Beyond the European Social Model

The Open Europe think tank has released a new book of essays by leading thinkers from across the EU. “Beyond the European Social Model” argues that the high-tax and highly regulated “social model” is not working, and that the time has come for the EU and its member states to take a different approach – away from the Scandinavian model and towards the Irish one. The study shows, for example, that the poorest 10% in Ireland saw their incomes rise six times faster than the poorest 10% in Britain or Sweden over the past decade.
In his essay “The Myth of the Scandinavian Model”, Martin De Vlieghere argues that in 1970, Sweden’s level of prosperity was one quarter above Belgium’s. But by 2003 Sweden had fallen to 14th place from 5th in the prosperity index, two places behind Belgium. From 1989 to 2003, while Ireland rose from 21st to 4th place, Finland fell from 9th to 15th place. Together with Italy, the three Scandinavian countries are the worst performing
economies in the entire European Union.

“Rather than taking them as an example, Europe’s politicians should shun the Scandinavian recipes,” he says.

Fraser Nelson says in a piece in the Scotsman that, despite the economic evidence, the UK seems to be drifting towards the Scandinavian way.

“Our tax burden is now higher than Germany’s (for the first time in history) and in Scotland the spending, as a share of the economy, is at Scandinavian levels,” he says.

“In the UK there are a scandalous 5.3 million adults – 14.7% of the workforce – out of work and on welfare of some kind or another, including incapacity benefit and lone-parent unemployment. In Scotland it’s 18% – just under one in five adults.”

According to Nelson, it’s all a question of what sort of society Britain wants to become. The Fabian Society in its ‘Narrowing the gap’ paper recommends expanding welfare for low-income mothers (and from pregnancy, not just childbirth), longer parental leave, more subsidised childcare, greater benefit rates for children, a higher minimum wage and higher tax.

“Its logic is, essentially, that if Britain taxed as much as Sweden, things would be a lot better. The Fabian pamphlet title was ‘Narrowing the gap’. It should have been ‘Tax is the answer’.”

But, as Nelson points out, between 1981 and 2003, Ireland managed to lift employment by 56% while Sweden achieved no jobs growth – and was literally overtaken by half of the European Union member states in the prosperity leagues.

“You would not expect to find many aspiring Brownite ministers near the OpenEurope document launch: they have already chosen the Fabian way.”

There are also warnings for Ireland with Doctor Constantin Gurdgiev writing that Taoiseach Bertie Ahern “should walk away from the partnership table once and for all.

“To achieve conditions required for robust growth, entrepreneurship, efficient investment and betterment of taxpayers’ lives throughout Europe, the Continental model of serial surrenders to the blackmail of the militant trade unions must be chugged into the dustbin of history.”

  • kensei

    “The study shows, for example, that the poorest 10% in Ireland saw their incomes rise six times faster than the poorest 10% in Britain or Sweden over the past decade. ”

    Of course, the poorest 10% in Sweden earned much more than the poorest 10% in Ireland, so this is spectacularly unsurprising.

    The whole point of the Swedish model is that it doesn’t have the same disparity of incomes as dispalyed elsewhere – the top people don’t earn as much, are taxed more heavily, but the bottom layers of society is pushed upwards, combined with a watertight welfare state. Corporation taxes are competitive, however.

    The question is largely beyond economics and more towards what kind of society you want to have.

  • Correct on both counts kensei. The gap between rich and poor is far more pronounced in less socially developed countries, and it is a question certainly beyond financial metrics, if not economics.

    One can look at any country, pick a few stats on growth and economics, and use them to villify the system. But would Sweden swap its education system, its health system, its labour regime and workers rights regime for that of Ireland? Would Sweden give up its principled and applauded position on the World stage in order that it can secure enhanced income growth? In Joe Nye’s book ‘Soft Power’, he argues that Sweden has for years enjoyed vastly disproportionate power on the world stage due to its continuing and committed investment to international affairs. It is likely that a shift to the Irish model would preclude this.

    Without having read the piece yet, I’d have to agree with Doctor Constantin Gurdgiev as well in that partnership does not represent the way forward. The reason for this is that the unions have long abandoned their previous social, left-leaning bent in favour of manna and a race to the top. Unions now serve merely as wage negotiators, and have become self serving political power bearing entities devoid of ideology and supportive of whatever government they are dealing with. It is a recipe for mutually reinforced disaster.

