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Report | Doc. 12026 | 30 September 2009
The social impact of the economic crisis
(Former) Social, Health and Family Affairs Committee
Summary
The current economic and financial crisis calls into question a number of assumptions which have underpinned the member states' economic policies over the last decades, such as deregulation, the primacy of economic criteria in all areas of life and overemphasis on profit and growth. The current crisis is to a large extent a crisis of trust towards the financial and political institutions and towards the global system, which provoked it.
The crisis is understood as a call for change, to translate the Council of Europe’s values more strongly into economic as well as social policies. Thus, the report contains an array of policy recommendations to ensure linkages between social progress and economic development.
The report also shows that member states with an elaborate social and health protection system are also economically significantly better placed in meeting the challenges of the current crisis. Countries that have strong and efficiently-run social and health protection systems have valuable inbuilt mechanisms to stabilise their economies and address the social impact of the crisis. For other countries, the priority is to meet urgent needs, while building the foundation for stronger and more effective systems.
Finally, the rapporteur underlines the importance of strengthening dialogue between the various international organisations, in particular with the International Labour Organisation (ILO) and the World Health Organisation (WHO). It encourages greater involvement of the social partners so as to enable the Council of Europe to raise its political profile and play a more prominent role in the area of social rights.
A. Draft resolution
(open)1. The current economic and financial crisis calls into
question a number of assumptions which have underpinned the member
states' economic policies over the last decades, such as deregulation,
the primacy of economic criteria in all areas of life and overemphasis
on profit and growth. The current crisis is to a large extent a
crisis of trust towards the financial and political institutions
and towards the global system, which provoked it.
2. In this context, the Parliamentary Assembly recalls its Resolution 1651 (2009) on the consequences of the global financial crisis and
its Resolution 1673 (2009) on the challenges of the financial crisis to the world economic
institutions.
3. The economic crisis has to be seen in connection with other
major challenges that we are facing: climate change, the crisis
of energy and of water supply, shortage of food, which have a significant
impact in many regions of the world. The challenges of demographic
change, the difficulties to have access to health care and the weakening
of social security systems in many countries also urge us towards
more sustainable policies. A coherent answer to this range of political
challenges is required.
4. The Assembly understands this crisis as a call for change.
Coming back to “business as usual” will not solve it. To meet the
challenges of the crisis it will be necessary to come to significant
changes in the economic and social policies of the member states
of the Council of Europe.
5. Change should mean to translate the Council of Europe’s values
more strongly into economic as well as social policies. It should
also mean to significantly reduce the current level of unemployment
in the Council of Europe member states. The Assembly is concerned
about the increasing segmentation of the labour market, with more
and more precarious employment situations and the growing marginalisation
of specific groups such as long term unemployed, less skilled people,
people with disabilities, or people from migration backgrounds.
6. The current situation fundamentally challenges the functioning
of the social systems. For the Assembly, work is not just a productive
factor but also a central element of human personality and of participation
in society. In the current crisis, learning systems must be accessible
and affordable for all members of a society, irrespective of the
contractual form of employment. Innovative arrangements providing
for transitions between jobs without a break in employment in some
member states provide promising experience to avoid the loss of work
and income.
7. Change should also ensure a dignified life for all people
in Europe, particularly through the sustainable provision of quality
social and health services which are essential for people to be
able to take up opportunities.
8. Experience and research have shown that member states with
an elaborate social and health protection system are also economically
in a significantly better position to meet the challenges of the
current crisis. Countries that have strong and efficiently-run social
and health protection systems have a valuable in‑built mechanism
to stabilise their economies and address the social impact of the
crisis. These countries may need to reinforce existing social protection
systems. For other countries, the priority is to meet urgent needs,
while laying the foundation for stronger and more effective systems.
9. Solidarity and adequate social security are the keys to overcoming
the current crisis. They are also essential to ensure to a fairer
– and thus sustainable – future global economic system.
10. In this context, the Assembly refers to and fully endorses
the Decent Work Agenda and
commitments made by the ILO and its constituents in their 2008 Declaration
on Social Justice for a Fair Globalisation as well as the Global Jobs Pact adopted at the
2009 June session of the International Labour Conference in Geneva. These
policies should be based on the following principles and ensure
linkages between social progress and economic development:
10.1. devoting priority attention
to protecting employment through sustainable businesses, quality public
services and providing adequate social protection for all as part
of ongoing national and international action to aid recovery and
development;
10.2. boosting effective demand and helping maintain wage levels,
including via macro-economic stimulus packages;
10.3. enhancing support to vulnerable women and men hit hard
by the crisis, including youth at risk as well as low-wage, low-skilled,
informal economy and migrant workers;
10.4. focusing on measures to maintain employment and facilitate
transitions from one job to another as well as to support access
to the labour market for the unemployed;
10.5. establishing or strengthening effective public employment
services and other labour market institutions;
10.6. increasing equal access and opportunities for skills development,
quality training and education;
10.7. avoiding protectionist solutions as well as the damaging
consequences of deflationary wage spirals and worsening working
conditions;
10.8. promoting core labour standards and other international
labour standards that support the economic and employment recovery
and reduce gender inequality;
10.9. engaging in social dialogue, such as tripartism and collective
bargaining between employers and workers as a constructive process
to maximise the impact of crisis responses to the needs of the real economy;
10.10. ensuring that short-term actions are coherent with economic,
social and environmental sustainability;
10.11. ensuring synergies between the state and the market and
effective and efficient regulation of market economies, including
a legal and regulatory environment which enables enterprise creation, sustainable
enterprises and promotes employment generation across sectors;
10.12. recognising the contribution of small and medium-sized
enterprises and micro-enterprises to job creation, and promoting
measures, including access to affordable credit, that would ensure
a favourable environment for their development;
10.13. increasing investment in infrastructure, research and
development, public services and “green” production and services
as important tools for creating jobs and stimulating sustained economic
activity.
