in a personal capacity.Sigmar Gabriel has been a Member of the Land Parliament of LowerSaxony since 1990. He leads the SPD group in the Land Parliamentand was Prime Minister of Lower-Saxony (1999-2003). He is amember of the National Executive Committee of the SPD and alsoDeputy Chairman of the Friedrich Ebert Stiftung.Roger Liddle is Special Adviser to Prime Minister Tony Blair onEuropean Affairs and writes here in a personal capacity.Peter Mandelson is Chair of Policy Network and has been theMember of Parliament for Hartlepool since 1992. He was formerlySecretary of State both for Northern Ireland, and for Trade andIndustry.Jean Pisani-Ferry is Professor at the Université Paris-Dauphine. Heis a member of the Conseil d’analyse économique. He was co-authorof the Sapir report from the High-Level Study Group appointed byRomano Prodi in 2003.1

2WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?Angelica Schwall-Düren has been a Member of the Bundestagfor Münsterland (Nordrhein-Westfalen) since 1994 and DeputyChairwoman of the SPD group in the Bundestag (on European Affairs)and a member of the National Executive Committee of the SPDsince 2002.Dominique Strauss-Kahn is the former Minister for Economy,Finance and Industry (1997-1999). He was also Minister for Trade andIndustry (1991-1993).Marisol Touraine is the national Secretary for Solidarité at theParti Socialiste. Previously, she was a Member of Parliament for theIndre-et-Loire constituency (1997-2002).Brigitte Zypries has been the Federal Minister of Justice sinceOctober 2002. Previously she was Director General in the StateChancellory of Lower Saxony (1995 to 1997) and State Secretary inthe Federal Ministry of the Interior (1998-2002).

PrefaceTONY BLAIRI welcome this publication that marks the occasion of an important Policy Networkseminar bringing together leading British, French and German social democrats.Europeans are right to celebrate their diversity. There is no uniform Europeanmodel of market capitalism; no identical social system. Within Europe, even withinthe EU 15 and the eurozone, there are wide differences of economic performanceand social outcome. But Europeans still have a lot to learn from each other. SinceNew Labour came to power in 1997, Britain has done well in terms of growth andemployment. We are catching up on productivity, but despite the sustainedprogramme of investment this government has put in place, there is still some wayto go before Britain matches the high-quality public services that many of ourEuropean partners enjoy. Despite our impressive record in tackling child poverty,Britain is still scarred by a legacy of inequality and social exclusion which, on theContinent, is much less pronounced. This is the ‘progressive deficit’ that is NewLabour’s driving mission to overcome.So, we welcome fellow progressives to London to debate the challenges thatface us. In or out of office, social democrats have always sought to devise agoverning strategy that combines economic dynamism with social cohesion. For weknow that, unless we master the politics of production, the politics of equalitybecome impossibly difficult.In today’s world, that means devising a politics of production that is equal tothe challenges of competitiveness in a world where China is emerging as a majorindustrial power and India as a successful international service economy. It meansensuring greater investment in knowledge (where, in research and higher education,Europe, as a whole, is lagging woefully behind the United States) and strengthenedinnovation capacity. And it means modernising our Welfare States and labourmarkets not simply to cope with the realities of demography, life expectancy andchanges in family life, but also with the demands of a different type of advancedeconomy.As social democrats from Britain, France and Germany, we face these commonchallenges on the basis of shared values of social justice and genuine opportunityfor all. Our parties have proud histories. As a result, there is always a tendency tolook to the great days of our parties’ golden age: Willy Brandt’s championing ofOstpolitik; the achievements of the Popular Front in France; and the creation of theWelfare State under the Attlee Government in Britain.But our values do not belong to the past. They are the basis for facing thechallenges of social justice today and we have to be tough-minded with ourselves inapplying those values to present-day problems. That is why this common progressivedialogue really matters.3

INTRODUCTIONWhere Now forEuropean Social Democracy?PETER MANDELSONThe publication of this book of essays marks the occasion of a seminarin London of British, French and German social democrats to discussthe way ahead for social democracy.The seminar is an informal gathering, not a meeting of Partyrepresentatives. It has no official status. But it is, nevertheless, animportant event. I cannot think of anything similar that has happenedin my 20 years experience that has involved senior members of theBritish Labour Party.There is a paradox here. Politicians talk very little about politics topoliticians in other European countries. Yet integration is a centralreality of all our political lives. Economically, what happens in Franceand Germany impacts greatly on Britain, and vice-versa, becausewell over half our trade is with the European Union. I read a paperprepared for a recent international conference that the Chancellorof the Exchequer, Gordon Brown, hosted in London on enterprise: itcontained the statement that 50 per cent of the regulation affectingbusiness, and thereby jobs and prosperity, is now decided upon by theEuropean Union.Yet for all the realities of integration and interdependence,political dialogue is, at best, weak. Of course, there are intensiverelations between the governments of Europe, whatever their politicalcolour. National civil servants, across a wide range of departments, arein constant touch, bilaterally and in hundreds of official workinggroups that meet in Brussels, to crawl over technical dossiers. Ministerscome together more intermittently at Councils and bilateral meetings,but often to debate an agenda that reflects a pre-set national positionon issues that have been ‘in the system’ for some considerable time.5

6WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?As politicians, they often feel locked in and frustrated by the lack ofopen dialogue on the ‘real issues’ that we share in common.There are fledgling European political parties. The Party ofEuropean Socialists does provide a useful forum for mutual contact.The recent report 1 on globalization prepared by a working groupchaired by Poul Nyrup Rasmussen, the former Danish Prime Minister,is, for instance, admirable in its content and wisdom.But the main focus of the PES effort has understandably been theEuropean Parliament. MEPs have played a considerable part in itswork. Dialogue between members of national political parties is muchrarer and suffers from the problem of every representativeorganisation that every affiliate demands the right to be represented.Practical constraints mean that in the new EU of 25, intimate dialoguewill have to proceed on an informal basis between self selectinggroups.Why then hold this seminar among British, French and Germansocial democrats? First, it is a rare opportunity for open discussion ofvalues, objectives and policies. Secondly, we all have important recentexperience of government that we can share and learn from eachother. Thirdly, we all face a big political challenge of renewal.In Britain, we have started to look forward to an unprecedentedthird term. In the post-Hutton, post-tuition fees climate of opinion,the challenge is to re-engage the Party in a bold agenda of reform sothat New Labour can govern with confidence, rather than relapse intoa mind-set of cautious consolidation.In Germany, the SPD spent 2003 coming to terms with thechallenge of the Schröder Government’s Agenda 2010, includingpainful and difficult Welfare State and labour market reforms. 2004began with the SPD promulgating a bold agenda on innovation withhope of lifting the Party’s fortunes as the year progresses and economicrecovery takes hold.In France, the Parti Socialiste is coming up to the secondanniversary of Jospin’s third place in the first round of the Presidentialelections. Despite growing problems for the centre-right government,it still needs to show fresh unity of purpose and ideological renewal tobecome a credible challenger for power.

VisionsandValues

What is a just society?For a radical reformismDOMINIQUE STRAUSS-KAHNWhat is a just society? This question is at the heart of our socialistidentity, and the source of our values as men and women of the Left.The search for social justice, for equality between citizens, and forcollective solidarity constitutes the principal objective of the Europeansocial democratic project.But the world has changed. Collective values are evolving.Capitalism is undergoing a profound period of change. The traditionalWelfare State, the providential state, is in crisis. The internationalcontext is in the process of a radical redefinition of its post-Cold Waridentity, in which the September 11th, 2001 attacks are a key element.The world has changed. However, our political agenda hasremained the same. It remains anchored in the doctrine of traditionalpost-1945 social democracy.Our responses to this new order must evolve. To achieve itsobjective of social justice, twentieth century social democracy had aprogramme adapted to the rhythm of its times. To achieve the sameobjectives, socialists today must renew our ideological corpus. Wemust launch a new age of social democracy.In our traditional political vision, a just society is a society foundedon redistribution. Capitalism produces inequalities, and the role ofsocial democracy is to correct these inequalities, by redistributing theprofits of the economic machine to those who have not benefited, orto those who have been its victims.This is what all social democrats have done since the Second WorldWar, in building the Welfare State. This model emerged from a virtuouscircle between production and redistribution: strong growth allowedthe financing of redistribution, which in turn, supported consumption11

DOMINIQUE STRAUSS-KAHN 13the distance between the successful and everyone else.• Capitalism was standardised; it has become ‘post-Fordist’. Fordistcapitalism was based on the model of the large industrialenterprise and strong class identities. The standardisation of tasksalong a chain, and therefore the common interest of those whoworked along it permitted a sense of rapport between employersand the workers’ representatives. Employees had clear rights, withequal conditions of work for all. The modern economy, founded onthe differentiation between tasks, flexibility, and direct relationswith the client, has called the Fordist model into question. Largeenterprises have disappeared to the benefit of more atomisedunits, class barriers have broken down, and jobs have becomemore individualised. The result of this evolution is that theemployees’ rights have been eroded, they have been put intocompetition with each other, and paid according to theirperformance. As a corollary of this, inequalities in pay are rising.• Capitalism was national; it has become global. Globalization hasenlarged the salary range. Globalization weighs heavily onrevenues, and especially the salaries of the least qualifiedemployees in Western countries, who have to compete with thelow salaries of developing countries. Waves of delocalisation andrapid deindustrialisation in Europe – at least of labour intensiveindustries – bear witness to the gloomy effects of globalization.At the other end of the scale, globalization increases the value ofthe new cadre of international executives, whose function is toorganise the nomadic nature of business. This group is rewardedwith stock options, bonuses and so on.The redistributive capacity of the Welfare State has diminishedWith the growth of inequalities caused by the market, the need forredistribution has grown, if we wish to maintain a just society. TheWelfare State has come under attack on three fronts: ideological,demographic, and economic.The liberal ideology has won hearts and minds. It seems tocriticise redistribution as being harmful to growth. Redistribution

14WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?might suppress the spirit of enterprise. It creates a benefits culture,and puts a break on the return to work of the unemployed. It increasesthe costs of production and limits the profitability of businesses, andconsequently the level of investment.Demographic evolution threatens the providential state. This is theresult of a fall in the number of people who contribute to the socialstate and a rise in those who benefit from state assistance. In France,until the end of the twentieth century, there were once three activeworkers for every pensioner. By 2020, there will only be one worker forevery pensioner. The growth in life expectancy has been coupled witha huge rise in health spending, especially on those dependent and atthe very end of their lives.Economic globalization produces a tension between growth andredistribution, which threatens the Welfare State. The success of postwarsocial democracy rests on the equilibrium between productionand redistribution, regulated by the state. With globalization, thisequilibrium is broken. Capital has become mobile: production hasmoved beyond national borders, and thus outside the remit of stateredistribution. Production thus depends on attracting internationalinvestment. For strong liberals welfare spending detracts from astate’s attraction as a destination for mobile capital: to achievegrowth, the Welfare State would have to be sacrificed. Growthwould oppose redistribution; the virtuous circle would become avicious circle.The providential state has therefore been shaken. In theseconditions, the risk is strong that it will no longer be able to controlthe growth of inequalities. Even worse, its disengagement at theprecise moment when the mutations of capitalism are causing thegrowth of inequality, could lead the machinery of inequality to spinout of control. This is the case in the United States: over the past20 years, the richest one per cent have increased their share ofnational wealth from eight per cent to 14 per cent, close to the1900 level of 18 per cent. Even if nothing is done, Europe couldfollow the same path.

DOMINIQUE STRAUSS-KAHN 15Social expectations of the Welfare State have evolvedIn traditional social democracy, social expectations were at firstcollective: to improve the condition of the working class, and to betterredistribute the profits of labour. Today, our societies are expressing astrong demand for individual promotion. This is explained by anevolution of collective values: the growth of individualism, aspirations,and a stronger desire for personal accomplishment – and its rewards.This is further explained by the evolution of post-Fordist capitalism.Yesterday, workers were ensnared by a social class that woulddetermine their individual destinies. Today, with the decline of theidea of class, and the enfeeblement of collective identity, eachindividual plays their own hand. Everyone is responsible for theirprofessional development, for his or her success or failure. This isexplained by the democratisation of education, a very recent process. InFrance, between 1987 and 1997, the median age for finishing educationpassed from 19 to 22 years of age; the number of those with a bachelor’sdegree has more than doubled from 30 per cent to 63 per cent.These expectations of individual success and social promotion aredeceptive. Social mobility is feeble in our societies: inequalities ofdestiny are vast. Statistics show an unbelievable stability in thereproduction of inequalities. Intergenerational inequalities aregrowing: social mobility is even weaker, the chances that a worker’schild will become an executive are still slim. Social mobility is evenweaker than it was in the past: in 1960, a French worker could expectto attain the salary of an executive in 30 years; today it would take 150... Contemporary society has a less justifiable level of inequality thanduring the middle of the twentieth century. Today’s discourse createsterrible frustration because it leads us to believe that all responsibilityis personal, in other words: if you fail, it’s your own fault. Classconsciousness is disappearing and the social structures that went withit are fading. Since the democratisation of education has mostbenefited families of modest means, it is this group who will suffermost from disillusionment.The Welfare State responds badly to the new social expectations.It was constructed to regulate the relations between classes. It rests

16WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?on the reparation of the injustices of capitalism meted out to thepopular classes. Its message was: “You have nothing to expect from thecapitalist – you will always be the losers. There’s nothing you can doabout it; the popular classes are always exploited by the dominantclasses. Only the social democratic state is able to correct theinequalities that you suffer”. This is why the social democraticprovidential state created a system to deal with injustices ex post. Themarket produced inequalities which the state then corrected, aposteriori. But contemporary society has liberated individuals from thefatal embrace of class. Our fellow citizens thirst for personal success.They say to us: “Do not interest yourselves only in providing a measureof security for us in case of set backs, give us also the means tosucceed. Give everyone a real equality of opportunity”. It is thisdemand that we must address.Swept along by the mutations of capitalism, demographic changes,and new social expectations, society is today on a dangerous slopingpath towards inequality. The Left is the agent of the permanentstruggle against inequalities. To guarantee a just society, it must renewits ideology and its instruments in order to adapt them tocontemporary realities. It must found a modern form of socialdemocracy.In order to do this, I propose a three-pronged vision of socialism:redistributive socialism; socialism of production; and empoweringsocialism. This vision should take material form in a new area ofregulation: Europe.Faced with the growth of market inequalities,‘redistributive socialism’ must be strengthenedThe historic programme of social democracy is redistribution. We mustnot flinch from this task at the precise moment when the market isincreasing inegalitarian pressures. On the contrary we must make thesystem more redistributive: it is imperative if we want to stabilise thegap in disposable income between the richest and the poorest,because at the same time the difference in incomes increases evenbefore redistribution.

