Thursday 28. May 2020
#148 - April 2012


The social market economy under new threat


In January, the bishops of COMECE commented approvingly on the ‘social market economy’ that the bishops believe to be at the heart of the EU project. The market itself, operating by criteria of ‘performance and reward’ fails to take account of other human needs. Therefore social protection instruments are essential so that ‘a dignified standard of living can be guaranteed to all citizens’. Part of the purpose of government is to ensure these and the obligation bears on the EU itself, not only on Member States.


The concept of the social market economy has quickly come under renewed challenge, and from a formidable source: Mario Draghi, President of the ECB, the European Central Bank. However what Mr Draghi said is at odds with how some have interpreted him. He was understood to argue, in a dramatic and threatening way, that defending the Euro ‘will necessarily involve giving up a social model based on job security and generous safety nets’.


But Mr Draghi was expressing a danger not recommending a policy. He was asked by the Wall Street Journal ‘Do you think Europe will become less of the social model that has defined it?’. He replied, ‘The European social model has already gone when we see the youth unemployment rates prevailing in some countries. These reforms are necessary to increase employment, especially youth employment, and therefore expenditure and consumption’. These words actually defend at least some aspects of the social model: if youth unemployment figures of between 40% and 50% are ‘prevalent’, to prioritise youth employment is an urgent and socially responsible objective.


In any case, Mr Draghi is a central banker. In the present crisis, his expertise and that of his colleagues is vital. Yet bankers are neither our political leaders nor our ethical and philosophical guides. It is not for the ECB to arbitrate, for example, what kind of jobs for young adults would count as decent work, and what jobs would merely exploit their desperation; or what ought to be the priority of social protection among other political goals.


Economic choices always require political arbitration. Do we favour growth so that just distribution is indefinitely postponed - as in the famous ‘trickle-down’ model? Or do we insist on high standards of social protection so that overall growth is slowed but decent conditions of life are promoted? How can the EU support the Greek government in negotiating such tensions under extreme pressure?


What counts for markets is money (growing wealth, growing profit and - not least - growing rewards for those inside the system). The poor, without purchasing power, are rendered insignificant. The idea of the ‘social market economy’ precisely relativises and controls the impact of the market principle. In the Christian social tradition, in particular, there is no ‘common good’ without justice for the poor.


In 1991, long before the present crisis, the encyclical Centesimus Annus argued that a free economy (as opposed to a free-market economy) presumes ‘a certain equality between the parties, such that one party would not be so powerful as practically to reduce the other to subservience’. Human freedom therefore entails limitations on market freedom, in order to promote broader social and environmental goals.


Frank Turner SJ


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Note: The views expressed in europeinfos are those of the authors and do not necessarily represent the position of the Jesuit European Office and COMECE.