Eliminating Social Differences – The Weekly 11

Márton Gyöngyösi

12/06/2020

           

Even critics of the European integration would concede to the argument that it has undisputedly contributed to an unprecedented era of reconciliation between hitherto hostile nation states. 

Many factors played a part in reaching a consensus on the continent.

The tragic common experience of horror and devastation on all sides in two subsequent world wars only partly explain the joint endeavour to build a European cooperation.

Nothing ever was built on negation and negative experiences only. Creativity, goodwill, trust and vision are all necessary to construct a lasting mechanism. Without the cooperation and wisdom of a generation of like-minded political leaders, reigning in the Western hemisphere European integration could not have become reality. 

The Western political elite of the time predominantly adherent to the Christian-Social school of thought understood that in the evolving bi-polar geopolitical reality the key to success is an integration based on a mutually beneficial economic cooperation with a strong element of solidarity and inclusive social dimension.

In this process, the role of the US was critical at least in three significant areas. Firstly, learning the lessons of misguided policies after the First World War, Western leaders were wise not to humiliate Germany but help it get back on its feet. In a historic gesture of reconciliation, in 1953 the Truman-administration brokered the so-called London Debt Agreement to liberate Germany of its asphyxiating debt burden. Its Western creditors instantly wrote off over 70 percent of Germany’s pre-war debt. Furthermore, the US extended the largest financial assistance known in history to ailing European economies in the framework of the so-called Marshall Plan. Additionally, by forging a military alliance the US guaranteed the security of Europe at a time of nuclear threat in the Cold War era.

This act of solidarity, i.e. a combination of debt write-off and substantial financial impetus, as well as the guarantee to security, was key to launch the socio-economic upsurge of Europe with unprecedented decades of peace, welfare and stability to follow.              

If the European Union wants to counter successfully economic, environmental, security, health and social challenges of our times it can only do so by leaning on the experiences of post-war Europe and work ever harder on strengthening social cohesion between its member states.

The greatest threat to social cohesion in the EU today is the enormous geographical imbalance persisting in income levels between the periphery and core of the EU. 

Although an enticing perspective for any candidate country, with the benefit of hindsight it is fair to say that many member states joined the common market or indeed the common currency prematurely. It is a cliché of economic theory that economic integration and liberalization can only be successful if it is mutually beneficial and by definition it cannot be between unequals. In a common market with free movement of labour and capital, it is inevitable that the former will leave for higher salaries and the latter for higher returns. Equally, a common monetary policy is rarely suitable in the long run for countries with contrasting economic structures and fundamentals. Such a mechanism cannot result in a desired equilibrium, but more likely to bring about social disaster.

Today the EU is characterized by enormous geographical social differences with mass migration of labour from the periphery and an ever-increasing gap in welfare between East and West, North and South. 

Cohesion funds, the EU’s official policy instrument for closing the development gap and furthering closer economic integration between members have rarely fulfilled their mission. It is a common responsibility of donors and recipients that cohesion funds, which represent European taxpayers’ contributions, are targeted efficiently, spent effectively, and not subject to corruption.

To this day, cohesion funds have contributed more to the sustainment of corrupt political establishments, corporate interests across the EU than to closing the income gap by enhancing competitiveness. 

Therefore, it is fair to say, that the cohesion policy of the EU that should contribute to establishing social cohesion across the continent cannot compare to the post-war arrangements that helped Western Europe to get back on its feet. Apart from the moral hazard of misusing great quantities of European taxpayers’ funds, persisting social inequalities will inevitably lead to the surge of right wing extremism, populism on the one hand, and overstretched extreme-left activism. Signs of both are abundantly visible, with less and less space and time for sensible and constructive dialogue to find solutions.  

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