DOMINIQUE STRAUSS-KAHN 17Confronted with constraints that are affecting our redistributivecapacity, the Welfare State needs profound and courageous reforms.I wish to sketch out two courses:• Increase the efficiency of the redistributive system. In all countriesthere is a margin for manoeuvre. This is particularly true forFrance. We have certainly created a machine that redistributeshalf of national income. But it does this poorly: despite thisglobally huge volume, our taxes contribute little to the correctionof inequalities. The overall demands made on physical persons areabout the same at every end of the pay scale, both for executivesand the ordinary employee – that is, deductions amount to50 per cent to 60 per cent of gross income. If we were able toaccommodate this in the 30-year post-war boom, it is no longer thecase today. This is why a vast reconsideration of our whole taxsystem is needed, in the wider perspective of a global planwhich will encompass all instruments and allow us to find anoverall coherence.• Reform whilst protecting existing rights. The reform of our WelfareStates is necessary, as a result of, amongst other things, thedemographic evolutions currently underway. Those who sayotherwise and pretend the system can avoid reform aredemagogues. But the reforms that have been carried out byconservative administrations in Europe, and in particularly inFrance, are shocking. They threaten the fundamental rights andrupture the implicit tie between the state and its citizens. Let usconsider the case of the French civil service. Those who enter theadministration do so on the basis of an implicit contract: on theone hand, salaries are worse than in the private sector; on theother hand, jobs are safer and pensions much better. If civilservants are deprived of these and conditions aligned with theprivate sector, the contract is broken. This is even worse if thecontract has been long term, in some cases an individual’s entireworking life. That reform is necessary is incontestable, but it isquite simple if it only concerns new entrants into the civil service:everyone should decide if he or she wishes to enter public serviceunder the new conditions. It is more complex if it also concerns

18WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?civil servants already in post. It would be unfair if the reform wereretroactive on citizens, who in other circumstances would havemade different career choices. This is why reforms must recogniserights acquired in the past: this should be taken into considerationby an indemnity to protect existing rights. It is under this conditionthat reforms of our Welfare State, unpleasant although necessary,will respect the objective of social justice.To regulate modern capitalism and forbid the proliferation ofinequalities, we have to develop a ‘socialism of production’We can no longer watch passively as the market creates inequalitiesand correct them afterwards. Inequalities grow, and in certain cases,they can become psychologically unacceptable and cause resentment.That is why we can no longer allow the market to generate theseinequalities: we must attack them at the root, and intervene in thesystem of production. We, as socialists, have too long hesitated to dothis: in the name of maximising ideology we have forbidden ourselvesfrom reforming the capitalist machine from the inside. This has beenthe case in several European countries, particularly in Latin countries,where any attempt at reform has been seen as a betrayal of theworking class. In such circumstances the Left remains inert. “Theyhave clean hands, but they don’t have hands”, as Péguy remarked. Toorganise the ‘socialism of production’, is to accept getting ourhands dirty.This ‘socialism of production’ has a fecundity of directions:corporate governance, regulation of financial markets, and thesupervision of delocalisation ... I wish quite simply to insist on onepoint: to secure the worker over the course of their life, also known asprofessional social security.Since capital has become ultra-mobile, because industrial sites candelocalise more easily, because companies rise and fall more quickly,linear careers in one organisation have disappeared. Everyone nowchanges not only company several times in their life, but also theircareer. However, workers are in a fundamentally inegalitarian positionas a result of these changes. The highly skilled part of the workforce

DOMINIQUE STRAUSS-KAHN 19has qualifications that make them attractive to new employers.Indeed, these professional changes are often an opportunity for themto accelerate their professional development, renegotiating theirresponsibilities and their salaries. The poorly qualified worker has onlythe internal recognition of the quality of his or her work in a particularcompany. This recognition cannot be redeemed to impress a futureemployer: he or she is condemned to be unemployed, or at best, tobegin again from nothing. For the unskilled worker, professionalchange is a rupture, sometimes definitive, in his or her career.One must take charge of this rupture and guarantee the period oftransition between losing one job and finding another. In La Flamme etla Cendre, 2 I call this the mutualisation of the risks of professionalmobility. In the past, with professional rights, it was the job that wasprotected. It should be the individual that is protected, not the job.The practical solutions are obviously the most difficult to put intopractice: this is a new social right. We must build a real ‘professionalsocial security’. We European social democrats must all work togetherwith our social partners to accomplish this.To create real equality of opportunity, and a guarantee of socialpromotion for all, we must invent ‘empowering socialism’Intervening at the heart of the system of production to limitinequalities is not enough. We must also intervene further upstream,since we have seen that ordinary citizens do not have the means toensure their professional success. There are intelligent workers andchildren in both rich communities and in deprived neighbourhoods.Nonetheless, statistically, the former succeed, and the latter fail.‘Personal capital’, that is to say individual origins and their visiblesigns – if one is black, white or brown – the family context , and thesocial-urban environment all determine personal accomplishment.From this point of view, the market does not create new inequalities –it makes them apparent. It simply continues, in terms of financial andprofessional success the inequalities of the cradle.This is why I propose the construction of an ‘empowering socialism’to allow the reality of social mobility. This rests on two principles.

20WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?In the first place, the correction of inequalities at an earlier stage.We must leave behind the old idea of correcting inequalities a postieri– the logic of the old Welfare State – and correct inequalities a priori.Second principle, the concentration of public resources. The objectiveof an empowering socialism is to guarantee to everyone a real equalityof opportunity. Not just a simple equality guaranteed by law: ‘you allhave the same rights, competition is open, so may the best man win!’But a real equality. In order to do this, we have to give more to thosewho have the least – more public services to those who have lessnatural capital.This approach is a return to the origins of socialism, and theempowerment of the citizen. It opens the perspective of radicalreform in our public services which are the principal guarantors ofequality of opportunity: childcare, education, housing, urban renewaland integration ...I only want to take a single example, schooling. Today in France,in the name of republican equality, we offer in principle the sameeducation to all our children: the same course, the same subjects, thesame number of hours of tuition for all. This is not true in practice: theschools in deprived neighbourhoods are far less well kept because thelocal councils are much poorer, the teachers are of a poorer quality,since they remain in post for a much shorter period. Even if theprinciple of formal equality were respected, it would still be a falseequality, since schools are so egalitarian they reproduce and legitimiseexisting inequalities of opportunity. We must break with this formalequality and concentrate our resources on those who need them most,to ensure a true equality of opportunity. If a child needs 30 hours oftuition to learn mathematics instead of the 20 formally allotted by thetimetable, the school should be able to provide them. We must givemore to those pupils who have the most need.Modern social democracy must re-define the territory ofregulation and invest in the European fieldThe Welfare State is enfeebled because it no longer operates on themost pertinent territory. Capital has become mobile, and can easily

DOMINIQUE STRAUSS-KAHN 21avoid national regulation by delocalising. The territory of politicalregulation should become again the same as that of economics. Theglobalization of regulation should follow the globalization of theeconomy. In order to do this, we must put all our energy into theconstruction of Europe, which is alone in possessing the clout tobring about global regulation, partly through the construction ofinternational institutions. The state was the instrument of twentiethcentury social democracy. Europe should be our new horizon, and thelever of tomorrow’s social democracy.In this perspective, the current debates on the EuropeanConstitution are essential. ‘Technical Europe’, the entity that hascome into being since the Treaty of Rome in 1957, has been aremarkable instrument for the construction of the Single EuropeanMarket. But it does not facilitate the construction of a socialdemocratic programme for Europe. This is, by definition, a politicalambition – and political institutions alone, responsible to Europeancitizens, can put this into place. Whatever its weaknesses, theEuropean Constitution marks the first founding step towards thispolitical Europe. It is urgent that all the European parties of the Leftmobilise to push for its adoption.We live in a period of transition towards a new political cycle. Onepolitical cycle is coming to a close: post-war social democracy. A newcycle is under construction: social democracy for the twenty-firstcentury.The world has changed – our political framework cannot remain thesame, anchored in the doctrine inherited from the Second World War.We are in ideological retreat; we are out of step with the politicaldemands of our fellow citizens, whom we offer policies that are notadapted to the rhythm of our times. This is the origin of the presentdemocratic crisis.This crisis is a fact, but it is not terminal. We have to respond tothe democratic challenge and work to rebuild our intellectualfoundations. We have to create a political project adapted to themutations of modernity, a vision of society capable of offering the keyto the future, a new identity that can face up to the fall of the oldcollective remedies. This perspective rejects the passive response to

22WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?current transformations. Left reformism is not an abdication beforethe market, it is on the contrary a constituent part of a radicalreformism, capable of changing the course of the world.This is the collective ambition that we must fix ourselves upon.

Rediscovering theNeed for VisionSIGMAR GABRIELIn recent months, wherever German social democrats meet to discussthe state of our party and its government’s policy, we hear thissentence resounding like a short, fervent prayer. Whenever the SPD isin government many party members wonder if and how the politicsof the day can be brought into alignment with the historic mission ofthe SPD.The on-going discussion over a new SPD policy agenda should helpto satisfy this longing for a modernised social democratic narrative.However, if one listens closely a ‘secret course of instruction’ in thepolicy debate is also revealed: some suggest that in view of thedifficult decisions of Agenda 2010 they are able to pacify thesomewhat unwieldy and disgruntled political grass roots – cynics evenclaim they are able to keep them occupied. Others hope that througha new social democratic ‘vision’ they are simply better able to explainthe harsh realities of government policy.Others simply want to escape from this severe government policy.Based on the motto: if we already feel very uneasy when consideringthe difficult decisions associated with Chancellor and – at least untilrecently – Party Chairman Gerhard Schröder’s Agenda 2010, then wewant to at least play a neutral role in the policy debate of the SPD.The SPD’s regenerative energy source:freedom and empowermentNothing would be worse than following this ‘secret course ofinstruction’. It is correct that the SPD is a party that needs a surplusof hope and utopia in order to engage people for longer than just the23

24WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?brief moment of a singular electoral decision. In its 140-year history,the SPD has experienced and survived enormous historical breaksin Germany. Charismatic personalities, or savvy reform projects andlegislative plans do not suffice to explain why this party has survivedfor so long and even remained young and attractive: through the daysof empire, to the Weimar Republic and National Socialism and againstthe lively antithesis of Communism. Even the visible eclipse of ourhistorical sister movement – the labour movement – which has beentaking place for decades, has not changed this.The SPD’s fountain of youth was and is the main theme in thesocial democratic story. Its central idea is ‘empowerment’, whichmeans nothing less than keeping people’s lives open. No one shouldbe constrained by family background, income, gender, religion orethnicity. And it has always been the task of social democratic policyto clear away the societal barriers that prevent this inherent opennessof life. Where hurdles obstruct this openness in the life course, socialdemocrats want to train the muscles of every individual to enablethem to jump over them. We want to achieve this particularly throughgood education and vocational training. Where the social barriers aretoo high for even the strongest muscles, we want to work together topull down these barriers.Therefore, freedom is not only a collective goal of socialdemocracy in building a democratic society – but also always a centralcategory for the blueprint of life of every individual. We want toensure life chances for all, from the outset, to take part in theopportunities of their society. In order to achieve that, a responsibilityfor communal life has to be a part of the right to individual freedom.For social democracy, freedom and autonomy on the one hand, andpublic welfare and social responsibility on the other, were always twosides of the same coin. The combination of these, along with thenotion of empowerment and of ‘another’ life for every individual in‘another’ society that developed from this were the regenerativesource of energy that has been the SPD’s driving force for more than140 years.

SIGMAR GABRIEL 25The task of the SPD remains:strengthening people and opening pathsToday, what is the meaning of freedom, justice and solidarity ina modern society considering the dramatic change in the economy,social structure and demographic developments? 140 years ago,when members of craft guilds and workers organised, freedom andjustice were existential values in a society that prevented theirimplementation to a great extent. Solidarity was then a merit that wasfirst and foremost practiced daily by the labour movement throughself-organisation, because Imperial Germany did not want to grantsolidarity to the workers. In the last 140 years, social democrats havelaboriously struggled, at times bitterly, for a high degree of freedom,justice and solidarity. However, no one will deny that today theGerman social state is arranged fundamentally differently than theclass-based society of 1863. This is precisely because of socialdemocracy, which has throughout the years achieved significantchanges and improvements for people and their co-existence.In our modern society there are also barriers for the personalopportunities of the individual as well as for societal developments:educational opportunities continue to be strongly linked to socialinheritance; children are a poverty risk for families; bringing upchildren can be incompatible with having a job; increasing massunemployment; the recurrent failure to integrate foreigners andre-settlers; and, the decreasing ability of our cities to create socialintegration, to list just some of the problems. It is precisely thetraditional voter groups of the SPD who increasingly feel that we areno longer sufficiently aware of these barriers and the everydayconcerns. Young families that can only afford children or holidays, thetechnician or engineer who at the age of 50 can no longer findemployment, the craftsman who must spend 10 per cent of his netincome on nursery school spaces for his two children or the pensionerwho has not moved in 30 years, but in the meantime no longer feels athome, 70 per cent of those living in his part of town now being foreigners.Thus there are enough tasks for a party that has devoted itself tothe principle capability of emancipating the individual and society.

26WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?In addition it is a good social democratic tradition to not only carefor national – or today European – tasks, but at the same time alsoincrease awareness for people living together at the internationallevel. Starvation, environmental catastrophes or violent conflicts arebound inseparably to the environmental and social conditions ofdeveloped industrial nations and are a worldwide challenge for socialdemocratic policy.The new tasks for the SPDThere are, however, great differences between the empowering contentof social democratic policy of 20 or 30 years ago and that of today. Oneimportant difference lies in the historic success of social democracy initself. This success has not only led to the disbanding of the classicsocial democratic environment, but also the opinion formers, electedofficials and functionaries of the SPD are now further removed fromthe conflict-laden daily experiences of traditional SPD voters.In the past, social democratic municipal council members wereinformed of conflicts through their involvement in sports clubs, inschool parents’ councils or in workers’ councils. Today, in many citiesthey perhaps attend the respective annual general meeting but live ina sphere that is otherwise disconnected. The consequence of this is notonly a lack of mutual commitments, but also in part the denial ofexisting conflicts that do not suit particular political positions. Thisis most noticeable time and again in the fear-laden inner-partydiscussions over the real, existing conflicts between Germans andforeigners.Therefore, the SPD must urgently change the social structure of itsmembers, functionaries and elected officials. This requires not justrejuvenation. Most importantly, it must also be extended to theeveryday experiences in occupational and social life. In former timesthere was a lack of women in the SPD, and now in addition there is alsoa lack of skilled workers, craftsmen, technicians, nurses, policemen,workers’ councils and the self-employed. In essence, the purpose isto bring together as many different experiences and viewpoints aspossible to confront one another in the SPD. Only in this way can

SIGMAR GABRIEL 27exciting discussions and reasonably sure-footed decisions emerge.The second main, important difference in a new policy concept forGerman (and international) social democracy is that the classicalstrategy of re-allocating social wealth no longer reaches out enough toremove the social barriers that exist in today’s world.On the contrary, the structures and systems of social securitybuilt on this strategy have in themselves become an obstacle to anempowering development for many people in our society. On the onehand we have been living for decades by mortgaging the future,because the political class’ strategy of conflict avoidance – includingsocial democrats – has increasingly financed its social programmesthrough borrowing. A completely different redistribution has arisen,namely for the benefit of those who are living at the expense of futuregenerations.Today, the result of this already is that we are confined to copingwith the past and we are not free to act for the future. In Germany,we spend each year €114 billion on debt-servicing and pensions andonly €25 billion on investment. For research and technology, only€12 billion are allotted in the federal budget. A society that spendsten times more on managing the past than it does for the future isquickly a thing of the past.On the other hand, the combination of a hedonistic policy on thefamily and the lack of childcare options has led all the formulas of oursocial security system to fall apart. Because we would like to retainour traditional form of social security, we have been confronted foryears now with rising contributions and decreasing benefits. Thissimultaneous destruction of the freedom of the state to develop andthe margin for decision making of the individual is ultimately thegreatest danger for Germany’s social state model. The climax wasfound precisely under a political leadership that gladly gives theoutward appearance that it would like the exact opposite. TheCDU/CSU and the FDP with Helmut Kohl, Count Lambsdorff andtheir party supporters shunned reforming financial policy and thesocial systems just as they preached freedom instead of socialism.Financing German Unity on credit and at the expense of labourersand white-collar workers in the social security system will cling

28WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?to our feet like lead weights for decades to come.The result is public discrediting of the social state, particularly byemployees. As paradoxical as it may sound, what once helped toovercome the risks in life – that is the whole German social securitysystem – has in its traditional mode of organisation now become anobstacle to a free and self-determined life for many people. Aftersocial deductions from hard-earned gross salaries not much moneypasses into net pay packets. Particularly young families see thisincreasingly as a barrier for the freedom of choice on the one hand andfor taking part in the existing social opportunities on the other.Therefore, in the meantime, the willingness to partake in collectiveprotection from the risks in life is massively diminishing.If the SPD wants to preserve joint finance of the social securitysystems, due to changed occupational biographies and dramaticdemographic change it must decide on a new model of the social state.Much of what was in former times necessary for collective protectionhas today become obsolete at least for a large number of people,because increased income enables autonomy and provision.In principle it is a matter of reviving our concept of solidarity:acting responsibly to oneself and also towards others. How muchautonomy and personal provision may be expected in our society, howdo we create more individual decision-making authority, which risks inlife require collective protection, which public welfare interests mustbe financed through the taxes of all citizens instead of through thesocial insurance contributions of labourers and white-collar workers?The answer to these questions in no way comprises a threat oreven a departure from the social state. On the contrary, the only waywe can create a new and attractive model of the social state is withnew confidence and trust in the personal competence of everyindividual and in the efficiency of common social security systems.Take a chance on more policyLast but not least, in Germany we need to reform our constitution initself. In reality, it is not the supposedly influential associations andlobbyists that make reforms, creativity and innovation difficult. It is

SIGMAR GABRIEL 29the constitutional practice of state institutions themselves, becausenowhere else in the world does the respective opposition have as muchinfluence over the governing majority’s legislative practice as it doesin Germany – in fact without having a real interest in improvements.At the same time, all parliaments and governments of the post-war erahave greatly contributed to the fact that the expansion of legislation,and of the concomitant growth in administration has led to abureaucratic explosion today.Instead of safeguarding freedom and justice, people frequentlyexperience state institutions as an obstacle that restricts creativity,dynamism and the will to organise. And this is not actually just inthe case of the often-cited founders of new businesses, but alsoof associations, cultural initiatives or individual involvement. Ourpolitical system has achieved a truly organised irresponsibility if welook at the parallel jurisdiction of the municipal, state, federal and EUlevels. Not only does this in the meantime institutionally hinder theefficiency of democratically elected parliaments and governments, butalso it obstructs the tempo of essential investments and innovationsin science and the economy. It is precisely the Social Democratswho, referring to Willy Brandt, could dare and call for much moredemocracy. In order to do this, though, they must above all dare totake a chance on more policy.A reform of our state institutions and of federalism is overdue. Asocial democracy that is less obsessed with the details of perfectinglegislation from above, and which instead opens a path for morefreedom and responsibility for the individual as well as for respectivegovernmental levels in the federation, states and municipalities wouldbe considerably more appealing.The social democratic story remains grippingThus there is not a lack of obstacles for societal and also individualprogress. The SPD has every reason to link up with its emancipatingtradition self-confidently. It must wager on freedom and socialresponsibility and cannot in the process form contrasts. Both the wishof every individual for freedom of decision and the awareness of

30WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?collective responsibility for the development of society as a wholecontinue for us today to be reciprocal conditions.The SPD was always the party of the modern, a party of dynamismand movement. It was the SPD that knew that achievement breaksprivileges, that what is earned and worked for is more important thanwhat is inherited. It was social democracy that cleared away barriersand blockades, broke with many taboos and as a result enabled allpeople new access to the state, economy and society. It was the SPDthat always opened up a new opportunity for the ‘excluded’.This social democratic idea is just as lively and attractive as in thelast 140 years. It comprises the story of a young society that once moreperceives children as an exciting enrichment to our lives, thatencourages competence and orientation in education and bringing upchildren, that provides social security but also requires autonomy, andit is a society that is at least as active internationally in the struggleagainst starvation and poverty as it is against despots and terrorists.We are obliged to explain to people what social democratic meanstoday and why the policies that we have today have something to dowith why we set off on this path 140 years ago. Only when we havesucceeded in this convincingly will the SPD also regain people’s trustand respect.

