Essay
The long cycle that began with the creation of the internal market, whose first phase brought opportunities for the social dimension but which ultimately led to global integration, resulting in a long period of anti-social policies, has come to an end. We are now entering into a new period, in which the rules of the internal market are changing in response to the need for environmental sustainability and strategic autonomy. The question now is what place the social dimension will occupy in this new architecture.
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The Single Market has been at the heart of European integration since its inception. Its revival in the mid-1980s, with the adoption of the Single European Act and the White Paper on the completion of the internal market, represented a major milestone. This, however, was more than 30 years ago. It is now time to look to the future and ask ourselves what a more social and environmental internal market could look like in the context of open strategic autonomy (OSA). Before looking into the future, let's quickly take stock of the current internal market.
The revival of the internal market in 1985 can generally be understood as a product of the desire to create a European form of capitalism. This project was supported at the time by some 40 major industrial leaders, who formed the Round Table of Industrialists, an episode well chronicled in the analyses of Professor Bastiaan Van Appeldoorn (2003). It was also the project pursued by the President of the European Commission, Jacques Delors. This period saw a form of compromise between the political forces of the left and the right on the internal market, as well as the emergence, to a certain extent, of a social dimension; this was illustrated, for example, by the establishment of the European social dialogue, as well as by the Community Charter of the Fundamental Social Rights of Workers and the accompanying social programme (1989).
However, as globalisation progressed, the project of European integration gradually evolved to become a mere link in this greater process, which ultimately subsumed European autonomy. This is also well-illustrated by Van Appeldoorn’s work, which shows how, in the mid-1990s, the Round Table of Industrialists became dominated by Anglo-Saxon multinationals whose goal was to focus production in the world’s three major economic regions: Asia, Europe and North America. It was at this time that China became the factory of the world.
Against this backdrop, social compromise was replaced by the deregulation of social protections at a national level, the Bolkestein Directive (2005) and the Laval et al. rulings of the Court of Justice (2008) being the most notable examples. These decisions were compounded by a pressure to deregulate that resulted from the economic crisis, as well as the first (2004-2009) and, in particular, second (2009-2014) Barroso Commissions. It was in this context that Mario Monti (2010) wrote a concise and strategic report that, while positive about the successes of the internal market, was also critical about its shortcomings (in part social and environmental).
By the mid-2010s, the situation had once again begun to change. China was becoming a technological and political power (a systemic competitor) and the idea of a rising tide of globalisation lifting all boats was fading. At the same time, populist movements critical of European integration and the internal market were on the rise. The most significant example was the radical change that took place in the United Kingdom, when conservative elites advocated with success for a withdrawal from the Single Market.
Beginning in 2020, the Covid crisis opened up a new debate, with the initially disorganised European response calling into question the commitment to freedom of movement and highlighting the fragility of the supply chain, now deemed “strategic” (see, for example, European Parliament, 2021). Autonomy and strategic sovereignty became the new mantra, with France, and later Germany, leading the way. Considering both the Covid and environmental crises, many have questioned excessively long value chains and called for better integrated and more local production. Recycling and product quality (through high environmental standards) have become essential during this transition. The Russian invasion of Ukraine and the ensuing energy crisis have highlighted the new global geopolitics and, as with Covid, called into question pillars of the internal market, such as state aid or competition rules.
On the other hand, this new environmental (and social) taxonomy and reporting, along with the analyses of the environmental stability of banks and of companies in general by the European Central Bank, indicate a change in the outlook of financial markets and companies. It is now considered that supply chains should be made shorter in order to reduce C02 emissions and that there is a need for reshoring part of the strategic production of goods. As major investments are being made in this transition, we are seeing changes in state aid, competition rules and the Stability and Growth Pact. The "Alibaba" model – perhaps the best symbol of the way the internal market developed after 1992, i.e. providing the consumer with ever cheaper products from further and further away without any real regard for social concerns – has become outdated.
What can we conclude from this? Firstly, the long cycle that began with the creation of the internal market, whose first phase brought opportunities for the social dimension but which ultimately led to global integration, resulting in a long period of anti-social policies, has come to an end. We are now entering into a new period, in which the rules of the internal market are changing in response to the need for environmental sustainability and strategic autonomy. The question now is what place the social dimension will occupy in this new architecture.
