Inequality in Europe - Causes and Solutions

Inequality in Europe

Causes and Solutions

Supervisor: Dr. Rene Gabriels

Markus SchindlerID 6043111


Mail: [email protected]

Date: 19-06-05Bachelor Paper IIFinal Version

Table of Contents

Introduction p. 1

The trend towards inequalityp. 4

Class-fragmentation in Societyp. 7

The key factors for wealth-distributionp. 10

Integration p. 11

Education p. 18


The Cures p. 20

Conclusion p. 21

List of Referencesp. 23


Introduction

The recent Crisis has revealed striking inequalities within the

European Union. While millions of citizens are faced with

unemployment and decreasing standards of living, a small

percentage of the population has seen an excessive increase in

wealth. State guarantees for services of general interest have

declined drastically, while deregulation and unemployment

skyrocketed. Despite world-wide protests, however, the gap

between the rich and the poor continuously widens. It is argued

that this development strongly affects the ‘middle class’ in

Europe, a class that inherently represented the majority of a

country’s electorate as well as wealth and productive work.

While the ‘middle class’ as such can be seen as a rather vague

concept and is correctly identified as “a chameleon among

definitions” by Pamela Pilbeam (1990), the perception that the

wave of neoliberal homogenization that is sweeping across

Europe significantly perpetuates its marginalization is

evident. Furthermore, as is explored by this paper, the

increasing gap of individual wealth in society, as well as

among the European nation states, has not only led to an

increased fragmentation of social classes, but also to the

creation of a new class, which is subjected to a standard of

living that has been popularly believed to be a thing of the

past in Europe – the precaritate (The Great British Class

Survey, 2013). Interestingly, this development does not seem to

be limited to individuals, as the ‘poor’ countries such as

Greece or Portugal increasingly have to pay the price for the

wealth of the ‘rich’ northern states (Streeck I, 2013).

1


This development, however, cannot surprise,

as government spending on institutions providing for social

equality and an equality of opportunities has seized

dramatically. With examples such as Greece being used to

discredit social welfare, while models such as the German

'Hartz IV' are excessively hailed and celebrated (die Welt,

2008) funds for the welfare state are withdrawn rapidly

(Streeck I, 2013). This promotes the impression that the

welfare state is fading. Furthermore, the increasing gap

between member states leads to fragmentation among the European

peoples as well as among its classes. Following

this perception, this paper aims at assessing the reasons for

this development, arguing that the decline of the national and

the lack of a European welfare state crucially contribute to

both, the continuous disappearance of the middle class and the

dramatic increase in social hardship in Europe.

2


It is shown that the neoliberal worldview and its consequences

played a significant role in inducing Europe’s contemporary,

precarious situation. The question this paper tries to answer

is: What are the explanatory factors for inequality in Europe?

This paper is limited to the extent that it

aims at assessing a general trend in Europe, rather than the

situation in a country specifically. Neither is it directed at

a global scale. It is believed that it is more beneficial for

the ends this paper pursues to view Europe as a whole, rather

than as a fragmented entity. Especially the significant degree

of economic integration that has already taken place serves to

show how events in single countries have an effect on the

entire Euro-zone and justifies a more general approach.

There is a reason why Neoliberalism has

taken its roots in Europe. Today, it unites a considerable

amount of followers, who believe in its potential to alleviate

the problems Europe faces today. The theory is simple: in order

to fight poverty, people need to be put into jobs in order to

enable them to earn money. This, in turn, will provide for the

basic funds needed to build and sustain an existence.

Naturally, in order to create more jobs, the economy needs to

grow. To grow, in turn, the economy needs to increase its

productivity, which can be reached by increasing its output, or

decreasing the necessary input. Increasing the output implies

producing more with the same means of production. Decreasing

the input implies using fewer resources for equal output.

Ironically, this may lead to jobs being cut, as they might no

longer be needed to maintain feasible levels of productivity.

Generally, however, the credo of those pursuing the neoliberal 2


ideology is striving for a continuous increase of growth and

productivity, due to their wide-ranging effects on wealth and

prosperity. In order to achieve this, every element that is not

crucial to the system needs to be eliminated. The logical

fallacy that ensues, when wealth and prosperity are proclaimed

as the results of cutting jobs and social services for the

masses, however, seems to be rarely recognized. While

eliminating all factors that are obstructive to the system does

increase productivity and growth in terms of GDP, one has to

wonder if more productivity equals more prosperity. Today, with

rising GDP, inequality seems to be rising as well. A trend,

that seemingly spares the upper classes. Hence, it is

understandable, why the situation in Europe is described as

grotesque by some and why many wonder, who actually profits

from an ever more flexible economy.

The analytical content of this paper is based on the

prerequisites for social classes defined by Pierre Bourdieu

(1986), framed and adapted to the contemporary context by the

Great British Class Survey of 2013. Hence, the first chapter of

this paper quantitatively assesses the development of

inequality in Europe over the past decades. This is followed

by an exploration of the contemporary class structure in

Europe. Subsequently, the underlying problems of these

developments are analyzed, specifically focusing on integration

and education as crucial factors for inequality in Europe.