Permanent reformism:the social democratic challengeof the future?PATRICK DIAMONDIt is commonplace today to advocate a strategy of ‘permanentreformism’ 1 for the European Left. Social democrats should distinguishthe enduring goals of public policy from the contingent means throughwhich they are pursued. The revisionist tradition does not represent afixed body of ideas or programme, but rather a constant questioningof the means by which traditional social democratic aims can beachieved.Conservative parties, it is argued, stand for maintaining order – thestatus quo – while social democrats seek to advance human progress,and by embracing ‘permanent reformism’, envisage the creation of asociety more equal, more free, more inclusive, more communitarian,and less disfigured by human misery and suffering.Permanent reformism affords huge opportunities for the Left andcould be the foundation for its long-term recovery – returning indeedto the situation at the end of the 1990s when Left parties held officein 11 out of 15 European Union countries.But we must begin by debating the structural obstacles to reform,what Anthony Crosland termed “the psychological resistance torevisionism”, and its consequences for the electoral fortunes of socialdemocratic parties – for revitalising the Left in Europe intellectuallyand politically over the coming years 2 .Throughout the 1990s many centre-left parties turned to reformistideas in the belief that they should not merely accept the marketeconomy, but embrace the values of enterprise, personal responsibilityand hard work. No single European social democratic model emerged.Instead, three distinct and coherent modernising projects havedeveloped since the early 1990s: the modernising statism of France,31

32WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?the consensual corporatism of Germany, and the globalized socialdemocracy of Britain.These transitions are founded on a paradigm shift within Europeansocial democracy since the mid-1980s.• The Left should remain steadfast in its commitment to socialdemocratic values, but maximise innovation in the means ofdelivery.• Liberty and freedom are the means, as much as the ends, of socialdemocratic politics and Left parties should reclaim their roots insocial liberalism.• The production of wealth is as fundamental as its redistribution: acoherent strategy for increasing productive capacity and long-termsustainable economic growth is fundamental.• Parties of the Left must embrace new currents in civic societyand seek to draw strength from the forces of change – namelyfeminism, environmentalism, and internationalism.The history of socialism revisionismA revisionist approach is, of course, nothing new on the Left – and weshould guard against scorched earth thinking. The current revision ofsocialist doctrine is in fact strikingly similar to the revisionism of thepast. In the late 1950s and early 1960s, socialists in Britain, France,Germany, Italy and elsewhere re-examined their doctrine andattempted to free themselves of ideological baggage they regarded ascounter-productive – with varying degrees of success. The German SPDwas the path-breaker at Bad Godesberg in 1959 presenting itself as agradualist social democratic party with the slogan: “planning wherenecessary, the market whenever possible”.As Thomas Meyer has argued, Bad Godesberg achieved a dramaticbreak with the past by ending the deeply ingrained dualism on theLeft between orthodoxy at the ideological level and half-heartedpragmatism in practice 3 . Gaitskell and Crosland pursued precisely thiscourse for the British Labour Party culminating in the failed revision of‘Clause IV’ in 1959.There are other striking similarities between the revisionism of the

PATRICK DIAMOND 331950s and 1960s and what Donald Sassoon terms the ‘neo-revisionism’of today 4 . The two movements have occurred after a lengthy period ofright-wing hegemony. In both eras sociologists were predicting ‘the endof ideology’ as Kirchheimer heralded the embourgeoisement of theworking-class. There is another parallel. In both eras, a period ofpessimism about capitalism’s survival was followed by its remarkablerecovery. Since the beginning of the 1990s capitalism has provedglobally resilient despite the comparatively weak performance of theEuropean economy during those years.There are of course major contrasts with the 1950s and 1960s, notleast the Left’s recent embrace of constitutional reform – as opposedto a defence of the ‘bourgeois state’ which had first legitimised socialdemocracy in the late nineteenth century. The internal process ofrevisionism is nonetheless ceaseless.The SPD recently published a new ‘framework for the just renewalof Germany’ as part of its Agenda 2010 reforms, embracing ‘a cultureof innovation’ in public policy 5 . By calling for the establishment ofnational ‘elite universities’ for example, Chancellor Schröder hasbroken a post-war taboo of German social democracy, as he seeks toaddress the skills gap while tapping more effectively into scientificinnovation.The leading French politician Dominique Strauss-Kahn has setout the case for a ‘radical reformism’ in the Parti Socialiste as thefoundation stone for the modernisation of French society. He has calledfor greater investment in education and human capital, housing andthe health sector, drawing on experience from Britain and Scandinavia,alongside fiscal and regulatory reforms – widening access to decent andsecure jobs 6 .The British Prime Minister Tony Blair has argued recently in apamphlet published by the Fabian Society 7 : “It is time to acknowledgethe 1945 settlement was a product of its time and we must not be aprisoner of it. We must recognise that what was absolutely right for atime of real austerity no longer meets the needs and challenges in anage of growing prosperity and consumer demand”.

34WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?Are we therefore all revisionists now?Political forces can’t survive without regular self-questioning. Thesocialist philosopher R.H. Tawney set out the challenge for socialdemocratic parties with characteristic brilliance in the early 1950s: “totreat sanctified formulae with judicious irreverence and to start bydeciding precisely what is the end in view”. 8 Our parties still have tonegotiate very different national political cultures and legacies – inaddition to different electoral and parliamentary situations.Nevertheless, social democrats in Europe face common challenges as aresult of globalization and the rise of ‘anti-politics’, antagonised bychanging class structure. This squeezes Left parties and forces us toadapt to change.But this commitment still begs fundamental questions. Is theattachment to permanent reformism really tenable in the long-term?Crosland understood that the revisionist project “is an explicitadmission that many of the old dreams are dead or realised; andthis brutal admission is resented … it destroys the old simplicity,certainty, and unquestioning conviction” 9 . Can social democraticparties therefore adopt such a vision without retreating to thecomforting myths of the past, and can revisionists renew themselves?We should be conscious of the dilemmas posed by permanentrevisionism.Revisionist dilemmas: public service reformThe British example is instructive. In re-casting Clause IV of the PartyConstitution in 1995 to fully embrace the market economy, New Labourended the historical antagonism between the Left and the privatesector in Britain, and abandoned forever the dream of wholesalenationalisation of ‘the commanding heights’. It was a triumphal actof revisionism.However, such a shift has had profound long-term consequences.The consolidation of the centralised post-1945 welfare state hasemerged even more avowedly as the principal objective of the LabourParty since the mid-1990s. To swallow the market, some on the Left

PATRICK DIAMOND 35have hardened their attitude to the public sector, judging onlycentralised state provision to be compatible with the commitmentto equity.The provision of public services by traditional state providers isregarded by many in the party as the touchstone of social justice.Hence the raging disputes since 1997 over Public Private Partnershipprojects for capital infrastructure, the use of private agencies in theNHS and schools, establishing ‘foundation hospitals’ in the healthservice, and the outsourcing of public administration functions toprivate operators.This orthodoxy on public services has also been reinforced byLabour’s abandonment of the rhetoric and aspiration of socialisttransformation that reached its climax with Nye Bevan in the 1950s. Bydiscarding the bold aim of replacing capitalism with socialism, aminority in the Party have settled for a more modest and conservativedefence of the traditional Welfare State as the pinnacle of socialistambition.Public services are rightly fundamental to the social democraticconception of the good society. But the removal of one rigid orthodoxyabout markets is in danger of hardening new orthodoxies in relation tothe public sector. As Andrew Gamble has persuasively argued 10 , thequestion of whether there should be public services at all has beenconfused with how the provision itself is delivered.Public services and the public sector have been equatedunambiguously when they are in fact quite different entities. That thepublic sector should be regarded as an island of altruism in a sea ofprivate interest and greed, and private profit must never be allowedto intrude, is obviously too simplistic.This intransigence puts at risk the continuous innovation essentialto achieving Labour’s aspirations for public services. The foundingprinciples of the public service to which Labour is most attached, theNHS, are that it should be universal and free at the point of delivery,not that it should be provided through a particular structure or set ofemployees.PPPs are intended not to weaken public provision, but to add a newdimension drawing on capabilities across both the state and private

36WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?sector – tapping into the disciplines, incentives and expertise thatprivate firms can provide.But there is another rationale for PPPs beyond the shallowerappeal of ‘what matters is what works’. Partnership and collaborationprovide deeper benefits. As Martin Summers has pointed out in relationto local government: “one of the most valuable benefits of opening upwhat have traditionally been local government domains to outsideorganisations – whether they be commercial organisations, quangos,charities, NHS trusts or housing associations – is that there has beenopportunity to see how different means of decision-making perform;thus presenting alternatives to the traditional monolithic, hierarchicaland departmentalised local authority model” 11 .Well-planned and executed partnerships can also give users andcitizen groups a stronger role in commissioning services, and achieve astronger focus on outcomes. This could ultimately mean communitiesfeel a stronger sense of ownership of public services, helping to forgenew coalitions of support for adequate levels of public expenditure.Many of the most ambitious and innovative programmes undertaken bythe UK Government since 1997, including Sure Start for the early yearsand Learn Direct for adult learning, were founded with a strong ethosof partnership at the core.Formal involvement with public organisations can also transformthe operating behaviour of private sector firms. Such firms are calledupon to act within a regulated framework of employment law,disclosure of information, integrity, and accountability. This implies,correctly, that there are no rigid ideological or institutional boundariesbetween the state, private and third sector. Both state and market areembedded in, and dependent on, social institutions. Equally, ‘privatesector involvement’ is not a catch all solution to every social policychallenge, nor is it necessarily an appropriate device for interventionwhen existing provision fails.The Labour Government in Britain has taken great strides inreforming public services since 1997. It is striking that influentialconstituencies and interests on the Left are coming to accept the needfor greater devolution and pluralism in public provision. But thedangers of new structural barriers to reform, both institutional and

PATRICK DIAMOND 37ideological, are ever-present, as a period of revisionism andenlightenment in the 1990s risks giving way to the familiar chorus ofheresy and betrayal today.Refreshing the Third WayA second dilemma relates to the specifically Anglo-American socialdemocratic reform project of the third way. Again, there is a dangerthat in regarding this project as the only catalyst of policy‘modernisation’, those who advance the third way forget that it tooneeds to be revised. They become by implication ‘old’ New Labour.The third way as envisaged by President Clinton in the mid-1990s wasrooted in a politics of aspiration – how to appeal to those groups in thelower middle and working-class, famously termed ‘the ReaganDemocrats’, who became alienated from the Left in the early 1970s.However, the dominant force in the economy and society today is oneof pervasive insecurity.The economism and futurism implicit in the third way in fact servesto undermine the revisionist approach since it implies that history hasan ultimate, fixed destination. Yet there are always new frontiers tobe conquered. The historian Larry Siedentop shows in ‘Democracy inEurope’ that the tendency to reduce politics to a solely economicmatter, a strong disposition in much of Britain and the US, carries gravedangers 12 . Equally, we should be alive to the threat of futurism – thenotion fundamental to Thatcherism that we know what the future isgoing to be; we have no choice but to embrace it; and those who graspthe future are entitled by virtue of their superior insight to lead therest of us towards it.Fatalism is the enemy of the revisionist approach. Fundamentally,if global capitalism and its forces conquer all before them, how canpolitics have an ethical dimension any longer? This mentalityexacerbates cynicism and corrodes trust in public institutions bydisqualifying any scope for moral argument. The underlyingassumptions of the third way project therefore need to be re-visited.New thinking should be rooted in a broader and more coherent politicalnarrative that is unambiguously couched in the values of the Left.

38WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?Equally, those who consider European social democracy to bein irreversible decline are too pessimistic. Embracing ‘permanentreformism’ opens new doors and unleashes new opportunities:electoral, political and intellectual. Fundamentally, revisionism is aradical cast of mind that provides a critical framework for thinkingexpansively about human affairs, to develop strategies and policiesthat take account of change. But the Left, while embracing therevisionist project, must also be aware of its dilemmas in order togain renewed intellectual and electoral relevance.The ideal of a European Union able to offer an effective counterweightto the ‘Washington consensus’ of the IMF and World Bank hasrich potential. Economic globalization is still far from comprehensive.For all the emphasis on globalization, and the challenging structuraladjustments in the European economy it requires, trade has grownfaster within the EU than outside. Markets for goods and services, inparticular, remain far more European than global. There is still scopefor macro-economic policies at both national and European level.Hence there is a golden opportunity to deepen integration in a socialand economic direction at the same time as expanding the Uniontowards eastern and central Europe.A new European social democratic model:life chance guarantees?We should therefore pursue existing initiatives such as the 2010 LisbonAgenda, while opening up new routes to economic dynamism andsocial justice. Europe needs a social architecture that is in strongerharmony with the kind of economy, employment and family structurethat is developing based around what Esping-Andersen terms ‘lifechance guarantees’ 13 . A new European social democratic model thatprovides a compelling response to insecurity yet does not imperileconomic competitiveness is still eminently achievable. But improvingproductivity and growth performance within the Euro zone is anessential prerequisite. It is a harsh reality, but there are no longer anynational roads to socialism.This is an open field for the Left as the Right risks imploding in the

PATRICK DIAMOND 39face of its own contradictions. Across Europe, a disparate array ofconservative parties express continuing hostility to the EU withouthaving the courage to discard its institutions. Their effort to createcoherence, by seeking to exploit anxiety about ‘outsiders’ whilesimultaneously affirming neo-liberalism, has provided short-termsuccess by the ruthless exploitation of insecurity – bracketing togetheranxieties about crime, migration, identity, public services, andterrorism. Yet this is deeply confused and in the long-term mayfracture the electoral constituencies of Right-wing parties beyondrepair.Conclusion: next stepsAll modern European socialist parties recognise that there is no goingback. Embracing permanent reformism has many attractions. But weshould not delude ourselves that committing to it at the theoreticallevel will somehow dissolve all structural barriers to the revisionistproject. It will not. The hard grind of analysis, clarification,prescription and persuasion lies ahead of us. Yet if social democracy isto survive, we must do more than catch up with the changes of the last20 years. We must chart a new path for the future.

