The emergence of neo-liberalism in 1980s, has directly related to disfavoring of the social welfare state. Before neo-liberalism, social welfare state emerged as a result of 1929 economic crisis which was introduced by Keynes. He defended state intervention to the economy by destroying orthodox approach. According to Keynes, 1929 crisis proved that the economy is not the mechanism which works with invisible hand.
The visible hand has been the state which not only intervened the economy, but also provided increase in social public expenditure and fall in the size of unemployment and taxes. However, starting from 1970s, economic problems in the countries where the social state model has been applied started to appear. The main reason for the need of economic shift was that public spending was higher than the rate of increase in national production. Therefore, states faced with the reality of budget deficit, unemployment, rising stagflation and decrease in productivity.
Neoliberalism as a political economic system, defended withdrawal capital from state sovereignty, leaving labor to market conditions and transfer of economic activities to the free market mechanism. Hereby, the crucial characteristics of this model were to eliminate all national and international regulations that narrow the area of financial movements, abandon the social policies implemented for the sake of public interest, create a self-functioning market mechanism by ensuring the liberalization of capital and globalize itself gradually by spreading all over the world.
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However, from the beginning of 1990s, the understanding come forward that economic integration will not give the desired result without social policy and without the participation of employees. That’s why, in particular, after expansion of globalization, the notion of European Social Model started to be strengthened. The tradition of the European Social Model can be regarded as a compromise between labor and capital, liberal democracy and social democracy.
After the victory of neo-liberalism as an economic model not only in economic structure, but also in integration process, EU aimed to direct welfare countries towards liberal market model with the aim of lower social expenditure, labor market flexibility and enhancing competitiveness. Individualistic conception became more important declaring that individual choice can drive the economy.
However, after expansion of globalization, the questions emerged that neo-liberalism serves to whom or if the change started in Western Europe’s welfare states, then were they converging towards hybrid European Social Model? Another question was that whether EU will experience divergence in development of social models. All these questions emerged in the second half of 2000s and made the basis of another debate of single ESM in the shadow of increasing effects of globalization. According to Vaughan Whitehead, the crucial characteristics of ESM include full employment, social discrimination, declining inequality in labor markets, workers’ rights improvement, social inclusion and fair wages. Other participants of the debate- Habermas and Derrida argue that ESM has a viable response and is the counter hegemonic project against the drawbacks of globalization.
So, losers, unemployment, decline in social expenditure and security and other social effects of neo-liberalism caused the emergence of social debate – ESM. I will analyze main neo-liberal policies from the aspect of declining social values. In other words, how neo-liberal policies through the integration process caused a decline of social model and emergence of ESM debate?
Firstly, I’ll analyze emergence of neo-liberalism in 1970s and have a look at the main three debates for controlling the economic and integration process. I’ll particularly give attention to the debate over social democracy. Then I’ll follow how the victory of neo-liberalism started to erode social state through the integration stages.
In the second part, I’ll briefly analyze the important neo-liberal policies which accelerated the erosion process of social model. I’ll follow social consequences of neo-liberal policies by analyzing Commission’s Neo-liberal Governance Toolkit after 2008 euro-crisis.
In the third part, I’ll continue to analyze the social consequences of globalization. As an unavoidable tendency of neo-liberalism, globalization faces the challenge by the people that it has been a conspiracy of capitalist elites. Geoffrey Garrett argues in his article that globalization’s main consequences include increase in economic insecurity and social inequality through the international governance of IMF and WTO. Therefore, my aim in this part is to analyze the contribution of globalization to social problems which ignited the ESM debate.