11. The Assembly considers that sustainable social and health
protection systems to assist the vulnerable can prevent increased
poverty and address social hardship, while also helping to stabilise
the economy and maintain and promote employment. To this end, it
encourages the member states of the Council of Europe to give consideration,
as appropriate, to the following:
11.1. introducing
cash transfer schemes for the poor to meet their immediate needs
and to alleviate poverty;
11.2. building adequate social protection for all, drawing on
a basic social protection floor including: access to health care,
income security for the elderly and persons with disabilities, child
benefits and income security combined with public employment guarantee
schemes for the unemployed and working poor;
11.3. extending the duration and coverage of unemployment benefits,
which should go hand in hand with relevant measures to create adequate
work incentives recognising the current realities of national labour
markets;
11.4. ensuring that the long-term unemployed stay connected
to the labour market through, for example, skills development for
employability;
11.5. providing minimum benefit guarantees in countries where
pension or health funds may no longer be sufficiently funded to
ensure that workers are adequately protected, and considering how
to better protect workers’ savings in future scheme design;
11.6. providing adequate coverage for temporary and non-regular
workers.
12. The above agenda closely interacts with other dimensions of
globalisation and requires policy coherence and international coordination.
The Assembly considers that international cooperation is particularly
important on the following issues:
12.1. building a stronger, more globally consistent, supervisory
and regulatory framework for the financial sector, so that it serves
the real economy, promotes sustainable enterprises and decent work and
better protects savings and pensions;
12.2. promoting efficient and well-regulated trade and markets
that benefit all and avoiding national protectionism. Varying development
levels of countries must be taken into account in lifting barriers
to domestic and foreign markets;
12.3. shifting to a low-carbon, environment-friendly economy
that helps accelerate employment recovery, reduce social gaps and
support development goals in the process.
13. The Assembly notes that in almost all areas of reform, the
revised European Social Charter contains norms which are recognised
by most of the member states. Yet both the public and political
decision makers are both insufficiently aware of its content. The
rights it enshrines must be publicised more widely, and feed into
the process of creating a social Europe. The Assembly accordingly
calls on member states to ensure that the European Social Charter’s
relevant key elements are incorporated in national reforms, so as
that they can become a reference standard for European social policy.
14. Finally, the Assembly underlines the importance of strengthening
dialogue between the various international organisations, in particular
with the International Labour Organisation (ILO) and the World Health Organisation
(WHO). It encourages greater involvement of the social partners,
which would enable the Council of Europe to raise its political
profile and play a specific role in the area of social rights.
B. Explanatory memorandum by Mrs Maria de Belém Roseira, Rapporteur
(open)1. Introduction
1. The Report of the High Level Task Force on Social
Cohesion in the 21st century, established by the decision of the
Third Summit of Heads of States and Government, was adopted by the
Committee of Ministers on 17 December 2007. The report stressed
that the promotion of social cohesion should be “one of the major elements
of the work of the Council of Europe, for which it is a strategic
concept, intersecting closely with the achievement of the core objectives
of human rights, democracy and rule of law”.
2. On 18 April 2008, the Bureau of the Assembly approved the
motion for resolution presented by Ms Maria de Belém Roseira and
others, which stated that “in order to disseminate the recommendations
of the High-Level Task Force among parliamentarians as widely as
possible, these should be considered and discussed by the Parliamentary
Assembly” – and to this end it entrusted the Social Affairs Committee
to prepare a follow up report on this subject.
3. The Report of the Task Force focused on five major challenges,
notably (1) Globalisation; (2) Demographic Changes; (3) Migration
and Cultural Diversity; (4) Political Changes/Democratic Functioning; and
(5) Socio-economic and Health-related Changes. It identified four
priorities/recommendations for social cohesion:
3.1. Reinvesting in social rights
(social rights to be more strongly promoted and health and education to
be developed as rights);
3.2. Greater sharing of responsibilities between public authorities,
citizens and social partners;
3.3. Strengthening mechanisms of representation as well as
social and civic dialogue in order to improve participation in democratic
processes;
3.4. Building confidence in a common and secure future with
particular focus on a new social contract, which would also include
work/family reconciliation.