Finally, the findings are used to present a possible solution

3


to the current predicament of inequality, culminating into a

conclusion to summarize the findings of this paper.

The trend towards

inequality

The middle class is

generally regarded as4


the ‘backbone’ of a society. Ideally, it yields the majority of

the taxes, and provides the majority of the workforce.

Independent from the specific reason, however, it can be

observed that the middle class continuously dwindles and that

society rather splits into a few elites with tremendous wealth

and a continuously impoverished bottom side that features an

increasing amount of precarious existences. This can be

assessed by

looking at several different indicators. Figure 1 (y-axis =

Gini-Coefficient) shows the Gini-index

for 27 countries combined (Solt, 2008-9). It shows a clear

trend in income inequality, which, after it decreased until the

late 1970s, rose rapidly until the late 2000s. While this

specific trend started in the Anglo-Saxon world and remained

stable in Europe, or even declined in Scandinavia, it “has been

growing in all country groups” (Schäfer, p.181) since the last

ten to fifteen years (OECD 2011: 24). Trends that accompany

this rise in inequality are, to a large extent, efforts for

liberalization and deregulation, as well as integration of the

market. As shown by Figure 2, the unemployment rates have

experienced a solid upturn from 2006 to 2010 (Unemployment

rates of seven countries, Figure 2, OECD 2011). Figure 3

depicts a clear trend towards more integration in market-

related areas.

5


Unsurprisingly, this is matched by the findings in figure 4,

showing a declining trend in market regulation since the 1980s.

This does not only include legislative acts, but coincides with

a decline in Union Density, while the ‘tax wedge’ (see graph)

remains fairly steady – implying a tax burden that relatively

increases. The general Product Market Regulation (PMR)

indicator, then, shows how market-regulating elements have

6


plummeted since the 1980s. Especially services of general

interest have experienced a drastic amount of deregulation,

starting in the 1980s and rapidly accelerating in the 1990s

(Summary Index: Figure 4, OECD 2011).

D

When comparing these findings to figure 5, which shows Armin

Schäfer’s (2013) results of a pooled time-series cross-

sectional

regression analysis

for Europe, as well

as Canada, Iceland,

Japan, New Zealand,

Switzerland and the

United states, it

becomes apparent

that exactly those

factors that are

strong determinants

of income

inequality have

also experienced

massive changes

during the last

decades. In this

figure, the

elements of social

expenditure and

taxation “reflect

7

Figure 5


the degree of distributive liberalization” (Schäfer 2013,

p.182). Union density, regulation and employment protection

show the amount of regulative

liberalization and are complemented by the remaining variables

as controlling elements (ibid.).

High values for the variables equal less liberalization with

the controls as an exception. The different models distinguish

themselves through the amount of additional variables used.

While model 1 only includes “dummy variables” (ibid. p.183) for

the respective time periods, model 2 introduces an “interaction

term for employment protection and social expenditure, since

these two could be functionally equivalent in reducing

inequality (ibid). The third model, finally, enables an

exclusion of the Scandinavian countries, to assess whether the

results are strongly influenced by their inclusion. Every one

of these models, however, yields the same results: the higher

the values of the first five variables, the less inequality in

a society. As displayed by the respective graphs, the values of

exactly these elements have continuously decreased over the

last decades. While the amount of social expenditure and

taxation has remained relatively stable over the same time

period (Figure 6, OECD 2007, 2010a, 2010b, in Schäfer 2013,

p.174), this was unable to negate the effects of the trends in

the other factors.

This data shows how the development in the recent years has

perpetuated social inequality in all 23 countries assessed.

Furthermore, it can be seen how the increase of market

liberalization coincided with these developments. The following

section picks up at these findings and attempts to put them 8

Figure6


into the contemporary European context.

Class-fragmentation of Society

Social classes are an issue inherent to any society. As their

nature implicates differences, the classes and the gaps between

them can serve as a useful indicator for inequality: the

greater the difference (through no fault of one’s own), the

greater the injustice. While a distinction of those ‘better

off’ from those ‘worse off’ may appear rather trivial, the

phenomenon of the Middle Class as ‘something in between’ has

provided a challenge for many scholars. In Europe, the term is

complicated by several terms and definitions, which tend to

majorly differ from country to country. The French bourgeoisie,

for instance, holds a different connotation than the Italian

borghesia, the Polish mieszczaństwo and the German Bürgertum. Many

of these terms harbor differentiations of their own, which mark

a differentiation from the middle class proper, but are still

included in the term Middle Class. Differences of the economic

middle class (e.g. Wirtschaftsbürgertum) and its educational

correspondent (e.g. Bildungsbürgertum) should also be heeded when

thinking about the Middle Class – not forgetting the fact that

it has never been a ‘class’ in the traditional sense to begin

with (Kocka, 1995).

Jürgen Kocka (1995) describes the Middle Class as a “post

corporate, supralocal social formation”. He describes how, in a

traditional identity-building process, it defined itself

predominantly against the privileged aristocracy of the fading

18th century, based on what may be paraphrased as the Weberian

9


principles of the protestant work ethic (Weber, 1905). As the

centuries progressed and the aristocracy’s privileges began to

fade, the lines of differentiation of the two classes began to

fade as well. This necessitated a new ‘other’, which was found

in the ‘lower’ or ‘working’ class.

