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Adieu the European Social Model?

Though last week's opening of the Dutch parliament may have caught some eyes for reason of King Willem-Alexander's maiden public appearance, others will have noted the extensive austerity measures announced in the Netherlands. Under the watchwords of sustainability and responsibility, Willem-Alexander after all outlined major Government cuts to social expenditure and even declared the Dutch welfare state's end. Such a development is particularly significant. The Netherlands has provided citizens with generous employment and social security rights for more than sixty years, and indeed has been considered a standard bearer of the so-called European social model. The Dutch case is alas far from unique in today's Europe. From the EU's western to eastern borders, numerous reforms have cut welfare budgets and deregulated labour markets. These measures have ranged from the extremely draconian (Mediterranean and Baltic countries) to the comparatively mild (Scandinavia and central Europe), yet to some degree have touched all European countries.

Reforms of this sort are admittedly not new. Since the onset of neoliberalism in the 1980s and globalization in the 1990s, numerous attempts have been made to make the European social model more flexible. The crisis has all the same accelerated this process. Exerting extreme competitive pressure on firms and severe fiscal pressure on Governments, hard economic times have prompted firms to implement wage and job cuts and Governments to impose swingeing public cuts. Some of the forces grinding down the European social model are nonetheless newer ones. EU/IMF austerity programmes introduced in response to debt crisis have imposed misery on Europe's Mediterranean and Ireland, and the role of bond markets in prompting austerity has lately come to the fore.

In the light of such developments, debates about the European social model's feasibility are being revisited. Although 'free-market' economists have anticipated the European social model's erosion for years, more leftward thinkers have generally insisted on such systems' viability. These researchers' ideas, the most famed of which is the 'Varieties of Capitalism' theory, posit that certain economies draw competitive advantage from elevated social standards. The crisis seems to throw a spanner into the works of such approaches. So severe has austerity been in the likes of Greece and Spain, the notion that these countries possess a distinguishing social model appears more and more a bad joke. Similar developments can be detected in central Europe and Scandinavia. Though in such countries liberalization programmes are more modest in scope, an incremental shift away from socially-minded policies is nonetheless unmistakable.

The time for obituaries may not be quite at hand, yet for my money we are indeed witnessing the European social model's slow demise. So diverse are the sources from which it is assaulted and so multiple are the national contexts in which these developments occur, post-war social models seem condemned to wither to shadows of their former selves. This in turn begs the question of what shall succeed them. The growth of large-scale 'insider-outsider' divides, in which precarious 'outsiders' are excluded from the welfare state's remit, is one possible scenario and to a degree already exists in certain European countries. This seems unsustainable on a larger scale however. The superior conditions of 'insiders' in part rely on such citizens' numerical superiority; should 'outsiders' reach a critical mass it is probable welfare provision will erode for all. Perhaps more likely is the retention of the European social model's basic institutions, but increasingly as 'empty shells'. Certain welfare programmes and trade union rights in other words may in name endure, but poverty and precarity will in reality overcome the model's traditional working class beneficiaries. The prospect of such pauperization including the likes of Willem-Alexander (who incidentally last week took a pay cut that leaves him with a mere €817,000 per year), is another matter altogether.

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