The Challenge of a Generation

Growing poverty and inequality in Europe prove that the market alone cannot deliver. It’s time to change the narrative, says JUDITH KIRTON-DARLING, Confederal Secretary of the European Trade Union Confederation (ETUC). Here, she sets out the terms of a new European social contract.

Austerity and poverty in Europe are blighting our continent. Both are having dramatic impacts on solidarity, our democracies and our capacity to create the conditions for peace and prosperity in Europe.

Bringing together unions from 36 different European countries, and 12 sectoral federations, the European TUC represents different cultures, different labour markets, different sectors.

We are all united in our demand for greater social justice, good and safe jobs, fair pay and pensions, quality public services and investment in education and training – 60 million workers calling for an alternative to austerity. On 14 November we called a European day of action to coordinate national actions and raise the volume on our collective concern.

There are 115 million people living at risk of poverty in the European Union, one fifth of society, more than two million more have joined this group since 2009/10. More than 25 million people are unemployed in Europe today.

Workers are paying for a crisis not of their making, often before they’ve even made it to their first job. One in five young workers in Europe is unemployed; over half of Spanish and Greek young workers. We hear these figures bandied around but these are individuals whose lives will be scarred by this experience unless action is taken urgently.

We are facing a catastrophe amongst our young and the threat of a lost generation not just to unemployment, but to underemployment and precarious work. This is the growth of the ‘Precariat’, as Guy Standing has put it. Paradoxically we are also facing major skills gaps in key industries and trades.

It’s altogether a damning indictment of poor economic management and proof that the market alone will not and cannot deliver. It’s time to change the narrative.

Inequality and poverty cannot be separated – one feeds the other. When talking about poverty and social exclusion in Europe, we have to look at what has been happening at the other end of the spectrum, at the rich and wealthy who have been the real winners of globalisation; at the balance between capital and labour, where the former has strengthened at the expense of the latter; and at how our tax systems are working.

We are now in the fifth year of this financial crisis and according to the IMF, it has cost over US$10 trillion globally in government transfers to the financial sector.

But behind the banking crisis hides a much deeper structural crisis of inequalities – in income, wealth, health and education. Wealth is increasingly concentrating in fewer and fewer hands. The richest half per cent of global adults now own over a third of the world’s wealth.

Income inequality is rising across the EU. Part of Germany’s economic miracle has been the creation of mass working poverty – the unions there are pushing for a national minimum wage to pull up wages that are as low as £1.50 an hour in some sectors. In Sweden, considered one of the most cohesive EU countries, the average of the top 50 incomes is 46 times that of the average industrial worker – that’s a full working life.

The collapse of the communist regimes in eastern Europe opened up substantial new markets to capital. Even more spectacular is the opening of China to capital, followed by other Asian economies. In a few years 1.5 billion workers were added to the workforce of the global economy with opportunities for the free movement of capital, goods and services greatly enhanced. One result has been extra pressures on industrial workers and, now, their service counterparts in the west.

Over the last 20 years the wage share of GDP has consistently fallen – in correlation with trade union membership, incidentally. The share of profit has rapidly increased and the shareholder value model, in which job losses increase share prices, has taken hold.

But it’s also about tax and the weakening tax base in many countries. It is easier than ever for multinational companies to transfer income and losses around the different tax jurisdictions, choosing the lightest regimes available. It is easy too for businesses to be located offshore in tax havens. The Tax Justice Network estimates that US$250 billion of tax are ‘evaded’ each year.

This inequality has created a vast pool of footloose global capital looking for the quickest returns – a factor behind the explosive growth of financial markets, securitisation, and speculative trading over recent decades. In 2011 over 90 per cent of financial transactions were purely speculative – increasing energy and food prices.

Today, speculators are playing chicken with governments, pushing us all to the brink of a much larger economic crisis.

As we know, rather than thanking their saviours, financial markets have turned into vultures circling over one indebted country after another. They have played a PR master stroke in directing attention to public debt (most of which is due to bank bailouts) and now call for ever stricter austerity, a windfall profit for the wealthy and a return to 19th century labour markets for the majority.

After years of real wages stagnating or falling for the majority, wages and pensions are under attack across the continent, allegedly to ‘drive growth’.

In countries under the Troika (the EU, European Central Bank and the IMF), the situation is particularly desperate. In Greece, the Troika demanded a 22 per cent cut in the national minimum wage and 25 per cent cut in the basic pension. Their policies are pushing for the creation of free export zones of exploited workers within the EU – putting pressure on everyone’s conditions.

Race to the bottom

Beyond the devastating effects in Greece, this has led to Romanian and Bulgarian wages being slashed to maintain competitiveness in a spiraling race to the bottom. Forty per cent of the population are already living at risk of poverty compared to 15 per cent in Scandinavia or the Netherlands.

Recovery cannot come through cutting wages – austerity has killed growth three times now – since 2010, in 1997 (during the Japan/Asian crisis), and in the 1930s.

Forcing people to attempt to live on average pay of £50 a week is pushing some of our poorest regions into extreme poverty.  This is what austerity means in south east Europe. Depressingly, this is not far off a carer’s allowance in the UK.

Hunger and energy poverty are rising rapidly in our continent. Food parcels are being handed out, people’s physical and mental health is suffering. There has been a dramatic rise in suicides, notably in Greece and Italy.

The recipe of the IMF structural adjustment programmes  – cutting the three Ps of pay, pensions and public sector – is self-defeating and counter-productive.