Especially towards the end of the 19th century, the Middle

Class was coined by great diversity and attacks by other

classes, but also by a questioning of itself (Kocka, 1995).

Hence, the Middle Class itself had, and still has, merely a

vague identity, with its strongest means of identification

coming from a significant other. As the significant other is,

as a rule, constituted by a potentially threatening entity, it

has shifted in the past. The status quo poses merely a mundane

threat for the middle class from below, but a rising antagonism

towards a newly risen ‘elite’, or Oberschicht, from above.

Arguably, this new elite has, since the Second World War,

continuously filled the void left by the vanished aristocracy.

Despite overly optimistic politicians propagating otherwise,

long years of crisis have made the unofficial existence of

social classes evident in every nation state of Europe. Income

distribution reached a new level of inequality, with wealthy

households receiving an exceptional gain in income. The middle

or under classes of society experienced a reduction. Whereas

the top one percent of society inherently experienced a greater

impact of both, periods of recession and growth, than the

bottom 99%, this is the first time the bottom 99% suffer from

decreasing income levels, while the top one percent gains in

wealth (OECD, 2008). This juxtaposition of two parties

suggests a division of society into two camps – the top one 10


percent and the bottom 99%. While this effectively displays a

general, striking disproportionality in income distribution,

one should be mindful of a crucial flaw of this approach – it

disguises the existence of another party in society. This other

party, referred to as the ‘Precariat’ in sociology, economics

and politics, defines a part of society utterly disconnected

from any form of the wealth many believe to be inherent to the

Western World. The term itself is a portmanteau resulting from

merging ‘precarious’ with ‘proletariat’. The British economist

Guy Standing was among the first to academically recognize the

phenomenon as late as 2011, in his book The Precariat – The new

dangerous class. In a corresponding article from the same year,

Standing describes the Precariat as a “class-in-the-making”.

While still unorganized and mainly angry in a disoriented

fashion, Standing leaves no doubt that the Precariat is a force

to be reckoned with in the future. Colin Crouch, in his

contribution to the book Politics in the Age of Austerity (2013),

generalizes by dividing society in three major parts. The top

one percent, the bottom 10-15 percent and the others, situated

in between the two (Crouch, 2013). According to him, the top

one percent is prominently the cause of political problems, as

the undemocratic concentration of power within the few people

who constitute this elite rises steadily and uncontrollably.

The bottom 10-15 percent, on the other hand, account for a

rising amount of social problems, which can only be presumed to

be caused by the precarious circumstances of their existence

and a dissatisfaction with the situation in general.

The results of the Great British Class

Survey of 2013, which bases its research on premises 11


established by Pierre Bourdieu’s Distinction of 1984, where an

individual’s position in society is derived from economic,

cultural and social capital, arrives at similar conclusions –

even going further than Standing and Crouch, by advocating a

seven-tiered class system. This system, starting with a leading

class of Elites, distinguishes between several occurrences of

the middle- and working class, until arriving at the Precariat.

This class, finally, is defined as “[…] the most deprived class

of all with low levels of economic, cultural and social

capital. The everyday lives of members of this class are

precarious.” (The Great British Class Survey, 2013) The study

goes on to point out, that “the very rich and very poor are

still with us in the 21st Century” – heeding the declining, but

still popular illusion that great social differences are

overcome. The average age of participants is given as 35 years,

with 90% defining themselves as ‘white’.

Specifically, the report defines the

Elite as a class wealthy in all forms of capital, while

possessing an exceptional amount of economic capital. This sets

them apart from the so-called Established Middle Class, which

lacks the exceeding level of economic capital. The Technical

Middle Class, which follows in the hierarchy, is identified as

a new and rather small class. While being able to rely on high

economic capital, they are lacking in culture and social

contacts. The following working class is divided into three

different groups, starting with the New Affluent Workers, who

are defined as a young and active group with moderate levels of

economic capital and higher levels of social as well as

cultural capital (The Great British Class Survey, 2013). The 12


Emergent Service Workers, who constitute another new class

according to the researchers, is an urban group commanding only

low levels of economic capital, but ‘emerging’ cultural and

high social capital. Finally,

the Traditional Working Class is an, on average, older group of

people, who score low on all three types of capital. They are

only followed by the Precariat. While this study was conducted

in Britain, developments on the continent seem to greatly

mirror its findings. Problems of social classes move into

public focus again, and especially their complexity, as the

seven-tiered class model serves to show, should not be

underestimated.

The key factors for wealth-distribution

Evidently, the problem of inequality in Europe is a multi-

layered problem. Its effects are simple, but multiple: The

wealth gap among individual members of society in Europe is not

only perpetuated by the circumstances within a state, but also,

and increasingly, by a wealth gap between the ‘rich’ northern

and the ‘poor’ southern states of the EU. This leads to an

increasing feeling of envy and protectionism among the European

peoples. The European states, which have maneuvered themselves

into an ever-increasing state of market dependency since the

1970s now struggle to uphold the illusion that ‘social justice’

still exists next to ‘market justice’(Streeck I 2013, p.92) .