GrowthandProsperity

Is the Lisbon Process Lost?ANGELICA SCHWALL-DÜRENThree years into the EU’s Lisbon economic reform agenda, theEuropean Union still remains far from achieving its goal of becomingthe “most dynamic and competitive knowledge-based economy in theworld by 2010”. Despite this, notable progress has been made at theEuropean level in implementing many parts of the Lisbon agenda – suchas energy liberalisation, financial services integration and the adoptionof a Community Patent, though we are still waiting for the positiveeffects on growth and employment that were forecast. Today it isquestionable whether we can meet the ambitious targets for reducingunemployment, raising employment rates for women and olderworkers and increasing expenditure on research and development tothe three per cent of GDP set at Lisbon.In view of the budget deficits in Germany, Portugal, France, Italyand The Netherlands, continuing slow growth rates and labour marketproblems – one might say that the Stability and Growth Pact ensuresneither stability nor growth and so call for changes to be made. ButI will not do so. Why?First, some remarks on the Stability and Growth Pact.At the European level, the rationale for the Stability and GrowthPact and the observance of sound fiscal rules in all the Eurozonecountries is as valid today as it was in 1997, when the Pact wascreated. If countries share a common currency, they need a set of keyrules for their fiscal policies and some kind of fiscal coordination.Without this, it could push up inflation and result in the ECB’s interestrates going higher than they otherwise would. Breaking the rules wouldalso send the wrong signal to the accession countries – showing that thecurrent Member States are unable to implement the necessary reforms43

44WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?and secure sound finances.In my view, the overall framework for stability-oriented economicand monetary policy in Europe is broadly appropriate, and there isno need for dramatic changes. Nevertheless, I do see scope forimprovement. I believe the EU needs fiscal rules that are flexibleenough to allow governments and parliaments to react to economicdifficulties, but strict enough to ensure the sustainability of publicfinances. The Stability and Growth Pact – in my opinion – gives us thisflexibility. I will return to this point later on.What is wrong in Germany?In my opinion, the budgetary problems in Germany, France, Italy andalso in The Netherlands are not caused by the Stability and GrowthPact or the euro. There is no doubt that the German economy – whichis highly dependant on exports – has been very badly affected by theuncertainty and poor growth seen in the global economy since 2001.The unfavourable economic conditions during the last three years havehad, and are still having, a particularly adverse effect on tax revenues,making additional expenditure on the labour market and social securitynecessary. But there are also other, special factors – such as thenecessary continuation of (very high) transfer payments to the newLänder, or constituent states, of the former East Germany; Germany’ssubstantial net contribution to the EU budget and last but not least:the fact that over many years (under the Kohl government) there wasa failure to implement real reforms in Germany.The conjunction of all these factors has brought about the currentsituation, which restricts Germany’s fiscal room for manoeuvre.In consequence, the ‘German political class’ and the Parliament inparticular has been engaged in very tough debates, which are stillcontinuing, about how to overcome the economic slowdown and risingunemployment, how to stimulate growth and ensure fiscal stability,and how to implement the unavoidable structural reforms withoutlosing the next elections.I think the main task is to find the right policy mix: one that willensure the long-term sustainability of public finances, growth, more

ANGELICA SCHWALL-DÜREN 45jobs and greater fairness between generations. And to have the powerto implement it.The so-called Agenda 2010 is the German roadmap for achieving allthese different goals. It is in line with the recommendations of theCommission and the Ecofin Council, and contains a mix of structuralreforms to social security systems and the labour market (the Hartzreform, health reform and pension reform), as well as long-termmeasures to reduce the national debt and promote fiscalconsolidation. I believe that these reforms are essential if we are tomaintain our living standards and ensure our social security systemsfunction in the future under the conditions to be expected in a societywith an ageing population.In addition, the decision to implement the next step of our reformof the tax system one year earlier will – temporarily – reduce our publicincome and lead to higher borrowing. But we are convinced that thesemeasures will support economic growth and private consumption, andas a consequence will lead to higher incomes and improved fiscalconditions. And this kind of flexibility of the Stability and Growth Pactshould be accepted. When the proposals of the European Commissiongo in this direction, then – I think – we would be able to agree.However, the political situation in Germany – in a federal systemwith an SPD-Green majority in the Bundestag and a CDU/CSU majorityin the Bundesrat – the council of constituent states – makes it rathercomplicated to implement the whole reform package. Therefore, wehave established a commission for the modernisation of our federalsystem.There is no way back – we have to proceed with reforms now – ina situation of weak economic growth, high unemployment and ongoingfiscal problems, and we are ready and willing to continue this way. Andthe clear voting and the broad consensus in the German Bundestag lastyear concerning the social security system reforms – especially onhealth and labour market reforms – made clear that the nationalparliament is willing and able to proceed with the necessary reforms.Now we have to reflect on the next reform steps: how can weimplement further necessary reforms without overstretching the socialcohesion of our society? How can we better explain what we have to

46WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?do and why? In the SPD we have launched a big debate on the rightinnovation and solidarity strategy for our society in the future. And thisis not a narrow discussion, but a very complex one, combining differentpolicy fields: such as the promotion of knowledge-based economicgrowth and competitiveness, improved internal markets, sustainablefinances and higher investment, an active Welfare State, education,training and life-long learning, higher employment, equalopportunities, more chances for older workers and women, how tomeet demographic challenges, greater social solidarity, justice andparticipation, a better quality of life. And last but not least: how totackle the challenges of enlargement and globalization. In other words– we are discussing our Lisbon agenda.Let me now come back to the European level and the Lisbonstrategy. The need for substantial reforms, not only in the MemberStates, but also across Europe and the European Union as a whole,is clear.First, I would like to welcome the new European Initiative forGrowth and the quick start list decided by the European Council inDecember to mobilise investment in two key areas of the Lisbonagenda – networks and knowledge. We also welcome the road map andthe new priorities proposed by the Commission for catching up withLisbon agenda. I think this is the right signal at the right time providingconfidence in the potential of the European economy.In February 2004, the European Commission will table its initialproposals for the new financial perspective for the period after 2006and the main policy outlines of a new agenda 2007-2013. I amconvinced that the forthcoming discussions in the Council are going tobe the hardest we will ever have had. This is not because there is nowillingness in the old Member States to support the accession countriesor the current cohesion countries, but because they are unable toachieve all the various goals simultaneously and without changes:securing growth and competitiveness, sound finances, highemployment, solidarity with the poorest, a very high agriculturalbudget and more money for the structural funds and the cohesionfund. In addition, we will have to face up to new challenges, such asprotecting the new frontiers of an enlarged EU, CFSP, ESDP and foreign

ANGELICA SCHWALL-DÜREN 47aid for the poorest countries in the world.I believe a very careful approach is required: we need a soundbalance between different objectives. We need better coherencebetween the financial perspective for an enlarged Union and therequirements of the Stability and Growth Pact leading to realbudgetary cuts in several Member States. And – as in Germany – weneed real reforms in the main areas of policy. The national parliamentstogether with the national governments can and should play animportant role to reach the necessary compromises. Otherwise we willbe unable to explain to our people what we are going to achieve inEurope and in our countries. Let me end with the motto of the Irishpresidency: let us work together in and for Europe.

Growth Policies for Europe:Is there a Common SocialDemocratic Agenda?JEAN PISANI-FERRYAssessmentThe growth performance of the EU is disappointing. The long termstatistics are telling: income per capita in the EU has for three decadesbeen stagnating at 70 per cent of the US level and since 1980, theshare of the EU in world GDP has declined by 4.5 percentage pointsfrom 23.9 per cent to 19.4 per cent in 2003, against a mere 0.5 percent drop for the US. Recent developments are also worrying, as labourproductivity growth has accelerated markedly in the US since 1995,increasing by one per cent per year between 1995 and 2002 comparedto 1990-1995; while it has decelerated in the EU, falling by one percent each year. While the slowdown in European labour productivitygrowth partially results from employment policies that have succeededin bringing low-skill, low-productivity persons back into employment,this cannot account for the whole story. There is also something wrongin the working of the engine.Finally, it is hard to be satisfied with the record of the euro areaduring the recent slowdown. Growth has been one per cent per year in2001-2003, against two per cent in both the UK and the US. It can beargued that things would have been worse without the euro – or, to putit differently, that the common currency cannot be held accountablefor the weaknesses and policy mistakes of its constituent memberstates. Nevertheless, the accomplishment is clearly inferior to whathad been expected by the supporters of monetary union.This underperformance questions the sustainability of theEuropean social model(s), as persistently slow growth makes the fiscalcost of social protection increasingly difficult to bear. It also questions49

50WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?the legitimacy of the EU in the eyes of citizens who regard prosperityas the number one European public good, and Europe’s ambition toplay a role in the world economy – in this respect, the ultimate threatis irrelevance.Against this background, it would be unfair to blame Europeanpolicymakers for having been inactive. They have successively launchedthree major programmes to rejuvenate old Europe and fosterprosperity through common policies: the Single Market in the 1980s;the euro in the 1990s; and the Lisbon Agenda in 2000. But while eachof those endeavours has requested adaptation and effort from Europe’scitizens, none has consistently delivered the growth that had beenexpected and promised. For that very reason, our depressing economicrecord undermines support for European integration.If this assessment is correct, 1 European social democrats must putgrowth on the very top of their policy agenda. They cannot afford, asthey often did in the past, to take it as given and concentrate ondistributional or qualitative issues. They must address the growth issuehead on, thoroughly investigate the underlying causes, and put forwardtheir specific responses.ExplanationsThere are different views on the balance of factors that accountfor the economic performance of the EU. What can be called thestructuralist view holds that (almost) all difficulties can be traced backto dysfunctional markets and especially to home-made rigidities inthe labour markets or excess regulations in the market for goodsand services. This view is widespread in Europe and among outsideobservers. At the other end of the spectrum, the unreconstructedKeynesian view holds that macroeconomic policy failures account for(almost) all of our growth shortfall and that structural factors play aminor role. This approach is well represented on the Left in severalEuropean countries.While there can be elements of truth in both explanations, nonecan really account for the facts. The structuralist view cannot explainwhy the same economic institutions that had been conducive to growth

JEAN PISANI-FERRY 51and full employment suddenly became a handicap; the Keynesianview cannot explain why the growth performance across countriesappears to be uncorrelated to the extent of the recourse to demandreflation policies.An alternative approach emerges from recent research and policypapers. 2 It emphasises that the economic institutions that areconducive to growth in a catching-up economy whose development isbased on imitation – such as long-term credit relations between banksand companies, lifelong labour contracts, oligopolistic competition,and so on, and can become dysfunctional in an economy approachingthe technology frontier, whose growth must be based on innovation.For example, barriers to entry that limit competition are hardlydetrimental to growth in developing economies that are far from thetechnology frontier, but become increasingly costly as the distanceto that frontier diminishes. By the same token, spending on highereducation does not significantly impact on growth in developing andemerging economies, but becomes a key long-term growth factor inadvanced economies.This approach does not deny the need to embark on structuralreforms in order to revive growth. However, it stresses that thosereform must be guided, not by a need to conform to an eternalparadigm, but by the need to make the economy better able toembrace the modern growth fundamentals of advanced economies. Forexample, it puts emphasis on ensuring an appropriate level of spendingon higher education and research, or on making sure that competitionpolicy aims at favouring the entry of new players rather than atcontaining the market share of the incumbents.This approach does not deny the role of macroeconomic policyeither. Investment in innovation inherently involves risks which can beeither magnified or contained by a well-designed macroeconomicstabilisation policy. As the US experience suggests, structural andmacroeconomic policies should be regarded as complements ratherthan substitutes 3 and reforming the EMU macroeconomic frameworkis an integral part of a European growth programme.If this view is correct, it has strong implications for European socialdemocrats: first, they should avoid playing again the same old tunes

52WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?and cease limiting the policy debate to a ‘structuralist vs. Keynesians’controversy (in fact, as emphasised in Strauss-Kahn, 2002), 4 there isnothing in the intellectual and political history of the Left that shouldmake it unable to address supply side issues and lead it to limit itselfto managing the demand side); second, they should give thoughts todefining a common reform agenda that both addresses the new issuesand corresponds to their values and priorities.What agenda?European political currents are likely to be increasingly heldaccountable for their ability to put forward and implement a crediblegrowth agenda. As usual when an issue is taking centre stage on thepolicy agenda, voters will make their choice on the basis of theperceived quality of the various programmes on supply.In such a context, social democrats have to beware of two risks.The first one is to be short on new proposals and ideas, with the dangerof giving the impression that they are not really able to tackle theissue. This risk is especially prominent in countries where the Rightholds power and presses on a pro-reform agenda, while the Left, inopposition, tends to resist it. Conservatives miss no occasion to portraythe Left as the new status quo party.The other risk is to embrace a pro-growth reform agenda that turnsout to be indistinguishable from that of the Right. This is a danger thatthe centre-left especially faces in countries where it holds governmentpositions and must act in coalition with centre-right parties or withcentre-right governments in the rest of Europe. But it can even affectthe home-grown reform agenda in countries where social democratsare in a majority. Such policies may be justified in their own right, butthey risk undermining the legitimacy of the Left in the eyes of its basicconstituencies.What is frequently missing is a reform programme that bothpromotes growth and has roots in the core values of the Left. TheLisbon agenda, which was elaborated when social democrats were inpower in a majority of EU member states, was a first common attemptand it still provides useful guidance, however its credibility has

JEAN PISANI-FERRY 53diminished as commitments have not been followed by delivery. Lisboncannot be regarded anymore as a sufficient programme. Rather, itshould be considered as a basis for further elaboration.This is not the place where a detailed agenda can be offered.However, a few selective issues can be outlined.Education and research probably come first. Both are essential toimproving Europe’s growth performance and both speak to the Left’slong-term acquaintance with the aim of developing and disseminatingknowledge. However, hard choices must be confronted: first, knowingthat spending on tertiary education represents 1.4 per cent of GDP inthe average EU country against three per cent in the US, how shouldthe required additional spending be divided between the state and theprivate individual? Second, knowing that the EU lacks world-classcentres of excellence for education and research, how shouldcompetition among universities be organised in order to foster bothexcellence and high quality in mass education? Education policies forthe twenty-first century cannot just build on yesterday’s successes.Ways must be found that combine continued public support withappropriate additional incentives that foster quality and the promotionof students from poor or minority neighbourhoods. 5A second issue is labour market reform. It is highly sensitive on thecontinent as the very project of reforming labour market institutions isfrequently pictured as being inspired by a neo-liberal agenda. Yet thebasic challenge – how to reconcile the business demand for moreflexibility to adjust to changes in tastes, competition and technologyand the peoples’ demand for income security – cannot be evaded. Onthe one hand, the need for a more flexible production system isindisputable, especially in an innovation economy. On the other hand,European citizens demonstrate in many ways that they are adverse torisk, and the role of economic policy is not to change the citizenspreferences. Fortunately, the game is not a zero-sum one: appropriateinstitutions that combine those two aims can also be conducive tohigher investment in human capital and therefore to productivity andgrowth. Instead of approaching the issue through piecemeal reformsthat may be detrimental to both workers’ security and long-termgrowth, such as the proliferation of temporary contracts, the Left

54WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?should rather confront the challenge and concentrate on designing,and making socially acceptable, institutions that can be conduciveto both.Macroeconomic policy is a third example. The current Europeanset-up has been inspired by the need to protect the ECB from thedanger of political interference that would have threatened pricestability. This legitimate objective has often led to relegate otherobjectives to second rank status, such as the need to ensureappropriate fiscal stabilisation and the need to establish amacroeconomic set-up that is at the same time conducive to growthenhancingreforms. In view of the inadequate growth performanceof the recent years, many social democrats rightly question theappropriateness of the EU fiscal discipline framework. Yet any reformof this framework must be based upon the recognition that fiscalresponsibility is an essential tenet of a well-functioning monetaryunion. Only after this reality is unequivocally acknowledged canfruitful discussions be started on the desirable reforms of the Stabilitypact and macroeconomic policy coordination procedures.Last but not least, the role of Europe in this very process ofgrowth-enhancing reforms must be assessed. Two views of Europeanintegration coexist among social democrats, which are increasinglydifficult to combine. The first holds that what European integration isessentially about is the building of a collective economic sovereignty.According to this view, states may have to surrender national economicsovereignty but it is in fact transferred to a higher, federal level. Thealternative view maintains that the essence of European integration isto create a level playing field for policy competition among states. Itis thus a process through which the best and most successful policiesemerge. Those two views have long coexisted in Europe, butcompromises are increasingly difficult to reach, as indicated by theongoing dispute on tax coordination and harmonisation. This debatehas a bearing on growth-enhancing policies: those who favour thefirst model naturally propose that the EU takes on explicitresponsibilities in this domain, for example through a change in thestructure of its budget that would lead to more Community financingfor research, infrastructure and innovation and through a refined

JEAN PISANI-FERRY 55macroeconomic framework, as suggested by the Sapir Report. Thosewho favour the second model hold that responsibility for growthessentially belongs to the remit of the member states and thatthe EU should only create conditions for those policies to beeffective.In summary, it is more than time to revisit the social democrats’European growth agenda in the light of recent successes and failuresand to put together a common package of credible pro-growth policies.The lack of serious discussion on these matters does not favourthe building of a consensus among European social democrats andthe elaboration of a common thinking. On the contrary, it favoursthe development on the Left of Eurosceptic attitudes and thedissemination of ideas that portray European integration as the Trojanhorse of free market fundamentalism.Fortunately, there is much the Left can do for growth withoutjeopardising its identity. But there is also a long list of new issues todeal with and of old issues to revisit, both at the national and theEuropean level. It is only by addressing controversies head on that thesocial democrats can define their own growth agenda and persuade theEuropean voters that they are better able to combine economicperformance with social justice.The current state of the debate among European social democratsis an indication of the time that has been lost. It is more than urgentto start working again.