4. The rapporteur believes that the recommendations of the High
Level Task Force reflect the distinctive Council of Europe approach
to social cohesion which is to treat access to rights for all as
an essential reference for a cohesive society. However, she would
like to make a few comments with a view to adding a broader dimension
to the objective of social cohesion. These comments also draw on
the hearing held on this subject by the Social Affairs Committee
on 27 October 2008 in the Portuguese Parliament, and the rapporteur
is grateful to all participants who have contributed to the discussion.
5. At its meeting on 12 March 2009 in Paris, the Committee approved
the Bureau’s proposal for a modification of the title of the report
in order to include the subject on “the social impact and the human dimension
of the financial and economic crisis in the Council of Europe’s
member states” (Reference No. 3527 of the Bureau on 30 January 2009)
and the rapporteur has changed the structure of the report accordingly.
2. The European social model and demographic change
6. The rapporteur is convinced that the European social
model reflects a common set of values, based on the preservation
of peace, social justice, equality, solidarity, the promotion of
freedom and democracy and respect of human rights. In the last 60
years this set of common values has allowed a growing Europe to successfully
become an area of greater economic prosperity and social justice.
Therefore social policies, when appropriately designed cannot be
regarded as a cost but, instead, as a positive factor in economic
growth. Although European states have different social systems,
and have implemented these values in different ways, they commonly
aim to attain a balance between economic growth and social solidarity,
and this is reflected in the European social model as a unity of
values with a diversity of systems.
7. Although applied in various guises, these social systems share
a number of common characteristics: they all involve government
intervention to reduce poverty and social exclusion, redistribute
income more fairly, ensure high levels of health and social security
and promote equal opportunities – and relatively high taxes to finance
these policies. It is fair to say (and important to remember at
present) that the European social model has also been a method of
social engineering and that of managing social conflicts.
8. At the same time, it is obvious that today a new vision of
the purpose of social policy is needed. Society is indeed undergoing
profound upheaval. Ageing populations are increasing pressure on
the workforce. By 2050, Europe could have lost nearly 55 million
people of working age. Demographic decline is therefore not an abstract
and distant event. It is already transforming society, the economy
and relationships between individuals and generations. If nothing
is done, the labour force will shrink dramatically in many OECD
countries in coming years. Both firms and workers will have to adapt
to the changes caused by globalisation and technological advances,
especially as large, labour-rich countries, such as China and India,
become better integrated into the world economy
9. It is therefore becoming a matter of urgency to establish
a common approach to meeting the three major challenges of globalisation,
technological change and demographic change. The crux of the matter
is clear: the European social model must demonstrate its ability
to respond effectively to these challenges.
10. Declining birth rates and increasing longevity have produced
a significant increase in the share of elderly in the population
of most OECD countries over the past three decades. The trend is
likely to accelerate sharply in the next decade, as the baby boom
generation begins to reach retirement age. These demographic changes may
have significant fiscal and economic consequences and pose important
public policy challenges for the countries involved.
11. Without major policy changes (such as for instance a re-balancing
of social policies and expenditures between generations), the increase
in the number of retirees relative to persons active in the labour
force will reduce growth in material living standards and put public
budgets under mounting pressure.
12. In European countries, it is expected that, by 2050, for every
person in retirement there will be only one person in employment.
This will put pensions at risk and increase tax pressures on the
working population. While all countries are faced with similar challenges,
the solutions must naturally take account of national circumstances.
In this respect the rapporteur believes that controlled immigration
can help Europe overcome the shortages of manpower likely to arise
in certain regions or sectors. But it can be only one element in
a much more global solution.
13. A new approach to policy on reconciliationof work and family life is also
becoming essential. Parental leave, part-time work and flexible
organisation of working hours are all of limited value if mothers
are the only ones to benefit. Europe will have to “move into top
gear” by encouraging women and men to work and consolidating the
position of children in society. In addition, European countries
need to introduce more active social policies which would essentially
mean getting people off benefits and into work instead of keeping
people in a state of dependency. We must respond to the demographic
challenge by helping young people to enter into the labour market,
by giving a new dimension to the policy of equality between women
and men and by doing more to encourage the sharing of family and
domestic responsibilities.
3. The globalisation paradox
14. The rapporteur believes that the current debate about
the social impact of globalisation is characterised by a paradox.
On the one hand, most economists highlight the lessons from economic
history, namely that more open markets tend to be associated with
greater prosperity. Indeed, freer trade and foreign direct investment
help realise the welfare gains associated with exploiting comparative
advantage. On the other hand, however, there is concern in the public
opinion in many countries about the risks that globalisation may entail
in terms of jobs and wages.
15. The promise held out by globalisation is to increase standards
of living for all by virtue of greater specialisation and higher
productivity, cheaper goods and services, better access to credit
and capital, and quicker diffusion of technological innovation.
At the same time, there are widespread perceptions in many countries
that in its current form globalisation is not working. Increasingly,
there is a suspicion that its benefits accrue only to a small portion
of the population while others gain little, except greater anxiety
and a growing sense of precariousness.