It’s not me saying this. In Japan this October, at its annual meeting with national finance ministers, including Osborne, Christine Lagarde, the IMF director, admitted that they’d got their sums wrong and that coordinated fiscal consolidation is stripping more out of the economy than it’s putting in. She also admitted that any stimulus measures were more effective than the IMF had been admitting.

What did our finance ministers do on returning from Japan? Did they admit that they’d got it wrong, or try alternative approach, or explain this honestly to the electorate?

No. They allow the economy to spiral down further. Currently the eye of the storm is centred on Spain but the conditions they are creating are a feeding bed for the far right, as we have seen in Greece with the rise of Golden Dawn, but it’s also happening in Spain.

Until the underlying macro-economic policies are changed to promote employment and greater equality, and the value of public investment is recognised, the constraints of austerity will remain, and our young will continue to be sacrificed.

This is a political decision. Our leaders have signed up to a collective suicide pact.

It is no accident. There are strong neoliberal forces pushing harder and further to use the crisis as a means of rolling back the very foundations of social Europe and cohesion: workers’ rights, the welfare state and public services.

The state is the test of civilisation, of how we look after those in need. The state was invented to protect the weak against the strong and to bring people towards security and equality, and it is being wantonly mutilated. Hard-fought rights are being trampled over – especially women’s rights and the rights of the disabled.

This crisis is being used to rewrite industrial relations and deregulate our labour markets still further.

In the last year the International Labour Organisation has sent urgent missions to several European countries out of concern that recent labour law changes have violated the most basic of rights to organise freely and bargain collectively.

On 24 February, ECB President Mario Draghi announced in the Wall Street Journal that the European social model is dead. The British government has been central in efforts to kill it, affecting not just British workers but all.

An alternative

As leader of the Conservatives in the European Parliament, MEP Martin Callanan has asked European leaders to strip back employment protection legislation and lead a deregulatory charge, even though it is clear that deregulation that got us into this mess in the first place. In May this year, he claimed that basic protections such as rights for temporary agency workers or maximum working hours were “totally irresponsible in the current climate”.

We are facing the challenge of a generation – to fight for and defend our basic rights and services, rights which many before us fought for and died to protect.

The last crisis of this scale, in the 1930s, led (after the horrors of the Second World War) to the creation of the welfare state based on principles of universalism which guaranteed a standard of living for the working class and ‘cash back’ for the middle class in return for security for all – because quality of life for all of us, depends upon the quality of life of us all.

Now, as then, this fight demands strong solidarity in action, locally, nationally and internationally.

It’s time to change the narrative. There is an alternative.

We want to see a new European social compact based on:

1. A more sensible timetable for deficit reduction in Europe: public debt cannot be directly compared to private household debt. We only finished paying back WWII debt in 2006 in the UK.
2. Fair taxation: cuts are disproportionately hitting the poorest and most vulnerable, we need a fairer balance between spending reductions and tax rises, including –
   • a Robin Hood Tax on financial transactions
   • efforts to tackle the tax havens and avoidance scams. In the UK £25 billion a year is in lost tax (eg. Vodaphone £6bn, Tesco £120m, Top Shop £300m, Goldmann Sachs £10m)
   • harmonisation of corporate tax rates to avoid shopping for lowest rates
   • a wealth levy to fund a Future Investment Fund or a solidarity tax on the highest earners.
3. A proper strategy for job creation, which could be usefully linked to the transition needed to tackle climate change. This should include:
   energy efficiency programmes and infrastructure investment, while it’s also key to address energy poverty in the long term
   quality public services, a driver of growth
   an industrial and innovation policy
   better use of public procurement (16 per cent of EU GDP) with social and environmental criteria
   re-regulation of financial markets and measures to tackle risk allocation to ensure long-term sustainable investment is prioritised (internalising external social and environmental costs).
4. A European Youth Guarantee:
   • proper training and apprenticeship programmes
   • intelligent, well-funded welfare-to-work schemes – open to people of any age
   • fair labour market rules promoting quality job creation.
5. Urgent solutions for the Eurozone, including:
   • a single Eurobond guaranteed by ECB/EFSF to halt bullying in the bond markets
   • stronger international cooperation and democratic control
   • a reversal of measures imposed in Greece which the Council of Europe decreed have violated fundamental workers’ rights.
6. Perhaps most importantly, we need a more even distribution of wealth:
   • action to address the destabilising inequalities of wealth
   • a living wage, worker representatives on company boards, new models of corporate governance, greater shareholder activism, new systems of ownership, or a bigger role for unions and collective bargaining.

The EU acting together represents 30 per cent of global GDP. It is strong enough to tackle the speculators and feral rich.

The future of European integration – indeed the future of the European Union itself as we currently know it – depends on re-engaging public support around a strong progressive vision of equality, investment and employment. Co-operation is the only way we can tackle poverty and end austerity in Europe. It depends on resocialising Europe.

The alternative is to repeat our history. And as Golden Dawn march through Athens with torches, this is not something I’m willing to sit back and watch.

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An earlier version of this article was given as a talk to the TUC event on poverty and austerity in Middlesbrough on 9 November 2012.

Judith Kirton-Darling is Confederal Secretary of the European Trade Union Confederation (ETUC). She seeking a Labour Party nomination to replace Sterphen Hughes as candidate for the European elections in the north east.

For more about the new Social Compact for Europe click here.