Lisbon:A Missed Opportunity forSocial DemocracyROGER LIDDLEFor several years European social democrats have been askingthemselves a pretty basic question. Can we devise a governingstrategy, consistent with our values, that guarantees economicprosperity in the modern world, while, at the same time, advancingsocial justice? With the economic core of Europe at best enjoyingsluggish recovery, this regrettably remains a big issue not only ofelectability against the forces of the Right, but also of whether theLeft can govern successfully.There are, however, deeper and more challenging issues for socialdemocratic thinking. Does a strategy to promote growth throughstructural reforms inevitably create ‘losers’ and damage social justice?How can social democrats justify painful structural reforms that mayin themselves deepen inequalities? Is it simply that once structuralreforms have moved the economy onto a higher growth path, socialdemocratic governments can channel that growth dividend into higherpublic spending that advances social justice? Or can we devise apackage of structural reforms more in keeping with social justice thanclassic neo-liberalism that is equally as effective in promoting growth,if not more so, and minimises the number of ‘losers’ along the way?Phrases such as ‘economic reform’ and ‘modernisation of theEuropean social model’ are freely bandied around in European debate.In themselves, these are loose concepts with intellectual origins asmuch on the neo-liberal right as the modern social democratic left.However, this essay focuses on the so-called Lisbon Strategy agreed bythe European Council in March 2000, which reflected a politicalmoment of social democratic optimism.Lisbon was a set of European Council Conclusions, not a party57

58WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?political programme. However, 11 of the 15 Heads of Government whoagreed it were of the Left. When the European Council meets inDublin, in a month’s time, to review progress in implementing theLisbon strategy, only three of those centre-left leaders will still bepresent: Blair, Persson and Schröder. Lisbon nevertheless has gainedthe status of the economic reform benchmark. It still represents themost comprehensive attempt to devise a governing programme foreconomic and social modernisation in Europe.As a programme of reform, Lisbon has so far brought limitedresults. The European Commission’s report to this year’s Spring Councilwarns of “still much to do” and “major problems which need to betackled urgently” 1 . However, my argument is that Lisbon representsmore than a ‘what matters is what works’ consensus among policymakers. Rather it has real potential as a distinctive model of politicaleconomy for the progressive left. For social democrats, our failure tograsp Lisbon represents a great missed opportunity. We should useLisbon to modernise domestic party programmes, as a point ofideological differentiation with the Right and to demonstrate thepotential of the European project to achieve social democratic goalsthat are no longer within reach of nation states alone.Why Lisbon is right on economic reformSome on the Left take issue with the premise on which Lisbon isbased: that the European model of social market capitalism facesfundamental challenges. Caution about the evidential basis forEuropessimism is certainly justified. The impact of the shock ofGerman unification on the core of the European economy has beenprolonged, but in terms of international competitiveness, Germany isvery far from being the ‘basket case’ of Eurosceptic myth. Statisticalcomparisons between EU and US performance can be simplistic. HigherUS growth rates in part reflect an expanding workforce: USperformance is less impressive by comparison with Europe on a percapita basis. Similarly, higher US productivity growth is in part theresult of longer hours worked; and, arguably, most Europeans, otherthan the British, have a perfectly reasonable preference for leisure.

ROGER LIDDLE 59However, it cannot be disputed that Europe’s impressive post-warproductivity catch-up with America had ground to a halt by the 1980sand there is mounting evidence that, since 1995, America has startedto extend its lead. According to the Commission, “the growth rate inproductivity per employed person in Europe has been going downsince the mid-90s and is now fluctuating between 0.5 per cent and1 per cent, against 2 per cent in the United States”. 2The Sapir report 3 provides a plausible explanation of how thestructure of the European economy has not changed fast or radicallyenough to close this widening gap. “The post-war system came underattack because the patterns of both consumption and production hadshifted in favour of different types of product requiring a different formof industrial organisation ... This called for less vertically integratedfirms, greater mobility both intra and inter firm, greater flexibility oflabour markets, a greater reliance on market finance and a higherdemand for both R&D and higher education ... However, these necessarychanges in economic institutions and organisations have not yet occurredin Europe and it is this delay which accounts for our growth deficit.” 4Some on the Left accept the facts of slower growth and higherrates of unemployment in core Euroland, but argue that it is better tolive in a more equal society where the unemployed receive high socialbenefits, than go the American road of high employment combinedwith bad jobs, high insecurity, poverty pay and more extremeinequalities. But the argument that there exists a crude trade-offbetween unemployment and inequality ignores the experience ofNordic countries and The Netherlands which have managed to combinerelatively high employment with more equal societies than France,Germany, Italy or the UK. Also, demography raises a serious questionabout the sustainability of European welfare states that finance highsocial benefits out of imposts on employers and employees. In Europe,over-60s, as a proportion of the population of conventional workingage, have increased from 20 per cent in 1960 to 35 per cent in 2000.The figure is forecast to grow to 47 per cent in 2020 and 70 per centin 2050. 5 This increasing dependency ratio could lock some Europeanwelfare systems into a vicious circle of rising social charges on the costof employment. In turn this would lead to higher unemployment,

60WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?especially amongst the low skilled and in turn diminish the long-termsustainability of the welfare systems.But the decisive argument against complacent acceptance of‘comfortable’ high levels of unemployment and inactivity should bethe old socialist conviction about the ‘dignity of work’. The moral risksof idleness were one of the main themes of the Beveridge Report thatlaid the foundations of the British Welfare State 6 . Today, the insiderdominatedEuropean labour market places the burden of inactivity onyoung and old. Employment participation among European under-25s issome 20 per cent lower than the US figure. Among 55-64s, it fellspectacularly from 60 per cent to 49 per cent between 1980 and 2000.Levels of employment participation need to rise in order to makewelfare systems sustainable in an ageing society, but the integration ofwomen and older workers into the labour force requires more labourmarket flexibility, and an economy that is generating part-time servicejobs on a larger scale than in many European countries today.The virtues of Lisbon as an ideological modelFor the author, the underlying assumption of Lisbon was right. Thegrowth and employment performance of the European economy isdeeply unsatisfactory. We have to reform – but for a clear purpose.Lisbon provides us with a value-driven approach to reform,because its essential purpose is the modernisation of the Europeansocial model in order to make it sustainable for a new century: torenew the economic and social platform on which further advancescould then be made towards the egalitarian goals of greateropportunity and security for all.Crucial to Lisbon is market opening and liberalisation to createmore flexible product, capital and labour markets; but there is muchmore. Lisbon envisages an essential complementary role for modernpublic intervention in spreading ICT, raising skills, boosting R&D andpromoting enterprise and investment: what, in New Labour’s 1997Manifesto, we called ‘flexibility plus’. It does not advocate theabolition or weakening of the Welfare State but, instead, a change inthe Welfare State’s role from passive payment of benefits to active

ROGER LIDDLE 61measures to promote employment. It argues that social inclusion andeconomic prosperity march hand-in-hand, and proposes, for the firsttime, European targets for tackling poverty in each member state onthe basis that social exclusion weakens long term economic potential.Ideologically and programmatically, the attractions of the Lisbonagenda for social democrats ought to be considerable. It provides areference point for the modernisation of our party programmes.First, it resolves a basic tension about economic policy that hasdivided the Left. Many blamed high unemployment in Europe onfailings of macro-economic policy: in particular, the dogged pursuit ofthe Maastricht convergence criteria in the 1990s. But an increasingnumber of experts on the Left have accepted, at least in part, thatunemployment has remained stubbornly high in several countriesbecause of structural factors, particularly labour market rigidities.Lisbon reconciles these positions with the proposition that structuraland demand-side policies need to work in tandem. Macro-policy shouldprovide stable conditions for growth. Open markets and well-targetedpublic spending raise the long-term growth potential of the economy,while labour market and Welfare State reforms raise levels ofemployment for any given level of economic activity.Second, Lisbon makes a social democratic case for markets. Thisis different from the neo-liberal proposition that the purpose inopening markets is simply to give the market’s ‘invisible hand’ freerein and the ‘sink or swim’ political philosophy that goes with it.The social democratic argument for strengthening competition isthat uncompetitive markets tolerate unaccountable accumulations ofprivate power. That accumulation of private power represents a vestedinterest that gives low priority to the claims of both consumers andthe unemployed, and acts as a barrier to new enterprise. Look at thearcane arguments over the Prospectus and Investment ServicesDirectives. The Stock Exchanges of European countries have sought tothwart the liberalising intent of the European Commission’s FinancialServices Action Plan. They are protecting their own narrow interests insurvival as against the broader European interest in loweringtransaction costs and making it easier for new entrepreneurs to raisecapital for new sources of growth and innovation in the real economy.

62WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?The greatest untapped potential of the Single Market is for SMEs togrow by doing increased business across more open European borders.Here lies some of the biggest potential for new jobs. Social democratsshould be sceptical of the obstacles put in new competitors’ way bynational champions seeking to protect their own advantaged position,even though the first round effects of freer competition may lead toloss of well paid unionised ‘insider’ jobs.Third, Lisbon postulates an active role for a modernised state: itsobjective is not a lesser role for government, but a more effectiverole. Structural reforms require more than opening markets andstrengthening competition. Economic debate tends to focus on publicsector deficits, but the crucial deficits in Europe are those ofknowledge. This is where America has established a growing lead. TheUnited States spends three per cent of its GDP on higher education and2.7 per cent on R&D, whereas the comparative EU figures are around1.4 per cent and 1.8 per cent of a lower absolute GDP. Also, Europe’sspending must be less ‘efficient’, because national duplication ofactivities prevents the full exploitation of synergies through thecreation of ‘centres of excellence’. So, there are many shortfalls in thequantity of ‘knowledge production’ that need to be addressed throughboth higher public investment as well as new policy frameworks thatpromote higher levels of private spend, such as R&D tax credits anduniversity tuition fees.At the same time, decentralised modern government has an activerole to play in promoting more efficient knowledge diffusion, leadingto more successful commercial innovation and enterprise 7 . Lisbonsupports shifting from old-fashioned state aids that paid out largesubsidies to big corporations to modern policies that promote thegrowth of SMEs and venture capital, especially in the less prosperousregions. But that requires more effective intermediary capabilities atregional level to deliver sophisticated methods of business support.Fourth, Lisbon is about modernisation, not abandonment of theEuropean social model. The move from passive to active labour marketpolicies is not a right-wing agenda of cutting back on the role of thestate. For social democrats, the real challenge of reform is tomodernise the ossified structures of the centralised state in order to

ROGER LIDDLE 63make it an effective delivery vehicle for promoting greateropportunity. Paying out benefits is a relatively uncomplicatedbureaucratic function; devising personal plans for the individual longtermunemployed, that will assist their labour-market integration, ismuch more complex and requires some localisation of decision-makingto reflect differing local circumstances. Similarly, among the non-Nordic members of the EU15 who have no tradition of comprehensivechildcare, establishing coherence out of the present patchwork ofprovision is a huge challenge for Welfare State modernisation.Fifth, Lisbon’s central focus on the target of ‘more and better’ jobsis a unifying challenge for social democrats throughout the Union. Thisis of far more concern to our supporters than Constitutions or IGCs(important though rapid agreement on them is). The recent reportfrom the Employment Taskforce 8 under the distinguished chairmanshipof Wim Kok sets a comprehensive and challenging agenda of labourmarket reform.It is, of course, nonsense to say any job is better than no job:otherwise, we would still employ children as chimney sweeps. But, aslong as a decent minimum of social and employment standards is inplace, a low-paid job is better than no job. Low pay need not meanpoverty. Tax and benefits systems can be reformed to ensure the lowpaid are not trapped in poverty, through the type of tax credits thatGordon Brown has pioneered in the UK. Tax credits are not simplya smart policy innovation. They are a key ideological tool forsocial democrats if, as many believe, the economic returns to differenttypes of labour are becoming more divergent, and therefore incomeinequalities are likely to increase, as advanced economies movebeyond the mass production stage.Work is the foundation of opportunity. For many long-termunemployed, any job is a first step in re-integration to the labourmarket. The responsibility of social democrats is not to make the initialcost to the employer of providing that fresh opportunity prohibitivelyhigh through excess regulation. Rather we should ensure there aremore rungs in place on the ladder up which the newly reintegratedworker could potentially climb. But this requires giving real policysubstance to the mantra of ‘lifelong learning’ from which we are still

64WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?some way away.Even in countries with recent strong employment performance likethe UK, there is no room for complacency. The New Deal has been abrilliant success in tackling long-term unemployment among youngpeople and relatively so amongst lone parents. However, theGovernment’s Strategic Audit 9 laid bare uncomfortable facts about theextent of inactivity in the UK labour force, especially among the over55s. The outlook for the unskilled, particularly in the less buoyantregions, is bleak; and far too many people in the workforce lack themost basic of skills. High levels of inactivity combined with a deficit ofskills is a huge part of the progressive deficit in the UK that Labour hasstill to address.Why the European dimension of economic reform ‘adds value’However, this particular UK illustration exposes a presentationalproblem for Lisbon. The themes that this paper has highlighted wouldcome across to many Labour MPs as essentially national challenges inwhich the role of the European Union is, at best, peripheral. I fear thatto their German counterparts, the EU might come across not just asperipheral, but as part of a more general problem of unwanted topdown interference. If much of the Lisbon agenda is about nationalpolicy implementation, why not leave member states to get on withmanaging the political challenges of domestic reform, without any fussfrom Brussels? Why bring Europe into the equation at all?The best reason is that the European dimension adds unique value– both in economics and politics. Market-opening measures, thatdeepen economic integration within the Single Market, improve growthpotential all round. This market-opening thrust is only one dimensionof the Lisbon package, but it is a crucial dimension, and one that canonly be delivered at European level. A vigorous combination of newdirectives to free up markets, better enforcement, a strongercompetition policy to promote new entry, co-ordinated regulation ofnetwork industries and more open trade would be a potent mix toenhance long term growth potential.Simply because this agenda is sold as ‘good for business’,

ROGER LIDDLE 65particularly in order to sustain elite support for the European project,does not mean it is ‘bad for working families’. Because it is goodfor growth and good for jobs, it is good for working families too. Wehave no less an authority than the economists of the IMF and theFederal Reserve to underline the point. “Our simulations indicate thatincreasing competition in the euro area to US levels could boost outputby 12.4 per cent in the euro area and 0.8 per cent in the rest of theworld” 10 . As a result, they predict Europe could enjoy an investmentand jobs boom.In the short term, there are inevitable losers from marketintegration. Social democrats have an obligation to help these losers toadjust. The traditional social democratic response has been to pressfor increased European funding to strengthen ‘social cohesion’ andto argue for a social agenda of high regulatory standards in orderto prevent a ‘race to the bottom’. Both these traditional responsesrequire modification.The traditional European instruments for strengthening cohesionhave been the Structural and Regional Funds. At one time, it waspredicted that the golden triangle at Europe’s core would be the majorbeneficiary of market integration at the expense of the periphery, butthis has proved false. No-one disputes the case for transfers to the newmembers of the EU whose living standards are less than half the EUaverage. But within the countries of the EU 15, regional differentialsfollow no consistent pattern and the effectiveness of EU interventionhas varied a great deal. There is a debate to be had on whether thistype of intervention is most appropriately channelled throughEuropean, national or sub-national budgets – albeit within a commonEuropean framework. There is also an issue about whether aid shouldbe refocused more on stimulating new sources of growth and helpingindividuals to adjust rather than on specific geographical areas andinfrastructure projects. But, for a social democrat, the promotion ofeffective support for adjustment must march hand-in-hand withmarket integration.On the issue of regulation, business across Europe is demandingthat the politicians ensure ‘Brussels gets off its back’. Social democratsneed to open up a more sophisticated debate about regulation and its

66WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?impact on jobs and competitiveness. EU-wide regulation can promotecompetitiveness by setting standards that apply across a huge market,the best example of which is how the GSM standard has made Europethe world leader in mobile telephony. EU-wide regulation can howevercost jobs in internationally competitive markets, if Europeancompanies are expected to adhere to more costly standards than theiroverseas competitors, as the Germans fear in the case of the presentdiscussions over the Chemicals Directive.Also, social democrats have to recognise that ‘Social Chapter’regulation can pose a particular burden on small firms. The LabourGovernment in Britain supports the concept of a floor of socialstandards, which since 1997 has become more solid and widely based.But there has to be flexibility in application. We have to accept thatthere may be trade-offs between the creation of new jobs and theimposition of costly social standards. All one can do is strike a balance,case by case.It is simply not good enough to argue that, in the long run, allEurope can be winners from more open markets. In the long run, weare all dead, as Keynes famously quipped. Certainly, we need strongaction at European level to strengthen the Single Market, such asbacking for the European Commission’s present proposals to extendthe Single Market in services and more determined enforcement ofexisting rules on competition and state aids. But we also need fullconsideration of imaginative proposals like those contained in the Sapirreport for ‘restructuring credits’ that redundant workers could puttowards the costs of moving home or retraining 11 . Social democratsneed to sharpen Lisbon’s policy focus on the problem of assisting thelosers from market integration.Equally, reform of the Stability and Growth Pact matters to bothmembers and non-members of the euro alike. The present Pact isinimical to the Lisbon objective of ensuring stable macro conditions forgrowth. Several countries have been forced by the Pact into policiesthat aggravate the economic cycle. This is not just a matter thataffects members of the euro. Perverse economic policies outsideeurozone areas are damaging to countries like Britain outside the eurowith over half their export markets in the eurozone. The decision by