Some argue that the wealthy western Democracies, especially

those that are united in the EMU today, have gone through a

process that turned states formally financed by tax-revenue,

13


through the obligations created by international markets, into

states that were forced to go further and further into debt.

Wolfgang Streeck describes this as a process from a state based

on tax income, over a state that sustains itself via first

public debt taken by the state, followed by private debt by

individuals due to the facilitation by the state to take up

loans – in order to compensate for the lacking provision of

social justice by the state (Streeck I, 2013). Today, according

to Streeck, the state turns into a mere provider of funds for

the market – a ‘consolidation state’ that is only concerned

with consolidating its finances in order to ensure the

repayment of investors. This seems to adhere to the current

market aim of turning employees “from a fixed to a fully

flexible cost factor. All risks are being transferred to

employees. (Weinberger 2010, p.6)

As two inherent factors that

perpetuate the current social problems, European integration

and education may be identified. Integration, as Europe’s

current, semi-integrated state obstructs both, national and

supranational actions and education, especially on the European

Union, as it prevents the creation of a true European Public

Sphere and with it keeps the European peoples from perceiving

the different possible solutions that do exist for the current

crisis of the welfare state and articulating an opinion on the

matter (Habermas II, 2013). The following sections tend to

these two elements in detail, outlining their significance and

current flaws.

14


Integration

While the Union as a whole features a near-seamless economic

integration, it is still severely lacking politically and

socially. Naturally, however, the three different aspects of

integration are strongly interconnected. Politically, the

aversion towards more integration has rarely been greater in

large parts of the population than today (Eurobarometer 78,

2012). While the benefits of the Schengen agreement are

increasingly taken for granted, xenophobia, especially towards

the new member states Bulgaria and Romania, is steeply on the

rise. In Greece, associations such as the ‘Golden Dawn’ draw

followers in great numbers. This is especially worrying, as

xenophobia is not only practiced rhetorically, but also

physically – by means of direct aggression against non-Greek

citizens (Roth 2014, p.151). Especially in those countries most

battered by the recent crisis, freedom of speech and the right

of assembly have suffered severely. Furthermore, in those

countries greatest affected by the crisis especially, democracy

has been critically damaged. Publically elected officials are

openly and officially being incapacitated by foreign

authorities, as impressively demonstrated by the attempted

Greek referendum on the austerity measures imposed by the

Troika and EU-countries in 2012 (Gammelin & Löw 2014, p.91).

After massive protest and the threat of withholding funds from

outside the country, the referendum had to be cancelled, and

the austerity measures were implemented without any democratic

legitimization. The government had been blackmailed into

obedience (Roth 2014, p.253). This example serves to show the

15


extent of influence supranational actors can administrate over

European countries today.

Similar processes can be observed not only in

Greece, but also in Portugal and, at least in an attempted

manner, in Italy (Streeck I, 2013). The justifications for

these practices are twofold. The most obvious one is their

proclaimed necessity. Some economies, predominantly those of

the southern European states, are deemed inefficient,

noncompetitive and, maybe most importantly, too inflexible. As

this is defined as the main reason for the debtor-states’

incapability to settle their debts, reforms have to be enforced

in order to alleviate the problem for the future. Also, systems

and institutions of welfare-distribution and control – which

may also be described as agents of social justice – are being

described as an undesirable and inefficient means of influence

on the natural fairness of the market. This is seen as an

inherently distorting mechanism that forces arbitrary,

political decisions upon a neutral and impartial market system

that hence needs to be eliminated. As Wolfgang Streeck points

out, what is often not mentioned is that, as opposed to the

process of the market, ‘political’ decisions tend to be the

results of an intensive, democratic discourse, with clear

responsibilities (Streeck I 2013, p.93).

The other official reason for their enforcement is morally

constructed. A popular argument in the rich democracies, such

as Germany, is to proclaim that those countries that ‘did not

do their homework’ need to be forced to do it now, in order to

ensure they do their part for their own prosperity, rather than

‘mooching off’ the work of others. This has proven to be a 16


useful tool to ensure the population’s support for austerity

measures. It has also, however, served to shroud the unofficial

reason for the implementation and austerity measures and the

lending of ‘aid’ to countries such as Greece and Portugal,

which is to separate the ‘capital’ from democratic influence

(Streeck I, 2013). As long as the people in a democracy have

the means to decide upon the priorities of the state, they may

opt for securing their own standard of living first, rather

than paying off foreign investors. This situation is not only

undesirable for investors. It also constrains the ability of

the state to take up new loans, as the investors’ ‘trust’ in

the state is impaired (Streeck I, 2013) and can thus be

perceived as undesirable for states as well. Generally,

democratic legitimization seems to be of little importance when

it comes to dictating ‘responsible’ courses of actions to

states. Hence, the extent of political integration is, from the

market’s perspective, in exactly the right state. It is

thorough enough to provide for inter-state ‘solidarity’ in case

of a national insolvency, yet weak enough to enable any

regulatory measures on a European level that could tame the

negative externalities of capitalism. Hence, European

integration, no matter in which respect, primarily serves the

need of the market. The only sphere, where the

European Union has achieved a level of integration that

deserves the name, is the economic sphere (Streeck I, 2013).