16. The rapporteur believes that this paradox can be explained,
first of all, by the unprecedented scale of globalisation. The range
of countries which participate in globalisation is much broader
than was the case in earlier episodes of international economic
integration. In particular, Brazil, the Russian Federation, India
and China (the so-called “BRICs” in the terminology of the OECD)
are becoming major trade and investment partners. 
17. More fundamentally, a unique feature of the ongoing process
of globalisation is that it concerns many labour-intensive services
as well – and not just primarily industry as in the past. This is
because globalisation goes hand-in-hand with the rapid adoption
of information and communications technology. New technology and
declining transportation costs and different costs or non-existence
of social protection systems, facilitate the fragmentation of the
production of both goods and services, and off shoring of certain
tasks to other countries.
18. On the other hand, a major factor explaining the globalisation
paradox is that economic integration is occurring in the context
of wider earnings inequality and perceptions of job insecurity (for
greater detail see the next chapter on the current international
context). The policy challenge is therefore to ensure adequate incentives
to work, learn and invest, while also avoiding socially-harmful
and economically-inefficient income inequalities.
19. The rapporteur feels that it is crucial to address the concerns
about the sustainability of the current globalisation regime: public
support for furthering international economic integration (and the
structural reform agenda more broadly) could wane if the perception
that many workers do not benefit from it takes root. There is evidence
that social conflict grows when inequalities are perceived to be
rising excessively. Social support for pro-globalisation policies
will be eroded if low-income groups and the middle class believe
that such policies do little to improve their situation or that
of their children. It is therefore essential for policy makers to
ensure that income inequality does not rise excessively.
20. More generally, in the years after the Great Depression and
before the Second World War, the first wave of globalisation of
the international economy gave way not only to economic protectionism
but, more importantly, to fascist and authoritative regimes in some
countries. One of the reasons for the failure was the inability
of governments to solve the so-called “Polanyi problem”: how to
manage the social disruption associated with unfettered economic
competition and a global free-market economy. Under the current circumstances,
this “problem” might be of increasing relevance again.
Under the current circumstances,
this “problem” might be of increasing relevance again.21. In this respect, it is fundamental for policy makers to realise
that they can play a major role in making the most from globalisation
and reducing workforce adjustment difficulties. In other words,
the rapporteur believes that “globalisation begins at home” which
means that national policies and actions still matter. Establishing
a code of good economic and social governance in enterprises and
public policies is vital at the national level; it is a prerequisite
for successfully addressing the globalisation paradox.
22. The rapporteur also wishes to stress in this context the importance
of the “decent work agenda” of the International Labour Organisation
(ILO). This concept refers to more than mere dignity. It involved
four objectives: minimum standards of work, the minimum wage, social
security and social dialogue between workers’ representatives and
employers. The decent work agenda indeed encompasses the “core labour standards”
which set the minimum basis of social rights established by the
international community. As an international legal framework on
social standards it aims to ensure a level playing field in the
global economy. According to the recently-adopted ILO Declaration
on Social Justice for a Fair Globalisation, “the four strategic objectives
are inseparable, interrelated and mutually supportive … to optimize
their impact, efforts to promote them should be part of an ILO global
and integrated strategy for decent work” (ILO, 2008).
4. The current international context and its consequences
23. Since 2007, social cohesion has been hit by a number
of global developments, in particular financial turmoil, rising
food prices and a shortage of raw materials. This has brought an
end to the generally rapid growth and strong employment performance
exhibited by the world economy almost uninterruptedly since the mid-1990s.
24. Indeed, the financial crisis which developed over the past
year and erupted in August 2008 represents one of the more significant
threats to the world economy. The credit crunch and the collapse
of stock markets affected firms’ investment decisions as well as
workers’ incomes and jobs. Several major economies in Europe practically
entered into recession in 2008 and unemployment is on the rise.
Important as rescue packages are, it is crucial to address the structural
dimensions of the crisis as well. While the costs of the financial
rescue packages will be borne by all, the benefits of the earlier
expansionary period were unevenly shared.
25. Looking forward, a critical issue is the extent to which the
current financial crisis and slowdown in the world economy may affect
disproportionately low-income groups. This is all the more relevant
given that, as recent ILO studies have shown, during the high-growth
period, income inequality increased in the majority of countries,
which may in turn damage the social fabric.
26. The World of Work Report 2008 demonstrates
that as global employment rose by 30% between the early 1990s and
2007, the income gap between richer and poorer households widened
significantly at the same time. What’s more, compared with earlier
expansionary periods, workers obtained a smaller share of the fruits
of economic growth as the share of wages in national income declined
in the vast majority of countries.
27. Likewise, during the same period, the income gap between the
top and bottom ten per cent of wage earners increased in 70% of
the countries for which data are available. In combination with rising unemployment
and job losses, the fallout from the financial crisis may have long
lasting effects on vulnerable groups, and so existing income inequalities
could intensify.
In combination with rising unemployment
and job losses, the fallout from the financial crisis may have long
lasting effects on vulnerable groups, and so existing income inequalities
could intensify. 28. In this respect, some members of the social affairs committee
also voiced their concern in Lisbon that social cohesion would be
the first victim of the unfolding crisis. Increases in taxation
would not serve to improve services or welfare benefits but to pay
off debts and finance government deficits.
