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Preserving social models while regaining competitiveness: can Europe do both?

Abstract

European social models have many advantages and some disadvantages—both have been widely discussed. However, disputes on whether the European welfare state is a good or bad idea have become less relevant since the demographic dividend that used to fuel the institutions of the welfare state has disappeared. Having fewer resources, Europeans must spend less. In order to adjust to the new situation it is crucial to rethink the essence of social goals, to explain conclusions to the public, and to then neutralise certain elements of social models in order to withdraw them from political bargaining and downsize them. All this is necessary in order to save the social models, which have become overused. Not having the demographic dividend available, politicians have had to increase the burden put on production factors, reducing net remunerations. European social models still have a lot of potential for the future. If they focus on the key social goals and are of a reasonable scale then they will once again contribute to higher productivity and competitiveness among European economies.

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Notes

  1. Today few people remember Ponzi but many remember Madoff.

  2. Pension systems are most exposed to the collapse of the Ponzi scheme.

  3. There is a long list of pros and cons regarding the concept of the welfare state—see Atkinson (1999), Barr (2001), Lindbeck et al. (1994) and Ringen (2009).

  4. For a broad picture of the good ideas and their implementation in the twentieth century, see Jude (2012).

  5. An analysis of the availability of resources for financing the welfare state goes beyond the scope of this paper. See, for instance, European Commission (2009).

  6. For a discussion of new challenges, see Esping-Andersen (2002).

  7. I use the term GDP throughout this article, despite the fact that it is often criticised. In this context its criticisms are irrelevant as it is used to mean any measure of the outcome of a working society.

  8. One of the extremes is often advanced as ‘evil’, giving the proponents of the other the chance to promote their views.

  9. Issues related to fair distribution of welfare go beyond the scope of this paper.

  10. For more discussion on the retirement age and the need to increase it, see Guillemard (2005).

  11. Note, for instance, the case of the Swedish prime minister, who said that the retirement age in Sweden should be increased to 75 years.

  12. This should not be confused with the privatisation of the systems. For a detailed discussion of the approach, see Góra (2003).

  13. Further discussion of these issues can be found in Góra (2011).

References

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Correspondence to Marek Góra.

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Góra, M. Preserving social models while regaining competitiveness: can Europe do both?. European View 11, 55–62 (2012). https://doi.org/10.1007/s12290-012-0208-4

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Keywords

  • Welfare
  • Demographic dividend
  • Ageing
  • Competitiveness
  • Europe