    Must read these articles, and blog back later.

  • Brian Boru

    Vindicates the rebellions of 1916 and 1919-21 from a nationalist perspective. Britain won’t let NI have lower corporate-tax rates so why would they have allowed the Republic?

    On the question of European Social Model versus relativewly free labour markets and lower taxation, the latter is unquestionable the right approach. We don’t want Franco-German style 10% unemployment, with lavish social-welfare disincentivising people from looking for work, or rigid rules that make it almost impossible to sack workers. If companies cannot fire, then they won’t hire – a problem that the French govt is belately trying to address with the “First Employment Contract”. Mainland EU govt’s need to show some backbone and face down the 8% of the workers in the unions. It is an insult of democracy that this 8% has blocked the necessary economic reforms since 1986. Let them eat cake!

  • Mark

    Personally I would rather have security and quality services.

  • fair_deal

    “Vindicates the rebellions of 1916 and 1919-21 from a nationalist perspective”

    James Connolly died for low corporate tax rates!?!

  • OK. The introduction to the book referred to in the lead in is fully available for dowload, which is cool.

    However, Open Europe is a business think tank, set up by business people in the UK, which tells me two things – first, that there is an ideological bent to this tome that is in favour of the free market before it analyses why, and second, being from the UK, that those business people are generally on the wrong side of favourable to the European Social Model.

    It is disappointing that the first statistic quoted is a Google hit rate, as follows:

    ‘A quick search on Google for the phrase “European Social Model” turns up more than 271,000 hits. If you type in “European Social Model + success” you
    get 93,000 results. So far so good, you might think. But “European Social Model + unemployment” turns up some 98,000 pages.’

    While one may argue that such an introduction is a little playful, and will no doubt be followed by erudite and clear argument on the pitfalls of the social model, and on how Europe needs to change, to lead off with misleading and spurious Google references is disappointing.

    Now, I’m going to read the two articles referred to.

  • Review: Martin De Vlieghere, The Myth of the Scandinavian Model

    De Vilighere introduces his piece by referring to Breugel, a think tank that propounds the Nordic model as the way forward, and denounces its study as an ‘ideological pamphlet’ rather than a scientific study. One must infer that his publication is, in fact, scientific. There are no (count them) no footnotes.

    While his argument on a statistical basis seems difficult to refute (the arbitrary elimination of three high performing European economies from their data, including Ireland), why is it necessary to emphasise twice in one paragraph that the think tank in question (Breugel) is government funded? Surely it could equally be thrown at Open Europe that it is business funded and therefore similarly compromised?

    His first point is that Sweden’s level of prosperity was one quarter (of what? I’m not sure – his graph is not footnoted, apart from saying it’s the OECD prosperity ranking) above that of Belgium in 1970, and was in 2003 two places (an alternate comparator, you’ll note) below Belgium. Why Mr. Vilighere do you arbitrarily select Belgium? Surely the appropriate comparison would be a bucket of appropriate countries. He’s from Belgium, I think. There’s a scientific reason for you.

    According to the Global Britain, another think tank in the UK, Sweden enjoyed fourth place in the EU Prosperity Ranking in 2003 (http://www.globalbritain.org/BNN/BN35.pdf), while Belgium languished in 9th place. But Mr. De Vlieghere probably ignored this as an ‘ideological pamphlet’ published by a government funded body. In 2004, the places were the same (http://www.globalbritain.org/BNN/BN39.pdf). Both of these documents source their data from the OECD. Could Mr. De Vlieghere be wrong? Of course I cannot double check his unannotated claims against real OECD data, as the labyrinthine website of that organization will not yield. He claims Denmark also to be poor, while my sources suggest the opposite. And between Sweden, Denmark and Finland (all three in the EU-15 top 6) he makes the point that the Scandinavian Model should be shunned.

    He then says that these three countries with Italy are the four worst performing economies in Europe. But Italy has an industrialist prime minister, arguably the most business friendly and social-model repellant governments in Europe, and this goes without explanation.

    I’m not going to be a blog hogger by going on any more about this, I’ve only got two pages into the article, and have spent two hours on it. And I’m getting mad too, and that’s not good.