29. Other members underlined that economic and financial pains
indeed tend to lead countries to pull back from globalisation and
openness. It would be, however, wrong to forget that the international
economic system has ushered in unprecedented growth and prosperity.
It has helped countries to develop, alleviate poverty, improve social
conditions, lengthen life expectancy, and carry out social and political
reforms. As at the same time the great alternatives to economic
integration failed, the choice is not between capitalism and non-capitalism;
it is between “good capitalism” and “bad capitalism”, between inclusive
capitalism and non-inclusive capitalism, between entrepreneurial
capitalism and a capitalism based on speculation. Yet, the global
capitalist system cannot survive without the help and support from
governments around the world and we need to find a fair balance
between state and the market.
30. It would be wrong to put “capitalism in the dock”, but it
is necessary to return to the fundamentals such as the role of labour
and production in the economy and the role of the state in the fields
of employment, health and social cohesion. In other words, the state
is back, but it is also looking evermore bankrupt. Ratios of public sector
debt to gross domestic product (GDP) seem likely to double in many
advanced economies. The fiscal impact of this financial crisis can,
we have been reminded, be as costly as a large war. Thus, the legacy
of the crisis is a disaster that governments of slow-growing advanced
economies cannot afford to see repeated in a generation. The effort
to consolidate public finances will dominate politics for years,
perhaps decades.
31. It has also been argued repeatedly that, in order to be sustainable
and bring positive outcomes for all, globalisation needs a new regulatory
framework, which requires the introduction of an appropriate governance structure
at the international level. However, as there is no consensus on
how exactly to proceed, few positive steps have so far been taken
to this end by bodies such as the G20 and the European Council and,
in all likelihood, few will be taken in the foreseeable future.
32. At any rate, the massive injection of government funds has
partially “deglobalised” finance at great cost to emerging economies.
Moreover, government intervention in industry often has a strong
nationalist tinge. It is also obvious that few political leaders
are now prepared to go out on a limb for free trade. This all seems
the result of a defective international monetary order and it is
difficult to know at present how well market-led globalisation will
survive all such stresses. Your rapporteur is hopeful, but not confident.
33. As a consequence, the international governance regime will
probably remain under-institutionalised and the task of protecting
societies from the potentially undesirable consequences of globalisation
will still fall largely, if not exclusively, on national-level institutions,
however weakened these may be at the moment. Hence the need to focus
on some of these institutions, in particular on those that have
to do with workers’ rights, trade unions and collective bargaining.
34. Without swift and co-ordinated action across nations, there
is every chance of already rising resentment among the ever-swelling
ranks of the unemployed spilling over into popular unrest, threatening
the very existence of "open access" societies. Preserving the basic
principles of the free market system must be the paramount purpose
of policy around the globe, even though unfettered markets would
seem manifestly to have failed us. Without such freedoms, societies
become dominated by corrupt political and economic elites, excluding
the less fortunate and depriving economies of their creativity and
ability to innovate.
35. The risk of a severe backlash against free market policies,
with creeping trade, financial and labour market protectionism,
is now obvious. Lax regulation allowed financial markets to run
amok, and anti-capitalist sentiment is now rising fast across the
globe. Yet it is not the free market system as such that failed.
Rather it has lost its sense of social and ethical purpose, became
corrupted, and therefore also became unsafe and unfair. Therefore
we need a socially more responsible market economy.
36. As was underlined by members, income inequality in the advanced
economies is likely to worsen. Therefore, it is important to ramp
up social programs to provide assistance to the innocent victims
of the crisis and to repair the damage done to pensions, retirement
accounts, and the housing market. Governments should use policy
tools (fiscal, monetary, social) to ensure that low-income households
do not disproportionately bear the costs of the economic slowdown.
They should put in place appropriate social safety nets to help
lower income households through the recovery period. In addition
they should establish income limits (in compliance with the prevailing
attitudes and traditions in each and every country) in order to
avoid unacceptable income inequalities.
37. Moreover, the rapporteur favours an approach that combines
strong social systems with active measures to assist workers during
periods of transition, as is the case in Scandinavian countries.
Well-functioning labour markets and quality in working life are
the key to the kind of innovative Europe we want to emerge.
38. In this respect, the rapporteur also wishes to underline the
essential role of social partners. Many of the solutions linked
to improving flexibility and security in the workplace lie at business
or branch level and depend largely on good cooperation between the
two sides of industry. The discussions will not be easy, but the
full backing of the social partners is vital. A joint contribution
from them on the issue of flexicurity would be a very important
step forward in Europe's quest for more and better jobs.
5. The social impact of the economic crisis
39. Social security systems are responding to the economic
crisis by adopting measures that aim to alleviate the social impact
of the downturn. But the severe pressure on schemes caused by the
crisis may have policy implications in the medium- and long- term.
40. Budgetary pressures due to the enormous rescue packages cannot
be absorbed “inflation free” and they will inevitably lead to pressures
on government expenditure and hence social transfers. Thus, there
is a risk that social transfer recipients should pay the bill.