Free movement of goods and services, as well as facilitated

transactions and movements of capital appear today more full-

fledged than ever before. These processes transcend national

borders and have little heed for national restrictions or 17


regulations – any regulation that is perceived as too

restrictive can be easily circumvented by relocating to another

law system (Streeck I, 2013). As a consequence, owners of

capital enjoy substantial liberty, while those restrictions

that were designed to ensure a serving, rather than a ruling

role of the market, are restricted by national borders and,

thus, dominated by the market. This greatly benefits mostly big

corporations, as they are able to move around Europe without

great constraints. Next to the logistical advantages,

corporations are thus enabled to exploit differences in wage-

levels within the EU and can move their production sites to the

cheapest location. The same applies to differences in taxation

within EU borders. Companies can simply relocate as soon as

they feel taxation is increasing in an unreasonable manner,

thus not only avoiding undesired taxation and regulation, but

also putting the regulator (the state) under pressure to

improve the conditions for the companies (Offe 2013, p.43).

This development, paired with the fact

that the European nation states have become ever more dependent

on foreign investors, perpetuates what we can observe today:

the market abandons its shackles and now increasingly finds

itself in the position of the ruler, rather than the ruled

(Streeck I, 2013). This leads to the, for the states,

disadvantageous situation of being put into direct competition

with each other: As all states are dependent on the ‘trust’ of

the market, they are forced to compete for providing the most

favorable conditions possible for investors (Offe 2013). As

states depend on an income from taxes, the jobs provided by big

corporations and investments and capital of investors, measures18


to consolidate the national household are being relocated to

those who are unable to avoid them – the middle and lower

classes of society. These areas are more easily targeted, as

they are, as a rule ‘immobile’ and cannot take advantage of

European economic integration. Predominantly either the

privatization of social services or simply the reduction of

government spending on these budget points serve as an easy

means to consolidate the state finances and improve the states’

attractiveness for investors. Naturally, the situation for

education is quite similar and is discussed in the following

chapter.

This forced competition of EU states with the other Schengen-

members, for the lowest tax-rates for wealthy individuals as

well as big corporations, has the consequence that the European

states are faced with a tough choice. Either, they work to

equalize the other, still lacking aspects of integration

(political, social, etc.), aiming at dissolving the need for

inter-state competition, or they attempt to solve their

problems by themselves. As today’s political reality, arguably,

does not permit for a sweeping integration of the extent that

would be necessary to tame the compulsions of the market within

the EU (Streeck II 2013, p.98), the states have so-far only

made very limited attempts of reigning in the market on a

European level. While scholars such as Habermas postulate that,

in the long run, European states will be unable to safeguard a

certain amount of discretionary capacity in an insufficiently

integrated EU, especially the dominant states such as Germany,

the contemporary ‘giant’ of Europe (Habermas I 2013, p.229),

19


have preferred to fend for themselves and perpetuated

nationalistic sentiments within the EU.

Thus, the European Union of today is coined by

fragmentation. Rather than achieving an ‘ever closer Union’,

especially the Eurozone is, arguably, heading in exactly the

opposite direction. The populations of the ‘rich’ member

states, or lending states, are increasingly antagonized from

the ‘receiver’ states, as the public discourse increasingly

stigmatizes countries such as Greece or Portugal as undeserved

receivers of help, who are ungratefully profiting from the

‘rich’ countries’ hard labor. Superficially, this poses as a

justification and an indirect form of payment for the northern

tax-money that is, allegedly, spent on the south – thus

appeasing the northern population. Ironically, this puts the

heads of state of the rich countries under pressure to enforce

austerity measures in the receiver countries, which will

indirectly find their way back to the rich countries due to the

high degree of economic integration: as a higher degree of

‘flexibility’ raises the poor countries’ attractiveness for the

market, the rich countries must show market-responsibility in

their actions and adapt their social systems to those of the

poor countries (Streeck I, 2013). The populations of the

‘poor’ countries, on the other hand, increasingly despise their

‘richer’ peers. This is perpetuated by externally dictated

austerity measures and a degree of stigmatization that they

feel is undeserved. They see their social systems destroyed

and themselves being held accountable as principals for the

actions of agents they had no influence over and hardly

profited from (Streeck I, 2013). Generally, these procedures 20


were not legitimated through democratic processes and the will

of the people, but through an international dictate that is

being enforced through undemocratic means by non-democratically

elected actors, predominantly the so-called Troika (Streeck I,

2013). Theoretically, officially sovereign nation

states could refuse the implementation of international

dictates or even refuse the prioritization of the repayment of

their debts over the well-being of its people. The dependency

from investments of today’s “debt-states”, however, negates

this option (Streeck I, 2013). Should a state refuse to repay

its debts, future loans, will exponentially increase in price.

If a state refuses to implement austerity measures dictated by

Troika, this will inevitably lead to the withdrawal of the

other states’ support. Hence, the people, as well as the

parliaments and populations of the debtor countries are

effectively incapacitated.

