Macron’s “Social Shield”: Pumped-Up Version of Social Dumping Myth

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French President Emanuel Macron addressed the citizens of the EU is a special letter, entitled “For European renewal”, published simultaneously in select media in all member states. This move by Macron is not surprising.

On the one hand, since the beginning of his term, the French president has attempted to seize the visionary role in the EU.

The upcoming European elections are focused on the nationalists, who “exploit the people’s anger”, and the “Brexit impasse” – this “symbol of the crisis in Europe”, and provide fertile ground for the introduction of all sorts of visionary ideals.

It is also worth to remember that the “yellow vests” in France forced Macron to seek such a dialogue within his own country – read, for instance, his letter to the people of France dated January 13, 2019, which has a dialogical tone, but offers very few concrete measures.

Macron’s Offer

What does Macron offer Europe? Setting aside some of his ideas in the fields of defence and democracy, it is important to focus on the economic vision of the French president. His leading point is the opposition of the words “convergence” and “competition”.

Macron states directly that Europe needs “to drive forward a project of convergence rather than competition”.

What does this mean, though? Why are precisely those two concepts in conflict, and why should we chose one or the other? The answer is, of course, in the context. This argument is, in practice, the pushing to a yet greater stage of the concept of social dumping, which Eastern European truckers are already painfully aware of.

The fight against social dumping was presented by Macron as a fight for fairer wages and working conditions for workers from new member states, but in reality aims to hamper competition from poorer countries – in this particular case, via posting workers or by the provision of transportation services. This is competition, and it favors poorer countries and gets in the way of richer ones.

This is why Western Europe was so insistent on the adoption of Macron’s proposals, and Eastern Europe protested in Brussels. The fight against social dumping does not bring about convergence, regardless of the name that is slapped on in.

Now, social dumping is absent from Macron’s letter, but the so-called “social shield” has appeared in its stead. We abandon competition and “achieve” convergence via a social shield, which provides equal pay for equal work and a European minimum wage.

Sounds great, but what is really offered, and will wages really equalize? Will French taxpayers pay for higher wages in Easter Europe?

No, neither will wages equalize, nor will someone in Europe start paying our wages.

Macron’s proposal really is that there be different minimum wages, corresponding to the respective country’s economic development, but contracted and coordinated by all in Europe.

That last bit constitutes Macron’s fight against competition. The social shield will not defend the Bulgarian worker, nor will it protects the French worker from the Bulgarian’s competition.

France’s age-old position is that Germany is undermining them by slowing the growth of wages and thus earns a competitive edge over France in manufacturing. If German manufacturing wages are a type of social dumping against France, imagine the extent of the dumping done by Bulgaria.

Such coordination as offered will mean only that wages in Bulgaria will be under constant pressure to grow beyond labor productivity (making the country less and less competitive), at the price of higher unemployment. The social shield in wages will not apply to those without a job.

It is no accident that the social shield is offered by countries with high unemployment for countries with low unemployment.

France has one of the highest unemployment rates in the EU – 8.8% as of January 2019, compared to 4.8% in Bulgaria, and only 3.2% in Germany.

The attempt to change the European model in favor of French interest by hampering competition from other countries is visible not only in the concept of the social shield, but also in Macron’s offer for a European conference, which has to put on debate all topics, including tabooed ones such as the revision of the treaties of the EU. Such a conference may be necessary, but the allusion to tabooed topics likely means in reality an attempt to reduce tax competition in Europe – another important French proposal that has been on the table in the past years.

In other words, Bulgaria’s two main competitive advantages – the low direct taxes and lower labor costs, are under attack in the French president’s letter.

These two topics – work compensation and taxes, will likely prove a hard nut to crack for Macron. The pushback on both, not only by Bulgaria but by the rest of the new member states, is too strong. The recent proposal to abolish unanimity in voting on taxation matters in the EU was quickly defeated.

Green Turn?

There are, however, topics where Macron may be successful. This is especially true when it comes to regulation and it is very likely that the proposed tax on large technological companies and the newest climate measures will be successful.

The ideas for a “new green course” for the world economy are quite popular on both sides of the Atlantic (see, for instance, last year’s article from Varoufakis), and it is very likely that European politicians will also adopt them.

Any green turn will, however, mean more expenditures – be it for households that will pay more for green energy,or for the industry that will have to buy more quotas, etc.

Any new green turn should in practice be regarded as new green spending.

When your country is part of the same union with the richest European countries and, thus, is forced to share equally the most ambitious green goals, such a green turn will bring about social tension as a result of extra pressure on particular sectors and consumers.

This is proven by the last 10 years in Bulgaria, and the next decade will likely bring more of the same.