41. According to an international survey conducted by ISSA (the
International Social Security Association), a body that is linked
to the ILO, public pension schemes suffered important investment
losses in 2008. These losses, combined with increased expenditure
– primarily due to the rapid rise in unemployment – and a reduction
in contributions, are placing intense pressures on some schemes.
These losses, combined with increased expenditure
– primarily due to the rapid rise in unemployment – and a reduction
in contributions, are placing intense pressures on some schemes.42. Some of the impacts on social security schemes are obvious,
starting with demands on unemployment insurance and social assistance
schemes which will be suffering like all other social security schemes
from the double burden of declining tax or contribution income and
increasing expenditure due to increasing numbers of beneficiaries.
43. Yet, in crisis conditions, the provision of social assistance
and social security benefits paid to unemployed workers and other
vulnerable recipients act as social and economic stabilizers. Benefits
not only prevent people from falling further into poverty, but also
limit the contraction of aggregate demand, thereby curtailing the
potential depth of the recession. This should therefore be the time
to strengthen social security benefits, where systems exist, or
to introduce systems, where no such system exists yet.
44. It is critically important that increasing resources for social
security are included as part of the respective economic stimulus
packages. Such transfers alleviate the risk of poverty immediately
for those who lose their jobs or are not able to work while, at
the same time, stabilising the demand for goods and services produced by
those who still have jobs.
45. The rapporteur wishes to underline the particular role of
social security and health protection systems in restoring economic
and social stability during the crisis and beyond. Obviously, governments
should avoid cutting allocations to finance social security benefits;
on the contrary, there is a clear need to enhance social security
systems.
46. Governments have recognised the need, and are reacting using
a variety of measures and additional allocations to different social
security programmes are also part of the crisis response measures
in many other countries.
47. In the rapporteur’s view, three things are needed. The first
is a fundamental overhaul of existing social security and health
systems and the correction of mistakes made during the last two
decades in countries where social security systems are already fairly
developed. The second and perhaps more fundamental task is to introduce
sound social security systems in countries where only rudimentary
systems exist so far. The third and most challenging task would
be to combine these two measures into a coherent long-term development
paradigm for national social security and health systems.
48. The crisis bears the risk that we are only seeking short-term
quick fixes to poverty and insecurity while neglecting longer term
solutions that would help to correct the fundamental inequities
in the global economy and society.
49. Finally, social and health protection and security systems
are one of the most powerful expression of social cohesion as well
as the most effective mechanism to protect individuals and the whole
society against social risks. The impacts of the crisis on social
security schemes are numerous: for example increase of requests
on unemployment insurance and social and health assistance (as insecurity
is an important cause of mental disorders and health related problems).
These systems like other social security schemes will feel the impact
of the decline of tax or contribution income and the increased expenditure
due to the rising numbers of beneficiaries. The economic downturn
also threatens savings and investments devoted to pensions and other branches
of social security.
50. The rapporteur is convinced that social security can play
an important role in re-establishing economic and social stability
during the crisis and beyond. Therefore governments should avoid
cutting allocations to finance social and health security benefits;
on the contrary there is a need to enhance social and health security systems,
in accordance with the idea that “health is wealth”.
51. This very same was recognised by the ministers responsible
for social cohesion of the Council of Europe member states, during
the conference held in Moscow on 29 February 2009, in particular
with regard to the promotion of social rights, sharing responsibilities
and strengthening mechanisms of representation and social and civic
dialogue and building confidence in a secure future for all, committing
themselves, taking into account the transversal approach to social
cohesion, to develop an integrated social cohesion policy in conformity
with national conditions.
52. Given that the Council of Europe considers access to social
security as a human right, the Council of Europe’s legal instruments
in this field (the European Code of Social Security, Protocol and
Revised Code) provide substantive and quantifiable standards thus
ensuring a decent level of protection. These instruments should
continue their contribution to the integration of the social dimension
into the future financial and economic order.
6. Concluding remarks
53. The economic crisis we are currently experiencing
requires a new role for economic and social policies. We know from
past experiences that severe financial crises cause economic recessions
that are extremely costly in human, social and economic terms. There
is every reason to believe that the looming recession we now face
could be particularly severe unless we react quickly to block the
channels by which it spreads to hit the lives of the most vulnerable
people and enterprises.
54. The decisions taken in just about every country in the world
to inject funds and bring down interest rates have proved incapable
of firmly reviving the economy. The rapporteur thinks that finding
a way out of the crisis depends crucially on the public authorities’
ability to conduct long-term strategies and to equip globalised capitalism
with institutions and rules.
55. The time has come to emphasise the social role of the economy,
the economy in the service of individuals and their development,
and not the role of individuals in the service of the economy and
the increasing of wealth.
56. It would be therefore essential to reverse the recession,
not only by emergency measures to rescue banks and finance companies,
but also by:
56.1. maintaining and
enhancing social and health protection systems to support working
women and men and their families who are now suffering job and income
losses as a result of a crisis for which they had no responsibility;
56.2. ensuring that productive enterprises, and in particular
small businesses which employ a large share of the workforce in
all countries, are able to access affordable credit lines, avoid
layoffs and wage cuts and prepare for recovery.