Thus it can be seen, how the peoples of Europe are not

only being fragmentized and antagonized, by the current

austerity measures that are dubbed as “without alternative”

(Streeck I, 2013). In the long run, the populations of both the

northern and the southern countries are left with a decreased

standard of living, disemboweled social systems and a democracy

that has lost any means to address the dictate of the market in

any way whatsoever. Naturally, through these processes

initiated on an inter- or even supranational level, the

disembowelment of systems of social security in the south puts

the northern countries under pressure to do the same in order

to ensure both, the amount competitiveness and flexibility that

the market demands and with it the favor of the investors. In 21


general terms, this can be seen as just another manifestation

of the effect of a lacking amount of integration in all aspects

but the economic one: the perpetuation of competition among the

EU’s member states. Despite

this situation, which seems very disadvantageous for the

concerned political actors, those involved seem to have

accommodated themselves comfortably along the lines of their

confrontation (Crouch 2013, p.219). To this, Colin Crouch adds

the assessment that the market and politics as actors are being

complemented by a third member: big corporations (ibid.).

According to him, these corporations are more than mere

‘lobbyists’, but are active participants in governance. This

actor, he argues, serves as an element linking the market and

politics together, thus providing for a system that betrays the

true neoliberal ideal of a strong separation of the state and

the market (ibid. p.220). It has to be highlighted, however,

that this interconnectedness does not provide an opportunity

for politics (read: elected officials) to influence the market

on another level, but rather vice versa. Furthermore, this

great corporate influence perpetuates the already existing

inequality in society, as it facilitates access to power for

the big companies and the rich, while it complicates access for

the less resourceful (ibid. p.221). According to Crouch, this

situation is fostered by the afore-mentioned corporations that,

as opposed to states, transcend national borders, as well as

the re-modeling of government organizations after the prototype

of private firms and the privatization of public services

(ibid.). Thus, the state generally loses power and influence

and is increasingly placed under the dictate of both the market22


in general and big corporations specifically. This serves to

continuously foster the primacy of the market over both

politics and democracy and, most importantly for this paper,

further increases the divide of the standard of living that we

can see in Europe today. The “privatization of

supply but not of demand and a separation of the user from the

purchaser” (Crouch 2011) enables private corporations to not

only have a share in determining public policy, but even use

government capacities to actively create new markets for their

companies (Crouch 2013, p.228). Thus, the welfare state as such

can retain its justification to exist only if it turns into an

“arena for corporate profit-making” (ibid. p.229), rather than

a provider of services by the public, for the public. As the

sphere of social welfare is increasingly privatized, the

question of corporate social responsibility arises. While the

general claim on behalf of the market promotes selfish behavior

as beneficial for the public good, arguably, it is merely

beneficial for the shareholders of those private firms that

generate profit through selfish behavior (ibid.). Thus,

shareholders gain benefits, while stakeholders (read: society)

remain empty-handed. The ideological ‘freedom of choice’, the

initial aim of social welfare, is perverted and turned into the

outcome of sessions in commercial courts (ibid. p.230). This,

paired with the fact that social responsibility increasingly

turns into something corporations pursue voluntarily, as

opposed to a legal obligation (ibid. p.231), perpetuates the

situation that welfare is no longer general, ideological and

the result of a public, democratic discourse, but specific,

non-transparent and arbitrarily determined by corporations. 23


Thus, social welfare is de-

politicized and, with it, detached from democratic processes

and legitimization. Those wealthy enough to be independent from

social welfare leave the social contract, while a growing part

of the population depends on corporations to provide for social

welfare. While, in theory, this may place corporations under

increasing pressure to provide for its employees, it most

definitely creates an unequal and restricted access to welfare,

which betrays its original purpose. Due to these reasons,

Crouch sees society on a path towards ‘post democracy’ (ibid.

p.235). While the decline of democratic influence on the

welfare state does not lead to its destruction, it does

perpetuate the strong influence corporations have on politics.

An influence that is hardly reversible, as this market is more

and more crucial for economic growth (ibid.) and corporate

power is continuously being immunized against democratic

influence (Streeck I 2013, p.241) – a process that can rightly

be described as a mere ‘façade-democracy’ (Bofinger, et al.

2012). These developments, which go hand in hand

with the very developed state of economic and the very

underdeveloped state of other aspects of integration, are now

being perpetuated by the austerity measures imposed on the

‘poorer’ countries, which have led to a severe decrease in

government spending and a wave of privatization that affected

every kind of government organization, profitable or not (Roth

2014, p.256). The ‘reforms’ desired by other states or

supranational organizations officially prioritize the needs of

the market over the needs of the people and without changing

the design of the contemporary European Union towards more 24


possibilities of democratic articulation that deserve their

name the ‘precarization’ of society will be perpetuated even

further. If the state of political integration

within the EU can be described as lacking, the state of social

integration must count as abysmal. Instead of aiming at

providing for a minimum level of income variation within the EU

or trying to complement or substitute the multitude of national

welfare states with a European one, the sole focus of political

actors seems to be the ‘flexibilization’ and increase in

competitiveness of national economies persists. Generally,

while the creation of a supranational provision concerning

social welfare still appeared to be on the agenda in 2012

(Gammelin & Löw 2014, p.131), it now appears to be vanishing –

with heads of state such as Angela Merkel saying “the EU is not

a Social Union” (Spiegel, 2014). The increase of GDP growth, no

matter the cost, seems to be the prime issue of political

thinking, while indicators as the Gini-Coefficient are

disregarded both nationally and internationally.

