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7 September 2015

Stewart Wood: ‘the Fiscal Compact was a historic mistake’

During an ETUI lunch debate on 3 September on the ‘New Politics of Inequality in Europe’, Lord Stewart Wood talked about the increase in austerity measures and the link with the escalation of inequality in Europe. In his view the Fiscal Compact was a historic mistake which allowed the Eurozone and the European Union to become a ‘transfer state’, based on mere redistribution while excluding all other options for macroeconomic solutions.

The event, organised by the ETUI and the European Social Observatory (OSE), took the form of a conversation between Lord Stewart Wood, Dr Lorenza Antonucci, Maria Jepsen, Director of the ETUI Research Department, and the audience.

Lord Stewart Wood talked about the change in perspective from the earlier days of the UK New Labour policies up to the present. He called for a new approach of tackling inequality through what he referred to as ‘supply-side intervention’. In his view, the New Labour approach was mainly a deal with business services whereby the financial sector was lightly regulated in return for letting the government redistribute among society the wealth that was produced. This approach, he argued, continued to generate inequality and is inapplicable today: ‘we need to correct the market and its inefficiencies and inequalities ahead of time instead of intervening after the event to redistribute wealth among society.’

The debate continued on the concept of responsible capitalism and the need to rebalance the relationship between state and market. ‘Inequalities originate from policies which, while not addressing social policies per se, yet touch upon the social sphere (i.e. market-conditioning policies)’, said Dr Antonucci. As her research on the role of the European Semester in re-orienting welfare state policies to tackle inequalities had shown, the ‘indirect effect of economic policies on social aspects represents the political source of inequality in our societies’. The separation at EU level is even physical: DG ECOFIN deals with economic policies, while DG Social Affairs handles social policies. Dr Antonucci is herself convinced of the need to open up a debate on the reasons for the split between the social and the economic aspects in the European Semester framework.

In this context, there seems to be a paradox concerning the role that trade unions need to play. Unlike business interest representations, which seem to be more comfortable in acting at the transnational level, trade unions are trapped between sectors at national level, while also encountering difficulties when it comes to bargaining in an international environment.

‘The big problem’, stated Maria Jepsen in conclusion, ‘is that in the Fiscal Compact and European Semester inequality is simply not an issue. There needs to be a way to build up mechanisms, institutions and policies that would enable our economy to tackle inequality from the outset, rather than at the end of the day.’

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