57. We must rebuild the regulatory regime for global finance markets
to reduce chronic volatility and instability. The new regime for
market economies must be founded on the old ethic that good hard
work deserves a fair reward. Our financial systems must support,
not undermine, fairness in society and the importance of sustainable
enterprises and decent and productive work to stable, peaceful communities.
We need financial policies that promote productive investment, restrain
speculative behaviour, ensure transparency and rebuild credibility
in the system. And in an open international system, the quality
of national banks and other financial institutions practices and
instruments should be subject to international standards of supervision.
58. The current crisis and its dramatic scale are, in the rapporteur’s
opinion, largely the result of the predatory behaviour of some economic
players towards individuals and of the absence of codes of conduct applicable
to enterprises and decision-makers to which we have shown a certain
amount of indifference and indulgence. We all allowed the value
of goods to overcome the value of values and the replacement of
solidarity by greediness.
59. Politicians and lawmakers face now a massive challenge if
they are to rebuild trust, and it is for us to take decisions that
will re-establish the long-term stability of our economic system.
There are no easy answers, but an honest recognition of the seriousness
of what we face and the need to make hard choices for the future is
a prerequisite to making the right decisions in the long run.
60. Public trust in our political institutions is also being severely
tested. The euro zone faces huge pressures from a one-size-fits-all
monetary policy, and there may be further shocks in the system to
come. On the rule of law, we have already seen some public unrest
as a result of falling living standards and the loss of jobs and opportunity.
There are renewed pressures and tensions relating to migration,
and protectionist tendencies are also on the rise. Yet, the rapporteur
believes that the ‘beggar thy neighbour’ approach is simply not
a solution.
61. The rapporteur wishes to stress again that one of the greatest
casualties in all of this has been trust. However, trust is fundamental
to the strength of the democratic process. It has taken a battering
and the blame culture is omnipresent, where blame is not only directed
at financial institutions and regulators, but at governments. Public
confidence in the functioning of the economy has been undermined,
and dissatisfaction with worsening living conditions has given rise
to social unrest. The credibility of governments is at stake. All of
us have to do our best in our countries and communities to rebuild
that trust.
62. Social cohesion should not be the first victim of the crisis.
In other words, it is essential that the effects of the crisis are
wisely managed and that governments and banks respond by doing everything
possible in a co-ordinated fashion to alleviate its effects. Measures
should be taken to extend social protection, facilitate training,
and provide emergency employment schemes. It is especially important
to protect those who are most exposed in the labour market, such
as young men and women who do not yet have jobs.
63. For the Council of Europe, the most important thing is that
the economic crisis will probably lead to fairly high unemployment
among our populations. People will lose their hard-won income and
assets. The main duty of the Assembly is to remind people that the
governments of our member countries must take responsibility and
protect our citizens, especially their social and human rights,
even in this crisis. In democracies, their legitimacy depends on
that.
64. Hence the need for concrete programmes which promote social
cohesion and prevent any watering down of the already agreed human
rights standards. These include obviously economic and social rights
as enshrined in the Universal Declaration of Human Rights, the 1961
European Social Charter and the 1996 Revised European Social Charter
of the Council of Europe - which still remains to be ratified by
22 member states.
65. It is now therefore time for the Council of Europe to apply
renewed vigour to achieving the objectives for which it was set
up, playing the part of an institution actively campaigning for
the defence, promotion and spread of human rights.
66. It is easy, in the face of a crisis, to give in to the temptation
of restricting rights, believing this to be a way of stimulating
the economy. Yet, the rapporteur believes that, quite the contrary,
the strengthening of rights would reinforce the public authorities
and make them more determined to get the economy moving.
67. In the overall framework of human rights, social rights have
a vitally important role. They are a factor in social stabilisation,
and thereby help to prevent outbursts of social revolt caused by
breakdowns which maintain a widespread perception of injustice (As
Pope Benedict XVI has put it: “Someone whose dignity is violated
with impunity becomes an easy prey to listen for the appeals of
violence.”). It is social rights alone which, in an objective and
binding manner, protect the right to dignity, to decent work, to
the prevention of social risks, to fair trade and to protection
of the environment. Only through social rights are the rights of
generations to come protected, for children growing up in a deprived
situation will not have the fundamental conditions that they need
to develop their potential to the full.
68. It is important to emphasise that social cohesion is a political
question, with a view to ensuring social justice. Social rights
are a legal question, and a precondition for the achievement of
social justice. The promotion of such justice, however, also requires
economic rights.
69. It will be one of the main tasks of the Council of Europe
in the 21st century to draw attention, through the European Court
of Human Rights, to the legally binding nature of the human rights
enshrined in the revised European Social Charter. Rights can be
demanded. Charity is gratefully received, but it does not constitute
a right.
70. This is why it is essential to highlight the binding nature
of the human rights defined in the revised European Social Charter
and the Council of Europe’s role as the “shield” protecting human
rights in general, and social rights in particular, for it is through
the granting to them of human rights that individuals acquire their legal
personality and the right to develop their full potential.