Summarizing, one can

say that the severely unequal state of integration facilitates

a dictate of economic reason over political or social

desirability. One may argue that contemporary realities do not

permit for a change for more integration in the areas of

politics and sociality. Even the argument of scholars such as

Wolfgang Streeck, who propagates a return and a re-instatement

of national institutions as a bulwark against the international

wave of economic, social and political homogenization, seem

hardly realistic, as they are likely to be impossible due to

the contemporary extent of economic integration (Habermas II 25


2013 p.212). It is my conviction that any change in the EU’s

path towards a ‘Hayekian super state’ (Streeck I, 2013) can

only be achieved by a strong public opinion, which has to be

the result of a powerful and active public sphere. In order to

achieve this, however, the underlying element of education is

indispensable. This is discussed further in the next section of

this paper.

Education

The element of education has a documented effect on a

democratic society. Figure 7 (Schäfer 2013, p.187) shows the

importance of education for a democratic society. Not only does

it have a much greater impact on election turnouts in general.

It even increases

its effect despite

rising inequality.

In the issue of the

standard of living

the assumption that

education is

essential is coined

by the fact that, in

order to discuss,

participate in and shape policy of any kind, the public needs

to be aware of their demands’ intrinsic effects. Also, it

follows Jürgen Habermas’ postulation that we need an active,

transnational public sphere in order to arrive at functioning,

collective European democracy that deserve its name. This is

crucial, as change for the better in the sense of the majority 26

Figure 7


of the people does not occur by itself. Without being aware of

the underlying processes of European, or even global

occurrences, without learning about the impact policies have

not only on them, but also in others, a European public sphere

that can effectively and feasibly participate in EU policy is

hardly possible (taz, 2014). Unfortunately, however,

education in Europe can be seen to be severely lacking in this

respect. Not only is the existing education system in the

different European states itself flawed in the sense that it,

to a large extent, abstains from teaching students about the

importance of the European Union and rather focusses on

reproducing the artificial notion of a nation state with an

inherent and clearly distinguishable people. Even graver is the

fact that through the austerity measures enforced on many

European states, the domain of education, which can be seen as

inherently belonging to the state, was hit by both, a wave of

dismissal of government-employed educators and of privatization

of education facilities – a process that can also be observed

for most other institutions financed with government funds

(Roth 2014, p.247). Naturally, as education fails to provide

what it should for a functioning society, in terms of

counteracting xenophobia, indifference or ignorance in general,

the project of a united Europe, no matter in which exact shape,

with a decent standard of living for everyone, is robbed of its

basis. On the first glance,

education may appear as merely one of the many other targets of

austerity policy and, as such, not afflicted with any

significant specialty. Hence the evidence presented above,

without high-quality and, as far as possible, impartial 27


education on a European-wide basis, the European Union will

have no future in the long run, no matter which shape it will

take. If the people are not actively involved in deciding which

future and if they are unable to estimate the repercussions of

their decisions due to ignorance perpetuated by the state,

Europe will remain a project of the technocrats and elites and,

as such, never function for the general good. Thus, if the not

only abstain from participating in the public sphere, but are

not even willing and able to follow the highly complex issues

of today’s European Union, the establishment of a public sphere

that transcends national borders is a futile effort.

When discussing the problem

of education, it becomes apparent that this issue is, in

reality, nothing more than another aspect of European

integration that needs to be, in a sense of the word, equalized

with the level of economic integration. Even more so, it can be

seen to represent the underlying factor that can shape the

other aspects of integration for the better. Also the European

economy can prosper in entirely new ways, if entrepreneurship

and the willingness of people to make use of the possibilities

granted by them through Schengen are effectively perpetuated by

an absence of xenophobia and fear of the other (Said, 2003). As

long as narrow-minded nationalistic sentiments not only

persist, but are even being supported by national and intra-

European politics, however, the EU heads towards fragmentation

rather than integration, regression rather than progress and a

future that will most certainly be more shaped by the

compulsions of a globally integrated market than ever before.

Ironically, a 28


change towards more investments in education by the state will,

most likely, have to be initiated by the population: As the

effects of education, as a rule, have long-term rather than

short-term effects, politicians will most likely abstain from

initiating such a change at the expense of other measures that

promise electoral success, even if limited, in the short-run.

Hence, it is questionable if sufficient electoral pressure will

be mobilized to initiate in improvement in education,

particularly on a European level.

The Cures

The obstacles for sustainably establishing a standard of living

in Europe that would justify a description as ‘first world’ are

strongly interconnected. The lacking amount of integration in

several respects hinders the creation of a European public

sphere, as cross-border communication on policy issues seems

irrelevant to the respective national citizens, especially due

to the rising power of populist parties, which exploit the

xenophobic sentiments that arose from the predominant way of

governance in Europe that culminated in enforcing undemocratic

austerity measures on the peoples of member states to make up

for state deficits, instead of trying to provide the grounds

for a fair consolidation of state finances by working towards a

degree of integration that allows for just and proportionate

taxation for everyone – without fear of being the ‘loser’ of a

European competition of taxes among the member states.