This is the subject of a study we carried out for the Belgian Ministry of the Economy as part of Belgium's preparations for its presidency of the Council of the EU in the first half of 2024 (Akgüç et al., 2022). The study proposes three scenarios for each dimension (social–internal market, environment–internal market and open strategic autonomy–internal market). On this basis, five global and coherent scenarios have been outlined, each including the three dimensions but with differences, for example in the intensity of the social dimension.
There is not enough room here to elaborate on these scenarios or to present the proposed associated changes to legislation or policy direction. What is important to stress is that there are choices to make regarding the future of the internal market, which will depend on the preferences of national and European actors.
For the purposes of this article, I would like to instead propose a more global view. The environmental challenges and the fulfilment of the Paris commitments will put the issue of value chains and the reduction of their length and complexity at the centre of the agenda. This discussion on corporate value chains is also at the centre of the OSA debate. The war in Ukraine has shown that simple but essential products, such as cables used in car manufacturing, whose production had been relocated to the country, can bring entire production segments to a halt.
This reconfiguration of production models, combined with the development of the circular economy, calls for us to refocus away from price (after all, an Indian or Vietnamese subcontractor will always be cheaper than a German or Scandinavian subcontractor) and towards product quality. A perfect example is that of batteries. The objective is to have high standards that allow a good recycling rate (and therefore additional jobs) relative to the manufacturing rate. In other words, a product defined by its quality and not just its price. High standards, it should be noted, was one of the explicit objectives of the 1992 internal market. Meanwhile, product quality is consistent with environmental issues, and a "circular economy" replaces the central concept of price.
But this quality must be accompanied by social quality and employment. This is the objective of creating and developing quality jobs that make sense, which are the opposite of David Graeber’s (2018) “bullshit jobs”. This is what happens in Germany, for example, in the Mittelstand, which consists of small- and medium-sized enterprises producing quality goods with good working conditions and worker participation. This is just one example, but it represents the objective: quality of work combined with quality of products.
Finally, this new perspective can only take shape if we go beyond an approach to wealth as it is currently measured, using indicators such as GDP. In this respect, there are many debates on alternative indicators. But here too the objective is clear: to move from a monetary evaluation to a measurement of the quality of life. This is a decisive step in the redefinition of well-being in a low-carbon society.
As stated in the introduction, a paradigm shift, such as those that the internal market project underwent in the 1980s and 1990s, opens up space for the negotiation of agreements between opposing interests. We are clearly in this situation again today. In this context, Europe must redefine its project and therefore its very core, which until now has been the internal market. A new social pact could be envisaged, involving employers interested in quality products, workers and trade unions concerned with the quality of work, and all NGOs and citizens advocating a better quality of life.
Of course, this is an extremely ambitious vision, which obviously raises many difficult questions. What kind of industrial and competition policy would this necessitate? Isn't there a risk that the larger Member States and their companies would be the big winners? It thus requires us to engage in debates that are both open and complex. At its heart, though, such a vision paves the way for a profound reflection on the fundamental objectives of European integration and Europe's place in the world – and opens up the possibility for real change.
The contribution is a revised and extended version from ‘A single market for the future’ (Pochet, 2022).
References
European Parliament (2021) Post Covid-19 value chains: options for reshoring production back to Europe in a globalised economy, study requested by INTA committee.
Graeber D. (2018) Bullshit Jobs: A Theory, Simon & Schuster
Akgüç M., Countouris, N. Hancké, B. and Pochet P. (2022) Rethinking the European single market: Moving towards new frontiers for a highly competitive, socio-ecological sustainable and resilient Europe, report for the Belgian ministry (SPF) of economy.
Monti M. (2010) A new strategy for the Single Market: at the service of Europe’s economy and society, Report to the President of the European Commission José Manuel Barroso
Pochet P. (2022) A single market for the future, Blog on ‘Social Europe’, available at: https://socialeurope.eu/a-single-market-for-the-future
Van Apeldoorn B. (2003) Transnational capitalism and the struggle over European integration, Routledge