71. The rapporteur is therefore in favour of a return to Keynesianism
in public economic policies, now an ecological Keynesianism, requiring
the state to fulfil its responsibility to intervene by conducting
policies designed to protect employment and to create the conditions
needed for the exercise of social rights. This is the only way of
building a base of confidence and stability which will enable enterprises
to obtain credit and families to attain the income stability and
predictability capable of guaranteeing a level of consumption that
can stimulate the economy.
72. The recognition, consecration and respect of social rights,
in this context, are preconditions to the success of economic policies.
Social rights are valid in themselves, for their consecration confers
dignity on every person, as an individual and as a member of the
community. Social rights are in fact part of the fabric of social
cohesion, rectifying inequalities of both origin and situation.
They nevertheless also play a structural role in the exercise of
active citizenship, making them vital to the process of perfecting
democracy and the rule of law.
73. Finally, the rapporteur considers that in nearly all areas
of reform, the revised European Social Charter contains provisions
which most of the member states accept. Yet the public and the political
decision-makers are both insufficiently aware of its content. The
rights it enshrines must be publicised more widely, and feed into
the process of creating a social Europe. As it is also stated in
the recommendations of the High-Level Task Force on Social Cohesion
in the 21st Century: “it is necessary to add more value to the work
of the Council of Europe on social cohesion which tends to remain
too confidential, known only by a relative small group of civil servants
and specialists.”
* * *
Reporting committee: Social, Health and Family Affairs Committee
References to committee: Doc. 11545, Reference No. 3437 of 18 April 2008 and Doc. 11834, Reference No. 3527 of 30 January 2009
Draft resolution adopted by the committee on 14 September 2009
Members of the committee: Ms Christine McCafferty (Chairperson) (alternate: Mrs Betty Williams), Mr Denis Jacquat (1st Vice-Chairperson), Ms Darinka Stantcheva (2nd Vice-Chairperson), Ms Liliane Maury Pasquier (3rd Vice-Chairperson), Mr Frank Aaen, Ms María del Rosario Fátima Aburto Baselga, Mr Francis Agius, Mr Konstantinos Aivaliotis, Mr Farkhad Akhmedov, Mr Milos Aligrudić, Ms Magdalina Anikashvili, Ms Sirpa Asko-Seljavaara, Mr Jorodd Asphjell, Mr Lokman Ayva, Mr Mario Barbi, Mr Andris Berzinš, Mr Roland Blum (alternate: Mr Laurent Béteille), Ms Olena Bondarenko, Ms Monika Brüning, Ms Boženna Bukiewicz, Ms Karmela Caparin, Mr Igor Chernyshenko (alternate: Mr Valery Parfenov), Mr Agustín Conde Bajén, Mr Imre Czinege, Mr Karl Donabauer, Ms Emilia Fernández Soriano (alternate: Mrs Blanca Fernández-Capel Baňos), Ms Daniela Filipiová, Mr Ilja Filipović, Mr André Flahaut, Mr Paul Flynn, Mrs Doris Frommelt, Mr Marco Gatti, Mr Ljubo Germič, Ms Sophia Giannaka, Mr Marcel Glesener (alternate: Mr Jean Huss), Mr Luc Goutry, Mrs Claude Greff, Mr Michael Hancock, Mrs Olha Herasym’yuk, Mr Ali Huseynov, Mr Fazail Ibrahimli, Mrs Evguenia Jivkova, Mrs Marietta Karamanli, Mr Włodzimierz Karpiński, Mr András Kelemen, Mr Peter Kelly, Baronness Knight of Collingtree, Mr Haluk Koç, Mr Oleg Lebedev, Mr Paul Lempens, Mr Andrija Mandić, Mr Bernard Marquet, Mr Félix Müri, Ms Christine Muttonen, Ms Carina Ohlsson, Mr Peter Omtzigt, Ms Lajla Pernaska, Mr Zoran Petreski, Ms Marietta de Pourbaix-Lundin, Mr Cezar Florin Preda, Ms Vjerica Radeta, Ms MariaPilar Riba Font, Mr Walter Riester, Mr Nicolae Robu, Mr Ricardo Rodrigues, Ms Maria de Belém Roseira, Ms Marlene Rupprecht, Mr Indrek Saar, Mr Maurizio Saia (Alternate: Mr Giacomo Stucchi), Mr Fidias Sarikas, Mr Ellert Schram, Ms Anna Sobecka, Ms Michaela Šojdrová, Ms Arũné Stirblyté, Mr Oreste Tofani, Mr Mihai Tudose, Mr Oleg Tulea, Mr Alexander Ulrich, Mr Mustafa Ünal, Mr Milan Urbáni, Mr Luca Volonte’, Mr Victor Yanukovych, Mr Valdimir Zkidkikh, Ms Naira Zohrabyan
N.B.: The names of the members who took part in the meeting are printed in bold
Secretariat of the committee: Mr Mezei, Ms Lambrecht, Ms Arzilli