ROGER LIDDLE 67France and Germany to ignore Stability Pact rules may have beeneconomically sensible in its own terms. On the other hand, it has calledinto question the viability of co-ordinated fiscal discipline at Europeanlevel, never mind the more ambitious notions that some economicexperts harbour for a carefully-tuned balance between fiscal andmonetary policy within the eurozone, if growth prospects are to bemaximised.If Lisbon’s goals are to be realised, Europe must adopt a revised setof fiscal rules that will facilitate public investments that raise longtermgrowth potential. Social democrats need to open up a new debateabout the composition of public spending; we need to considerwhether ‘knowledge investments’ should be treated in a different wayfrom transfers and other types of public expenditure, as conventionallyaccounted-for capital investment is treated under the Golden Rule.This debate is easier to have at European level than it is for anynational government unilaterally to change its fiscal rules.Other instruments can be deployed at European level tocomplement national action in improving growth potential. A reformedEuropean budget should serve as a catalyst for Lisbon-type reforms.The political problem is that any significant expansion of the Europeanbudget for these laudable aims would require an increase in the overallsize of the EU budget, unless existing policies, principally the CAP, arereformed. It is intolerable that, even with the CAP reforms that havebeen agreed, agriculture will still consume roughly 40 per cent of thetotal European budget when fewer than five per cent of the EUpopulation are farmers, and most of the money goes to richer farmersat that. No one is suggesting that agriculture spending can be slashedovernight. But social democrats should campaign for CAP spending tobe put on a clear, degressive path. The need to re-start the Doha tradetalks provides the political opportunity.However, releasing funds from agriculture is not in itself ajustification for European budget spending on other purposes. A keyprior question has to be answered. What are the ‘public goods’ thatcan only be achieved at European level by spending through aEuropean budget? Social democrats need to bring intellectual rigour tothe case for European tax and spend.

68WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?One obvious target for European action is cross-borderinfrastructure. Take one example: Europe has highly-developednational rail systems, but cross-border lorry traffic on Europe’s mainroads is burgeoning, especially as manufacturers take advantage ofscale economies within the Single Market to supply their customersfrom a handful of locations. Yet, the potential for cross-border railfreight is underexploited because of lack of integration across bordersand bottlenecks in national systems – most obviously in Britain’s case,rail routes through and around London. It makes sense for investmentsto be promoted and, in part, financed at European level to enable amodal shift from road to rail.Another example is research and higher education. Europe shouldnot simply duplicate national programmes. There is, however, a ‘publicgoods’ case for funding European centres of excellence in particulardisciplines. But decisions on which institutions to fund must be takenobjectively by an independent committee of distinguished scientists,rather than as a result of political log-rolling. There is also a casefor European grants that promote the mobility of researchers andlanguage students.How social democrats should use Lisbon to promoteEurope and modern social democracySo, Europe should add a vital dimension to national reform efforts. TheEU exists, the Single Market is its greatest policy achievement and keydecisions are taken at European level. Nor should we underestimatetheir progressive potential for growth, jobs and wider economicopportunity.A key feature of Lisbon was the launch of the ‘open method of coordination’:the idea that, in many fields, Europe would henceforthfunction not by top-down regulation but by shared benchmarking ofnational performance against European targets and guidelines. Themethod was described as ‘open’ because it was not meant to beprescriptive, reflecting the reality of diversity, but also the flexibilitynecessary to learn from each other’s experience. A massive civilservice effort has gone into creating these co-ordination processes, on

ROGER LIDDLE 69the part of the European Commission but also in the member states.The positive result has been the sharing of policy experience amongexperts on many of the challenges facing Europe. The best example ofthis is in employment policy where the case for more labour-marketflexibility and a switch to ‘active’ policies now represents theoverwhelming policy consensus.But the impact of the open method of co-ordination andbenchmarking of national policies has been less than the advocateshoped. Ministers have shied away from giving these processes real life.In part, the reluctance to embrace Lisbon wholeheartedly reflectsunderstandable political caution in exposing national governments tocriticism from Brussels. Top-down pressure from Europe used to beseen as a useful reinforcement of national reform efforts, but this isless true than it once was. A decade ago, this is how conformity withthe Maastricht convergence criteria, enabling member states to jointhe single currency was secured. Today, when the legitimacy ofEuropean integration is being undermined by Europe’s disappointingeconomic performance, politicians are reluctant to highlight anycriticism, especially if that involves the European Commission telling amember state that its performance in some policy area or other is notup to scratch.In Germany, the Länder share a gut instinct that many of the itemson the Lisbon agenda are ‘none of Europe’s business’, particularlyeducation, which the centre-right jealously guards as a Ländercompetence. In other countries, ministers retreat from daring toadvocate any positive agenda for Europe in the face of rising Euroscepticism.This spring, it will be interesting to see whether nationalgovernments are prepared to take up the excellent Kokrecommendations on labour market reform in order to reinforce theirnational reform efforts. Britain has proposed that each member statemake specific pledges of action in the year ahead. It is that type ofresponse that is necessary, if benchmarking is to have real bite.For social democrats in Opposition, the failure so far of nationalgovernments to embrace Lisbon with enthusiasm represents a missedpolitical opportunity. Each and every European government has

70WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?signed up to what is essentially a set of modern social democraticcommitments. To the extent that governments fail to live up to thosecommitments, they potentially expose themselves to domesticpolitical attack. The way to bring benchmarking to political life is toput Lisbon at the heart of the national political contest: to measureevery step of domestic reform against the demanding tests that Lisbonhas set.For social democrats in power, the Lisbon benchmarks can helphold their parties in government to the difficult path of reform. Theydemonstrate to the ‘safety-first’ opponents of reform in our partiesthat reform challenges are held in common, as is the case withuniversity reform today in both Britain and Germany. If party activistscan shed that self-righteous sense of their own uniqueness in having toface difficult decisions, those domestic reforms will be made easier.European social democrats need a shared sense of economicpurpose that is larger than the achievement of a wider prosperitywithin their own nation state. Of course, national electorates thinkfirst and foremost of their own country. But there are two big reasonswhy we should advance beyond that narrower compass.One is that, for all the diversity that Europe represents, there issomething distinctively European about the policy approaches thatEuropean social democrats share and Lisbon embodies. On macroeconomics,we do support a disciplined neo-Keynesianism, not a rigidmonetarist approach. We are not neo-liberals: we do support an activerole for government in public investment and creating the bestconditions for enterprise and innovation. We support modernisation,not dismantlement of the Welfare State. And we unite behind aprogramme for ‘more and better jobs’ as the basic foundation of socialjustice. And if, as Europeans, we share those principles, why not behonest with our electorates that fellow European social democratsshare them too?Of course there is huge diversity within Europe. And diversity thatencourages policy experimentation and ‘competition’ can be a goodthing. This is how New Labour discovered the New Deal in the mid1990s and it is how we are developing policies for investment in youngchildren and the expansion of childcare today. But alongside necessary

ROGER LIDDLE 71diversity, Europeans have shared values and there is a growing policyconvergence. It is nonsense today to speak of a ‘European socialmodel’, at least without many caveats and qualifications. But we arestep by step working towards a modernised European social modelwhich is very different from the American model – and the principlesof Lisbon are guiding us there, however inadequately.Social democrats need to have the courage of their Europeanconvictions. Let us have the confidence to think big. As Europeannation states alone, our ability to help shape a better world is verylimited. But through the European Union, if we can make it work – inall senses of the word, we have a chance of much greater influence.And if we can make Europe work, we will have set an example of thepotential success of rules-based multilateralism which, in truth,reflects the best hope for all mankind.But to make Europe work, it needs a strengthened and renewedeconomic dynamism – not just for the additional individual opportunitythis will create for millions, but to bring back optimism and selfconfidencein the European ideal. That is where enthusiasm for Lisboncan really make a difference.

The NewPolitics ofInsecurity

The place of securityin progressive politicsDAVID BLUNKETTI am pleased to have been asked to contribute to this internationalseminar on the new politics of insecurity. A heightened feeling ofinsecurity is a natural product of a rapidly changing world – the flipside of the benefits and opportunities of globalization. Since I becameHome Secretary nearly three years ago I have argued that respondingto this feeling is one of the most important challenges facingprogressive governments and the centre-left across the world. Weare all convinced of the need to face down terrorism – but wealso need to reassure people, for example, that our immigrationcontrols remain robust in the face of the increasing globalmovement of people and the growth of organised people smuggling,and we need to find new ways for communities to protectthemselves against crime and anti-social behaviour. We need to reducethe insecurity and fear of difference which comes through rapidchange.Running through all these challenges are four inter-related themeswhich I take to be central to understanding the place of security inprogressive politics. First, that it is wrong to set security up inopposition to freedom – that freedom actually presupposes order andstability. Second, that a true understanding of freedom must be broadenough to include people’s ability to engage in government andcontribute to their communities – not just a passive definition offreedom from interference. Third, that the challenge for governmentis to balance the need to protect individual freedom and rights againstthe values of community and mutuality – including the need to buildtrust and confidence in our systems of justice and security. And fourth,that as the threats to our security are becoming increasingly75

76WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?internationalised, so we must be prepared to work togetherinternationally to respond them.Security as the foundation for freedomThose of a liberal political bent have not always accepted that securityand freedom go hand in hand. But I believe that establishing a stableenvironment is vital for sustaining an open pluralistic democracy andcivil society – the foundations of our freedom.I believe that history shows how difficult it is for democracy toflourish if fear and insecurity allow those of extreme views to play onthe real, as well as imagined, concerns of the population as a whole.In the past, destabilisation has led to the rise of fascism andcommunism. In the 1930s we saw it in the Spanish Second Republic –the disintegration into factional civil war. We saw it in the WeimarRepublic, as Germany gradually disintegrated. Of course, economiccollapse was fundamental in creating this instability and insecurity, butso was a failure to impose order and to ensure basic reassurance.I make these comparisons not because we are in a similar situationto the 1930s, but because we should never take for granted how adecline in security can have disastrous consequences for liberty. In ourown country, in the relatively recent past, the tragedy of the 30 yearsleading up to the Good Friday agreement, brought for us anappreciation of how vital security is to our lives and our freedom.Now, of course, we face different challenges, which seek toundermine our security and impose restrictions on our liberty. Thetrans-national reach of religion, which can be and ought to be a forcefor good, turns into a threat when combined with the rise of religiousextremism which seduces people with the appearance of absolutemoral certainty – justifying the destabilisation of existing communitiesand even offering succour to terrorism. At the same time, it offersrepression, and a perverse form of order and stability through thedenial of tolerance, democratic free speech, and the crucial checksand balances that ensure that freedom can flourish.There are also new challenges domestically. Crime and anti-socialbehaviour are not new. But they combine with new social and

DAVID BLUNKETT 77economic trends in mobility and behaviour to create a new kind ofthreat to the fabric of our community life. Left unchecked, the fearthis can create holds people back from co-operation and engenders asense of powerlessness among those who seek to regenerate theirneighbourhoods. It is in those neighbourhoods most affected by crime,those most in need of regeneration, where disillusionment is greatest,where politics is most likely to be rejected. In order to make economicregeneration and social enterprise work, in order to stimulate peopleto have the self-belief to ensure that self-help and self-determinationwork, we have to get the essentials right, we have to ensure thatpeople are safe and feel safe. Otherwise there is a risk that we willleave the field open to extremist political parties. In Britain, this is thefocus of the British National Party, who are already playing on people’sfears and insecurities in leaflet campaigns around the country – andplaying on those fears in a way that will encourage community tensionsand spill over into the language of mainstream right-wing politics andmedia. Across Europe, we need to appraise the scale of the challengeand, whilst showing courage in seeing off the racists, close down theareas of concern which touch the lives of those for whom moralappeals seem like empty rhetoric in the face of their own immediatecircumstance.That is why our government has put security and order at the heartof our progressive agenda, rather than grudgingly accepted itsimportance. We have increased police numbers to record levels andintroduced fundamental reforms to increase police effectiveness. Wehave developed new approaches to tackling street crime and guncrime, to drug treatment and reducing youth offending, and to theoperation of our courts. These are based on effective partnershipsbetween the police, community leaders, education authorities andyouth services, courts, and drug treatment services.The same approach is characterising our drive to tackle anti-socialbehaviour: working with parents to help them bring up children,including parenting contracts for those who do not fulfill theirresponsibilities; working with communities to increase the regulationof public spaces; introducing new and effective penalties for those whocommit petty crime; and new forms of intensive supervision for those

78WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?who pose a greater risk to the community. A good example of this isthe Community Safety Action Zone established in Bexley, where thelocal authority has actively involved the community in tackling crimeand anti-social behaviour. In the first two years of the scheme, not onlyhave levels of crime fallen (in some categories, like street robbery,by up to 85 per cent) – but also and almost as importantly, fear of crimehas fallen dramatically, making a real difference to people’s lives.When previously only 20 per cent of residents said they felt safe afterdark, that has risen to over 90 per cent. This shows us how freedomultimately comes from a virtuous circle of security, communityconfidence, strong civil society, and democratic government.What type of freedom are we trying to achieve?The challenge of citizenshipThis brings me to my second theme. In addressing the issues of liberty,security and justice, it is essential to consider what sort of freedom weare trying to achieve. My belief is that we need to strive for freedomin its widest form – not just freedom from interference, but freedomfor people to engage in providing solutions for themselves, theirfamilies and their communities. As the Ancient Greeks would have it,the freedom to contribute to the Polis.Quite simply, I am interested in freedom from external interference,physical protection, the protection of civil liberties, but I am alsointerested in the positive freedom to get involved in formal politics,and, importantly, in the development of civil society. These typesof freedom are, of course, complementary. Participation as activecitizens and engagement in the democratic process are crucial to thevery survival of a pluralistic, civilised, and free society.This is as true in the neighbourhood or county, in the region, ornation state, as it is on the international scene. That is why I havesought to build a commitment to civil society from the neighbourhoodupwards. As Education and Employment Secretary I was engaged indeveloping ‘active citizenship’ programmes. We introduced intoschools the opportunity to learn citizenship and democracy, andlinked that to opportunities to volunteer in the community. Across

DAVID BLUNKETT 79government we are starting to shift the balance from income-basedwelfare to asset-based welfare, encouraging people to build for thefuture. We also need to shift the balance in community policy, not justhelping communities to fight immediate problems, but also buildingtheir assets – helping them develop new forms of social capital in arapidly changing world in which social trends, increased mobility andtime-poverty have eroded some of the traditional bonds which tiedcommunities together.I do not underestimate the challenge in supporting and renewingcivil society. We all know that formal engagement is falling across theworld – less than 60 per cent in the last general election in the UK.While some community movements flourish, others decline. We needto re-engage people in shaping their own society, and not simply asconsumers of service. But if we get it right, we can start to buildtowards a culture where self-help and mutual help go hand in hand andfeed off each other, rather than being seen as pulling in oppositedirections. This is not something government can impose from the topdown – people have to take responsibility for themselves, as individualsand as communities. But government at every level also has to takeresponsibility for enhancing their independence by supporting andequipping them with the confidence, skills, and assets they need totake on that responsibility.This is the type of truly free society we should be trying to build.The role of government in ensuring liberty, security and justiceSo we value individual freedom on the one hand, and mutuality on theother, and see the two as bound up together in our freedom to engagein politics and civil society. But it would be wrong to pretend that ourvalues never present us with any difficult choices. This brings me to mythird theme – the challenge of balancing the protection of individualfreedom and rights against the values of community and mutuality, ofshared trust and confidence in our systems of justice and security.Firstly, we must recognise that to provide protection, to removefear, it is necessary to be able to engage in collective governance. Todo so, all of us agree to forego some of our personal sovereignty and

80WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?to combine our individualism in order to achieve common goals.Legitimacy, of course, comes through people consenting to combinetheir individuality, and, through democratic politics, agreeing whichgoals the government should be pursuing.I have no patience with those who suggest that decisions abouthow we should protect ourselves against terrorism are not safe to beleft to government and should be left entirely to the courts and thejudiciary. We all accept that these decisions can have serious potentialresults for the community, but precisely because of this, they demanda legitimacy which can only come through the democratic process. Ifpeople are to accept the consequences of these decisions, they mustbe made by those they have elected and who they have the power toremove. There is a challenge to all of us to reassert the primacy ofpolitics as the key mechanism of democracy, with democracy offeringthe only peaceful means of settling differences and ensuring progress.We have a proud tradition of democracy in the UK. But we alsohave a proud tradition of preserving individual freedom. From theMagna Carta onwards we have sought to provide protection from thosewho seek overbearing power. I believe that these values are stillrelevant, indeed are more important than ever – and that they areappropriate for people across the world, even where nations andpeoples share a different cultural background. But I also believe thatthey are not inconsistent with putting in place systems of justice, andsecurity, which protect the collective good and our mutual freedoms,even when these systems constrain individual actions. The challenge isto protect liberty, not a ‘free for all’. We have a right to expect othersto respect our liberty – but this expectation must be based on anunderstanding that we are all inter-dependent and thereforeaccountable to each other.The balance is therefore crucial, not only to the maintenance offreedom, but also to the health of democracy and community. But wemust also be flexible enough to adapt to new circumstances – notsimply to retrench into old assumptions, but to build on existingfoundations to meet new challenges in a way that is consistent with ourunderlying values. This is yet another place where what we need is notbig government but active, engaged government, responsive to change.