As further

29


integration seems to be undesired not only by the European

heads of state, presumably due to power-political reasons, but

also by the European citizens, presumably as an effect of a

renewed perpetuation of nationalistic feelings of us and them

in light of the crisis this seems unlikely. An impartial

education of European citizens, which would enable them to

evaluate the up- and downsides of the possible courses of

action, appears unlikely as well, as this may endanger the

status quo of the comfortable accommodation of the market, big

corporations and politics and may thus be harmful for the

‘trust’ of the markets and, with it, the meagre amount of

economic growth that western democracies were still able to

artificially provide for today (Streeck I (2013), p.26).

Similarly, investing in education rather than trying to cut

government spending at all cost seems an unrealistic goal

today. Next to the danger of impairing the ‘trust’ of the

market by redirecting funds away from short-term consolidation

efforts, there seems to be no public desire strong enough to

demand such a change from any government – especially not for a

European-wide education project.

This is not to say that the current system, which tends to be

called neoliberal despite severe interventions of states in

markets, does not suggest solutions itself. These do, however,

predominantly consist of the postulation of ‘more of the same’,

meaning more privatization and more room for the self-

regulating force of the market. This approach has not been

fruitful so far and there are hardly grounds for future

30


optimism. Thus it can be seen that the status quo continuously

reproduces itself. The public, rather than fighting for active

participation in shaping the future of Europe, for a great part

abstain from participating at all (EP election, 2014) and the

established parties seem reluctant to initiate a public

discourse about the future of Europe. Especially after the

European Elections, however, there may be the potential for

change (FAZ, 2014). As

already postulated by Jürgen Habermas prior to the elections

(Habermas I 2013, p.229), the success of the Eurosceptic

parties, which can be seen to predominantly rest on the absence

of real public education, or Aufklärung, may finally enforce a

public discourse on many levels of society and shake the

established parties out of their lethargy. Through this public

discourse, hopefully, the topic of the European Union and its

future will finally move more into the center of public

political attention and with it the issues that are connected

to it. Furthermore, more integration and education may serve to

bridge the class-gaps within the European societies and provide

for a public sphere that not only transcends national borders

in Europe, but also the highly fragmentized social groups

within society.

Conclusion

In order to answer the question what can explain inequality in

Europe, this paper has taken a closer look on those factors

that quantitative analyses by other scholars have revealed as

31


its key determinants. The currently practiced system of pseudo-

neoliberal capitalism (Crouch 2013, p.219), the biased focus on

economic integration, dictated austerity measures under the

absence of democratic legitimization, the strive for GDP growth

at all cost and, in general, the primacy of the market have

shown not only to sustain inequality, but to promote the

fragmentation of classes as shown by the Great British Class

Survey (2013). Other elements, however, have proven to provide

for the opposite. Those are technical issues such as fair

taxes, investments in the middle class and the establishment of

a balance between labor unions and employers. ‘Real’ growth, as

opposed to growth artificially induced via debt, can also be an

aiding factor, if not an essential one (Sedlacek, 2014). Also,

a functioning public sphere among everyone involved in the same

system is necessary. While one may go as far as viewing this in

the context of a globalized economy, for the present, the focus

must lie on establishing this for the European Union. As has

been argued by this paper, the premises for this reach beyond

perpetuating integration. While integration is one of the key

elements, the individuals confronted with, and essential for

achieving an adequate level of it need to be focused on as

well. If one merely provides integration, but forgets to

provide those affected by it with the tools to wield it

properly, the project of European integration will stumble

under populist and nationalistic sentiments and, finally,

crumble under the ensuing fragmentation. Thus, education is an

essential, or the essential aspect to focus on for a more equal

and just society – also as it significantly enhances the

potency of the public sphere and the awareness of individuals 32


about themselves and others. It is also an underlying factor of

those forms of capital that Bourdieu (1986) uses to determine

social classes. While other authors, such as Johan Norberg

(2008) point out rising prosperity on a global scale, the

problems we face in Europe are not to the world’s benefit, and

the suggested solutions would not be at its expense.

If integration is the premises for

reinstating the element of social justice to the European

people, education is the premises for achieving integration,

and thus, for providing the chance for a society and a system

that benefits the many, rather than the few. Further

research will need to be conducted on the question how an

equalization of the different aspects of integration should

look like. Especially the question of how an equalization of

different aspects of life can be reconciled with the different

ways of life and different European cultures that are very much

worth conserving and that most definitely should be regarded as

an asset of Europe as a whole, rather than a nuisance that

should be eliminated. Also, the question of competence is an

essential one – it seems apparent that few among the European

actors could and would initiate a change towards more

integration, education and democracy on a European level. Both,

due to reasons of political power, but also since the

electorates of the European Union seem rather averse to it.

33


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Inequality in Europe - Causes and Solutions

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