DAVID BLUNKETT 81There is a vast amount of accumulated wisdom in our laws andlegal system. But at the same time, we must accept that theydeveloped for most of their history in a time where there were nointernational terrorists, no suicide bombers – for whom, unlikeordinary offenders, the prospect of punishment is irrelevant – no DNAevidence which could identify guilty parties long after the crime hadtaken place, and so on. These are the circumstances we have to facetoday in protecting society and enforcing basic rights and duties. Wemust adapt and develop our systems of justice and security, whilecontinuing to ensure that our philosophy and principles develop in away that is both responsive to the new environment and faithful to ourcentral vision of freedom.I believe that there is a wider challenge in adapting theseprinciples than simply to amend our laws and powers. As government,we will only be able to make our system of justice effective, anddeliver freedom in its widest sense, if we demonstrate that we can usethe power vested in us responsibly, and gain the trust of the public.That is why, alongside our legal developments, we have embarkedupon a programme of fundamental reform and investment across thepublic sector, including the courts, the police, our prisons, immigrationservice and support for communities. We are striving to make theseservices more efficient – for example with better systems performancemonitoring for the police and enormous investments in informationtechnologies to make our court systems work better – but also moreresponsive to the needs of the communities they serve. We aredeveloping community justice courts, which give people moreunderstanding of and confidence in how the system works for them,and youth referral panels which involve communities in dealing withoffenders, empowering them and enabling people to be part of thesolution.International progress requires co-operation not competitionI have talked about how responding to new challenges in the areas ofpolicing and justice requires us to engage local communities. But italso requires us to make new connections in another direction, on the

82WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?international stage. This brings me to my fourth theme, the need foran international response to what is an increasingly internationalchallenge.In the past, nations consciously chose to engage or disengagein international events. Isolation or collaboration was a matter ofconscious political decision. Today others have chosen and will choosewhether we engage or disengage, because terrorists and terrorist actscannot be escaped by any of us. They have engaged with us and wehave to engage with them; and in doing so, we have to accept that ourproblems and our enemies have no respect for national boundaries.In a world where the perverse certainties of the Cold War havedisappeared, insecurity, and the fear it brings, requires humanity toshare the task of providing international order and security. If weaccept that we are now inter-related, one with another, whether welike it or not, we will understand why, for example, there is noquestion of the UK having to choose whether we should work withEurope, or with the US. We have to do both. But it is important thatwe do so in a way which builds civil society across the world, whichengages with people, and is not just an exercise of distant diplomacy.As I have tried to emphasise at several points in this paper, thedevelopment of civil society is fundamentally linked to thedevelopment of freedom, from the local all the way up to theinternational level.That is why I believe that not only do we need greater jointworking, but the kind of joint working that people around the worldwill recognise, accept and trust. Achieving this is our responsibility aspolitical leaders. As Tony Blair put it, “partnership not rivalry” is thesort of international system which most people seek. Combining theforces of good for a purpose greater than dealing with the threat of adictator. Combining to ensure that the world is a better and a saferplace. For this is a very different world, even to 20 years ago. Theworld of the internet, the world of satellite phones and digitaltelevision, is a world on the move. Together, global movements ofpeople and instant forms of communication demand collaborativesolutions to shared problems.The developing world is our concern for we seek to enable those

DAVID BLUNKETT 83who are starving not only to eat, but to share in wider prosperity. Weneed to understand, and then heal the world, to set aside the causesof hate and bitterness. This is therefore a challenge not merely ofdamping the flames that would engulf us, but of seeking a post-conflictworld which reconstructs the civil and political processes whichgenerate good governance and self-governance.How those across the world who are dispossessed, disillusioned,and disenfranchised see countries like ourselves in the future willdepend on how we turn stability and security into prosperity, and howwe share the benefits as well as the burdens of that security andprosperity. Those who are misled or deluded by terrorism, by roguestates and by those who wish to exacerbate divisions, need a widerroad map that they can see will lead them to a better tomorrow. It isour security in the long run as well as theirs that we seek to achieve.

Freedom in Security:A Social Democratic VisionBRIGITTE ZYPRIESFreedom and security are social democratic valuesSince the dreadful terror attacks on September 11th, 2001, in almostall states the topic of security has appropriately been at the top of thepolitical agenda. In addition, crimes of violence, which are reportedin detail in the media, have also caused ‘security’ to become ofsignificant concern for a broad section of the population. Widespreadfeelings of fear and powerlessness among the general public,especially in regards to sexual murders and similar crimes, havepromoted calls for a ‘strong state.’ In consequence, there is a feelingthat for the benefit of security, individual freedom should retreat intothe background.This reveals the tense relationship between freedom and security– a field of tension with which we have long been concerned. This hasbeen a subject of consideration in policy and law for hundreds of years.As an outcome of the Enlightenment, the state’s monopoly on theuse of force was set against an area of personal freedom as anindividual value and a legal limit on state power was demanded. Socialdemocracy in particular is strongly committed to the values of theEnlightenment and, therefore, to freedom. Unlike any other party inGermany, social democracy has historically fought against oppressionand exploitation. It is the party of freedom and recognises thatsecuring freedom is a ongoing task. This is also something that we asthe federal government of the Federal Republic of Germany see as aparticular challenge in these times. Creating a reasonable balancebetween freedom and security is imperative.We do not, and need not, seek to match the call of conservative85

86WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?politicians for placing ‘law and order’ above all else. When GermanCDU/CSU politicians for example – as recently occurred – demand acurfew for all minors under the age of 14 during the evening hours,seriously consider electronic monitoring with leg cuffs for schooltruants, or support comprehensive video monitoring for entire cities,in my opinion these are over-exaggerated demands that no longermaintain the balance between personal freedom and security.Criminal prosecution must be effective and reasonableWe must create a balance between security and freedom especiallywith modern criminal procedure investigation methods.On the one hand, procedural forms must be made available toensure conviction of offenders and thereby the protection of thecommunity from crime to the greatest extent possible. On the otherhand, we must at the same time ensure that innocent people are notconvicted and that personal freedoms will be intruded upon to theleast extent possible, consistent with the goal of effective criminalprosecution.In Germany, the extent to which we want to expand DNA analysisfor purposes of criminal prosecution is currently under discussion. DNAanalysis has been hailed as almost a miracle cure in the recent past forefficient investigation of crimes. Indeed, the demand to enlarge thestatutory possibilities for these methods is repeatedly made.There have already been numerous recommendations in this field:every citizen should be included, at least all men, at the very least allpersons who have committed a crime with a sexual background. Therehas even been talk of using the opportunity of minor drug cases toexamine molecular genetic data in individual cases.Time and again the requirement of judicial authority – that is, therequirement in Germany that only a judge can order molecular genetictesting – becomes a point of disagreement. The assertion has evenbeen made that the judge hinders effective criminal prosecution.It is unmistakable that this discussion has populist featuresparticularly because of the impact of terrible crimes against smallchildren. When looked at more closely it is often immediately clear

BRIGITTE ZYPRIES 87that these recommendations are not at all appropriate to actuallyachieving higher security for the population. We must consider onething above all: that we have already achieved many successes withDNA analysis. Many crimes have been solved through this. All of theseinvestigative successes were achieved on the basis of the law in effect.My question is therefore: if our laws have enabled these successes, whyshould we change them?I am convinced that the statutory framework intended by thelegislature regarding molecular genetic testing and storage in the DNAdata file has led to only appropriate inclusions within it. That is thosewho pose a considerable risk for the future of serious criminal offencesand therefore, present a danger to public security.Only when such danger exists can we think about placing thepersons in the genetic data file. Given this, I reject as adisproportionate intrusion the inclusion in the data file of all citizens,all men or even all those with a criminal record. It would, in myopinion, create an imbalance in the relationship between freedomand security. I disagree with the inclination toward fantasies ofomnipotence in the fight against crime: if only all data were availableto us, we could solve all crimes. But we all know that this is not thecase. Such fantasies should not be encouraged.Freedom and security requireeffective prevention and intelligent punishmentsHow can we guarantee freedom in security? An essential aspect iscertainly the prevention of crimes, especially crimes of violence. Thisis because those who experience violence do not live in peace.Violence in our society threatens our internal peace. We must resistthis threat. At first glance one may believe that this is solely a task forthe state. However, it is not. This subject affects all of us and is onefor which we are all responsible. Society as a whole must create aclimate of prevention.Prevention is, above all, aimed at the roots of criminality and seeksto combat its deeper causes. Not only the state, but also religiouscommunities, industry, non–government associations, the media, and,

88WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?not least, the general public are called upon. First of all, preventionmust be accomplished locally, that is, in the community. Family, preschool,school, and the living environment all play an important role,as do social support services such as youth welfare services, generalsocial services, and the activities of charitable organisations. Children,for example, must be taught values and have boundaries demonstratedin pre-school and in school. Free time possibilities and involving youthin sport associations are also important topics. Similarly, preventionplays a role through technological means – it affects the externalconditions of possible criminal environments and is therefore aimed atreducing opportunities for crime or making the commission of thecrime more difficult – for example, through security locks or electronicimmobilizers for automobiles. Industry can also contribute toprevention here.In the Federal Republic of Germany we are happy to see that crimeprevention is becoming increasingly more important. Of particularimportance is working across areas of responsibility to aggregate strengthsand to utilise, network, and distribute accumulated knowledge.The state can and must also contribute to prevention. This isprimarily through the solving of crimes – because this also haspreventative effects. A high proportion of solved crimes is a greaterdeterrent than the threat of punishment. Severe punishments are nota universal tool of deterrence. Countries in which they are used oftenhave crime rates that are many times higher than in Germany. Thisapplies, for example, to the USA, where a significantly higherpercentage of the population serves prison sentences and where thepenal system as a rule is much more severe than in Germany. Thereflexive demand for harsher punishment is, thus, not target-oriented.Another important point: the punishment must take place quickly.The more time between the offence and the punishment, the moredifficult it is to have an effect on the offender by means of criminallaw. Particularly in the area of criminal law relating to juvenileoffenders, which is influenced by the notion of education, swiftpunishment for the offence remains significant today.Also the possibility of a suspension of the prison sentence whilegranting probation can have an overall preventative effect in

BRIGITTE ZYPRIES 89appropriate cases. With the imposition of conditions, the offender canbe shown the error of his or her actions, such as through conditionaldonations to non-profit-making organisations. As to criminal lawrelating to juvenile offenders, I believe that the example of orderingparticipation in social training courses or making the effort to achieveoffender-victim compensation is a meaningful preventative measure.In addition, a good policy of re-socialisation serves prevention. Itis imperative that punishment be imposed as effectively as possible.Unfortunately, the implementation of prison sentences all toooften has damaging side effects: the prisoner’s social, economic, andpsychological circumstances worsen, his or her family suffers. At thesame time the criminal self-image and criminal contacts and skills arestrengthened and social competences are diminished.Thus, in Germany, we are considering new alternatives tomonetary fines and imprisonment. This is also set against thebackground that the past few years have seen the prison populationcontinually increasing at a disturbing rate with no end in sight to thisdevelopment. We will, therefore, develop other ‘freedom-restrictingpenalties,’ such as, for example, a driving ban or a warning withsuspended punishment. Above all, however, we seek to expandcommunity service as a replacement for monetary fines andimprisonment. Community service should be performed in greaterscope than previously by offenders who cannot pay their monetaryfines. Moreover, convicted offenders should also be given thepossibility of performing community service to avoid the enforcementof a prison sentence of less than six months.Looking outside of Germany shows that other European countriesare already further along in the development of alternative penaltiesto imprisonment. I am thinking here above all of England and Wales,which several decades ago were the first in Europe to introducecommunity service as a punishment. The experiences in Europe showthat such ‘non-custodial’ sanctions, when they are intelligently imposed,are at least as valuable in their effectiveness as traditional punishment.We do not ignore this view. More flexibility in the choice ofsanctions will open new paths for us to tackle the problem ofincreasing criminality and decreasing financial resources.

90WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?A healthy society is the prerequisite for freedom in securityGuaranteeing the internal peace of our society is challenging and hasmany prerequisites. The state cannot do it alone. It can only achievethis together with a healthy society. However, the state must createthe conditions for this.I would like to explain this with an example:The regulation of immigration is of significant importance for thefuture viability of our countries. If in the future we want to avoid themistakes of the past we must finally better regulate the influx intoGermany in line with qualitative criteria and at the same timeintegrate immigrants as quickly as possible into our society. A newmigration policy must be a policy for internal peace and good societaldevelopment.I see the following as focal points for such a migration policy:We must fulfill our humanitarian duties in an exemplary mannerand pursue our economic and societal interests fairly. We cannot onlyreact to problems, but rather, must be proactive and creative.Migration presents tasks for society as a whole and for the state as awhole, the solution to which requires an overall plan.Migration policy should be created together with the people – bothcitizens and immigrants. Broad societal and political acceptance is themost important prerequisite for its success.In our society the view is becoming accepted – even if only slowlyin conservative circles – that we need new rules and statutory basesfor immigration. Therefore, the federal government introducedan immigration law in the last legislative session. It corresponds tothe demands of a modern society and serves Germany’s legitimateeconomic and political interests. The core of the legislation is a newregulation regarding residence, gainful employment, and theintegration of foreigners into Germany.Because of a formal error in the proceedings, the German FederalConstitutional Court declared the immigration law invalid in Decemberof last year. Therefore the legislation, without any changes, was againintroduced into the legislative process last year. I am, as before,convinced that we need such a law. This is because despite all political

BRIGITTE ZYPRIES 91dispute regarding the correct programme we cannot lose sight of this:we need a process for immigration that is geared toward the needsof the job market. With the immigration law we could better andmore flexibly steer employment migration than before. This will haveresults for all of us, for the entire German society. We expect positivechanges, such as in the job market and the social security system, butalso as to cultural co-existence. With the immigration law we havefor the first time placed immigration policy in a larger context. Amigration policy that considers these contexts and keeps a view towardall, immigrants and citizens, will succeed as a decisive policy aimed atintegration. Integration is the prerequisite for innovation.Freedom in security: prerequisite for asocial democratic Europe in the 21st century“Fair reform of our country.” Under this program the executivecommittee of the SPD in January 2004 agreed the “Weimar Guidelineson Innovation.”We want ‘Made in Germany’ to remain a trade mark. To be presentin the growth markets of tomorrow, our state-of-the-art technologymust be promoted more than before. Education, science, and researchmust become a matter for the entire society.Fairness in opportunities and integration are prerequisites for this,as are the long-term security of our social system and stable publicfinances.But so is freedom in security. It is a prerequisite for individual andempowering development. It is also the central theme of socialdemocracy in the twenty-first century. When faced with a choice,taking responsibility for freedom is not always easy. Simple,reactionary, and vague slogans are sometimes too seductive, candelude people into false security, calm them, and are – at least in theshort-term – politically successful. It is easy for conservative politics toplay this tune. Social democratic politics cannot allow it to be so easy;they must differentiate, explain, and maintain the balance betweenfreedom and security. By doing so, social democratic legal policy willbe successful.

Social InsecuritiesMARISOL TOURAINEInsecurity and the feeling of insecurity are many-sided. The degreeof protection against violence, prerogative of states, is a powerfulindication of a society’s development. Protection allows us to besocially independent, to limit the uncertainties of our environment andto manage it better. The public debate on the security of property andpersons is relatively well-defined: no one is suggesting the reduction ofthese rights to cope with growing risks; no one is proposing to give thisrole to those not vested with democratic legitimacy. The rule of law isbased on the principle of the necessary protection of property.This has not been the case for protection against social risks; therewas no need for protection until the rise of capitalism. It was not untilthe middle of the twentieth century that the idea of a doubleprotection by the state against social and civil risks took hold. Today,under the guise of necessity, some are calling for the dismantling ofthis system, arguing that the mutations of capitalism demand thetightening of civil protection and the loosening of social protection. Wecan less accept that post-industrial capitalism imposes the reductionof social guarantees to a minimal level, since it is largely illusoryto oppose civil security and social protection. The two are mutuallyre-enforcing, but we do not always have the right to protection fromsocial precariousness 1 . A new social compromise must be redefined,which, as at the close of the last global conflict, guarantees nationalcohesion and democracy. Faced with transformations in nationalsocieties and globalization, the construction of this pact, whichattracts neither liberals nor those in favour of the status quo, is theground for radical social democrats’ choices.93

94WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?A historic new compromiseSocial protection to guarantee employees against major risks, or moreoften, against poverty, does not date from the establishment of theWelfare State 2 . It originates in the idea of assistance, which is designedmore to ensure a healthy workforce than it is to protect individuals.Welfare marks a rupture in this movement; assistance ceded placeto insurance. Although European Welfare States are rooted in a varietyof conceptions and traditions, 3 the establishment of the providentialstate responded to a general desire to cover the great majority of thepopulation against most risks. In all European countries, the secondhalf of the twentieth century saw a strong growth in social spending;the 1980s were characterised in this respect by the efforts of lessrich countries to catch up. In 2000, social spending as a percentage ofGDP varied from 32.2 per cent of GDP in Sweden, to 20 per cent inSpain and Portugal.The appearance of modern social protection in the middle of thelast century was not only a response to the precariousness of theemployee, even if this was an essential dimension. It was also a resultof the memories of the recent past: the economic crisis of the 1930s,the toppling of democracies and war. In most European countries,political and social reconstruction was inseparable from a strong stateengagement in the protection of employees and their families.These systems are today being called into question. Contrary towhat liberals claim, this is not explained principally by budgetaryconstraints, even if this has strongly contributed to this. Thechallenges which our societies are facing affect the entire social andpolitical spheres. Profound transformations in social systems arenecessary: the fragility of populations is growing, and societies areengulfed in a ‘crisis of destiny’. We are worried about the future,conscious of the social transformations wrought by globalization, andyet, at the same time, the cult of the individual encourages our hopesof personal advancement. The result is an enfeeblement of socialprotection. It is necessary to reconstruct the social pact, as in the1940s and 1950s, which will guarantee national cohesion anddemocracy. The articulation of policies of security are indispensable.

MARISOL TOURAINE 95A degree of violence and incivilities are taking root in the perceptionof a socially hostile environment. Conversely, this insecurity isincreasing the public’s sense of uncertainty, and its need for theprotection that reduces this. It is not insignificant that the redefinitionof welfare policy must intervene at a moment marked, particularly inFrance, by a strong sense of insecurity. It is an illusion to imagine thatthe reform of these policies will produce a reduction in their cost.Social needs are growing and it is not possible to respond to them bytaking the risk of social disintegration. Our societies need to find a new‘historic compromise’, which will allow us to reconcile the constraintsof mobility resulting from economic dynamism, and the demand forsecurity – the sole guarantee of civil, social and national integration.Systems of protection under pressureThe crisis of social states is manifested firstly as a financial crisis. Therise of unemployment and poverty, ageing populations, and the growthof health spending have suddenly provoked a questioning of the socialsystem. But the policy of financial restriction, which has been imposedacross all domains in France, responds to neither expectations norneeds. Too restrictive for some, too loose for others, the post-warcompromise has found its limits. It is today confronted with fiveprinciple challenges that cannot be ignored.The first of these challenges is the disappearance of the socialconditions on which this system was founded, notably in France. Socialsecurity was established in the context of economic growth, and inparticular because of the double security of employment and familystructures. It was the head of the family, the breadwinner, whothrough his employment provided for those economically dependent onhim. The profound changes in employment in addition to the mutationsin family structures have weakened the guarantees to which theywere attached.This double transformation has also resulted in an evolution in thenature of the risks that need to be covered. On the one hand the riskslinked to the world of work are evolving, and yet they are not any morethe dominant force. They are evolving in that the accidents of work

96WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?and retirement no longer exhaust the list of situations to guaranteeagainst. The question of unemployment, and increasingly, ofprecarious working practices – the so-called working poor – andprofessional mobility have become central. At the same time, the careof the elderly, the social integration of families, the guarantee ofuniversal health care, and also insurance against new risks – medical orecological – have all become essential.In third place, we do not always take obstacles and individual riskssufficiently into account. At the heart of the world of work, theremoval of professional obstacles is a major accomplishment of recentyears. Employees have to be mobile, flexible, and permanently readyto adapt. These factors generate disquiet and angst; whereas theclassical social state offered the employee subordination in exchangefor security, today it expects complete flexibility without guaranteeagainst its side effects. Where once the employee was protected bytheir membership of a class or social category, the emergence of intracategoricalinequalities deprives the worker of statutory protectionwithout providing any new personal guarantee. The particularity of anindividual’s obstacles – what Ulrick Beck called the de-standardisationof work – is dealt with insufficiently by a system that privileges thedefence of employees, 4 but which is no longer homogenous.Moreover, the providential state did not sufficiently reduceinequalities. The very different impact from country to country ofsocial transfers on poverty is instructive in this respect. One exampletaken from what is referred to here as the French paradox in thematter of health illustrates this: whilst our system of care remainsglobally very efficient, which translates into a spectacular increase inlongevity, this performance has not reduced the pre-existing impact ofsocial class; France has the highest instance of premature death(before 65 years of age) especially among men, of all Europeancountries. The system of care has therefore made considerableprogress in the state of the country’s health without reducinginequality.Finally, all this illustrates without doubt that the social state isfacing a crisis of legitimacy. This in itself constitutes a significantchallenge. Until 15 years ago, the French social insurer had the feeling

MARISOL TOURAINE 97that everyone could expect to benefit in the same proportion from thesystem. This is no longer the case, and the impression that there areprofiteers, even if it is without statistical foundation, illustrates amarked decoupling between expectations of the Welfare State, andthe benefit that one subjectively receives.The need for collective regulationFor all the above-mentioned reasons, the social compromise set up atthe close of the Second World War is in crisis. Even if this itself affectsdifferent European countries in a variety of ways, the questions ofthe legitimacy of welfare, of its efficiency and its cost are posedeverywhere. Before considering the paths to a new social compromise,it would be useful to step back from this for a moment and recap.The dysfunctionalism of the state is explained in a large measureby the emergence of an increasingly more individualistic society. Thediverse paths followed by professionals today are part of our desiresand aspirations, and our wish to be understood for what we are. Theopening up of developed economies and the acceleration ofglobalization have prompted liberals to point to the end of the WelfareState and call for a return to private insurance for businesses andfamilies. Employers have analysed the concept of welfare as anunnatural creation unique to the post-war years, which must now bediscarded. Under the cover of the rhetoric of individual responsibility,employers are trying to limit social protection in the name of keepingthe freedom to innovate. Their remedy for the French Welfare State isminimal state protection, complemented by private insurance.This analysis is both erroneous and dangerous. It is erroneousbecause it is based on the false hypothesis that individuals take morerisks when they have less protection to fall back on. It is dangerousbecause it aims to permanently institutionalise a large category ofsocially excluded people, who would have to be contented withminimal protection. The democratic cost – national cohesion – and thematerial cost – civil insecurity – would be heavy. The state is and mustremain the central actor of social regulation, particularly because it isthe guarantor of the general security of society. The major role of the

98WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?state does not mean that it should be the sole actor, or even theprincipal force behind social policy.Conversely, an augmentation of existing social protection withoutlooking at its foundations is no gauge of efficiency. A part of the Leftfinds itself paradoxically in the position of defending the status quo,as if the extension of existing benefits could protect the populationfrom the new risks we are encountering. When it comes to pensions,health insurance, or unemployment, an increase in social spending isnot enough in itself to provide better social guarantees. Moreover, thisapproach places statutes over people. The perverse effects of thisprotection linked principally to employment are well known: the losersin the system pay for the protection of the winners.Five principles for a new social compromiseThe task is heavy, but is quite simple to spell out: how can we definea social pact which ensures collective guarantees in an age of mobility,individualism and of diversification of risk? This article proposes fivemain principles:First principle: distinguish the risks. The diversification of risksdoes not mean that they should all be treated with the samemechanisms. Since the 1970s, Giddens and Beck, along with others, 5have pointed to the appearance of new risks: medical, ecological andindustrial ... These do not tally with classic social risks. Some haveread this analysis as a diversionary tactic, which marginalises socialrisks by identifying risks as a whole.We have the tendency to underestimate the role of these new risksin the feeling of insecurity which is growing in our societies. This doesnot mean that we should treat all risks identically. It seems essentialthat structures of public prevention should be put in place against thenew risks, which could be arranged thorough mutual funds run by thesectors concerned, such as polluting industries or the pharmaceuticalindustry. Only social risks should be the concern of the social state.Second principle: differentiate forms of protection to ensure thecontinuity of rights. Since professional careers are so diverse, theconsideration of individual circumstances and particular life-courses is

MARISOL TOURAINE 99crucial. In France, this is not currently the case. Support should betargeted at ensuring the continuity of rights in whatever situationindividuals find themselves. Employment rights should no longer belinked to a particular job, but to the employee; thus, he or shewould preserve accumulated rights, for example, in training orexperience. 6 This is what is at stake for French socialists: professionalsocial security. This way offers a more promising path than the growthin constraints on employment contracts, thus individuals would beendowed with what John Rawls calls social capital, which they can usewhen they see fit. 7Differentiation of protection is also about targeting policies to takeaccount of professional movement: hence the reform of the currentpension system in France has been managed in a rigid way, whichimposes the same rules on everyone, without taking into accountfactors such as the physical demands of the job. A simple criterionwould allow us to take this into account: life expectancy.In a more general way, policies of solidarity should also be policiesthat allows for autonomy and independence. The taking of risks, thepursuit of one’s own projects, and also the ability to live without beingdependent on someone else through old age or handicap is very muchat stake in our societies.Third principle: make work pay and reduce poverty. Principallyfounded on work, social rights have the tendency to be reduced forthose who leave the world of work or who have precariousemployment. Precarious employment, often a symbol of poverty, hasreturned to French society, after its gradual disappearance betweenthe 1960s and 1990s. At the same time, the age of entry into theworkplace has increased, and the age of exit has fallen. A major axisof social policy, in particular in France, is the rise in the level ofeconomic inactivity, which has been largely unaffected by policiesdesigned to get those over 55 years of age back into work.Making work pay means reducing poverty. The new poor, whetherthey work or not, are reduced to state assistance. The weakestemployees should receive long-term contracts which are lessconcerned with the detailing of the conditions attached to a particularactivity than with guaranteeing access to employment to those people

100WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?who do not meet classic employment criteria.Fourth principle: the lever of family policy. The reduction ofpoverty also requires a family policy that encourages women to work –female employment is the best means of reducing family poverty – andconcentrates assistance on women on their own. Measures such asthose, in France, that allow women to get an allowance for bringing uptheir children without working are harmful in the medium term. Familypolicy is not reducible to social policy. First and foremost, it is a policyof integration, by the work of women and of young people, by theputting in place of structures to help children and teenagers, whichhelp to reduce degradation and social problems. In this regard, wemust question the French family allocation, which puts financialredistribution over collective investment.Fifth principle: install democratic procedures for collectivechoices. Insurance is more about prevention than reparation; it has noplace for a logic which blames society. The idea of making individualsmore responsible for themselves is associated by the liberals withmaking individuals guilty for their choices. If one takes the example ofhealth spending, one sees that responsibility for our behaviour ispresented as a punishment rather than a democratic act of choice.It appears natural to favour those whose behaviour is virtuous foreveryone. In a larger sphere, citizens should be confronted withchoice, notably in regard to public spending plans. It is indispensableto design means of consultation and democratic debate on thesequestions, which involve unions, and other associations, such aspatients’ representatives, family groups and so on.The example of the Scandinavian countries, in particular ofDenmark, shows that the expansion of social democracy is not a turnof the century utopian ideal but an unremitting struggle for reform.What is happening is not merely a replay of the historical conflictbetween the concepts of assistance and insurance which we thoughtwas over. It is essentially the capacity of the nations of Europe, and ofFrance in particular, to renew their empowering vision of society.

EndnotesPeter Mandelson1Rasmussen P. N., Europe and a New Global Order, Brussels, 2003.Dominique Strauss-Kahn1See most notably the work of Gøsta Esping Andersen.2Strauss-Kahn D., La Flamme et la Cendre [The Flame and the Cinder], Paris, 2002.Patrick Diamond1This term has been usefully developed in a number of articles by the BritishMinister for Europe, Denis MacShane.2Crosland A., The Future of Socialism, London, 1956.3Meyer T., Modern social democracy: common ground and disputed issues, Berlin,2001.4Sasson D., The History of European Socialism, 1996.5‘A framework for the just renewal of Germany’, SPD internal working paper,2004.6Strauss-Kahn D., ‘What is a just society?’, Where Now for European SocialDemocracy? London, 2004.7Blair T., The courage of our convictions: why reform of the public services is theroute to social justice, London, 2002.8Tawney R.H., Socialist Commentary, 1952.9Crosland A., op. cit.10Gamble A., Between Britain and America, London, 2003.11Summers M., ‘Towards a new democratic settlement’, Perryman M., ed., The BlairAgenda, London, 1996.12Siedentop L., Democracy in Europe, London, 1996.13Esping-Andersen G., ‘A New European Social Model for the 21st Century’,Rodriguez M., ed., The new knowledge economy in Europe, London, 1996.Jean Pisani-Ferry1This is not entirely uncontroversial. It is sometimes argued, albeit unconvincingly,that the reason for the gap in GDP per head between the US and the EU is thatEuropeans prefer leisure, or that Europe’s meagre growth is a result of itsdemography, see Blanchard O., ‘The Economic Future of Europe’, Journal ofEconomic Perspectives, forthcoming 2004.2Sapir A. et al., An Agenda for a Growing Europe, Oxford, forthcoming 2004.3Aghion P. and Pisani-Ferry J., ‘Réponse à nos procureurs’, Revue de l’OFCE,forthcoming 2004.101

102WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?4Strauss-Kahn D., La Flamme et la Cendre, Paris, 2002.5Aghion P. and Cohen E., Education et croissance, report of the French Council ofEconomic Analysis, 2004.Roger Liddle1Report from the Commission to the Spring European Council: Delivering Lisbon:Reforms to the Enlarged Union’, 21/01/04 COM (2004) 29, Brussels, p.7.2Ibid, p.9.3See Jean Pisani-Ferry’s paper in: Sapir A. et al., An Agenda for a Growing Europe,Oxford, forthcoming 2004.4Sapir, p. 29.5Sapir, p. 94.6Beveridge W., Full Employment in a Free Society, London, 1944.7The Lambert Review of Business-University Collaboration, HM Treasury, December20038Kok W., ed., Jobs, Jobs, Jobs: Creating more employment in Europe, Brussels,2003.9The Strategic Audit, Prime Minister’s Strategy Unit, November 2003.10Baymoumi, Laxton and Pensenti, When Leaner Isn’t Meaner: Measuring Benefitsand Spillovers of Greater Competition in Europe, IMF, October 2003.11Sapir, pp. 148-150.Marisol Touraine1This paper only considers civil insecurities, which has come under renewed focusin recent years. If social policy is not enough to reduce civil insecurity the reverseis also true.2It was in Germany in the 1880s that Bismarck first introduced the first nationalsystem of protection against misfortune. Great Britain paved the way with thePoor Law Amendment Act of 1834 before engaging in a much wider policy at thebeginning of the twentieth century. France was much later in introducing a systemof social insurance. The first half of the twentieth century was characterised bythe extension of these guarantees.3Gøsta Esping Andersen distinguishes three main categories of Welfare States:corporatist-conservative systems, rooted in the traditions of Bismarck, i.e. Germany,Luxemburg or Belgium; Beveridge style systems as the United Kingdom andIreland; and the social democratic system that prevails in Scandinavia. France isa hybrid case: Bismarckian in the setting down of open rights, Beveridgian inits universalism.4Beck U., Risk Society, London, 1992. See also Gautié J., ‘Marché du travail etparcours individuals’, Esprit, November 2003.5Giddens A., Modernity and Self-Identity, Stanford, 1991; Beck ibid.6Supiot A., Au delà de l’emploi, Paris, 1990.7Regan S., Assets and Progressive Welfare, London, 2001.