Speech - Internet and the transformation of the European social model
European Commission - SPEECH/13/786 07/10/2013
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Commissioner for Employment, Social Affairs and Inclusion
Internet and the transformation of the European social model
Confrontations Europe/Brussels, 7 October 2013
Good morning, Ladies and Gentlemen,
Thank you for your invitation to a conference on such an intriguing subject.
You will be discussing during the day how the internet is changing or can change education systems, workplaces and public services.
But let me try to open this event with a more general reflection – or perhaps you will say a more abstract one – following directly the title of your conference.
How is the internet transforming the European Social Model? And is it transforming it for better or for worse?
For me, the European Social Model is essentially about principles like social justice, solidarity and equal opportunities, and about ways to institutionalise these principles. The Treaty on European Union speaks about a highly competitive social market economy aiming at full employment and social progress. It also speaks about balanced economic development.
Such objectives cannot be achieved in an economy that lacks entrepreneurship, and they cannot be achieved either in an environment where market forces operate without any constraints.
For Europe to fulfil the Treaty objectives in the 21st century, we need a mixture of enterprise, innovation, fair competition, and democratically developed regulation and redistribution.
We need a good macroeconomic framework filled with good economic policies. And we of course need good governance based on rule of law, efficient public administration and dialogue between government, social partners, civil society and ordinary citizens.
The global economic context, the environmental context, demography and technology all change.
But if there are some principles that can characterise the idea of the European Social Model in a longer-term perspective, I think it is precisely social justice, solidarity and equality of opportunity.
Now, does the internet make it in any way easier or more difficult to maintain social justice, solidarity and equal opportunities in Europe for the years or decades ahead?
What changes if people can communicate throughout the world in real time, access instantly large amounts of information, and move wealth across countries in a few mouse-clicks?
What changes if a growing part of the economy consists of digital services, be it software programming or online marketing?
To give a short answer, I would say that the internet can help improve equality of opportunity and strengthen solidarity, but makes achievement of social justice more difficult.
Let me elaborate.
Social justice can be understood as fairness in the distribution of resources. Now, does the internet make the distribution of income fairer?
I fear that the opposite is true. The digital economy is prone to increasing inequalities in the economy.
There may be many hard-working and well-organised companies that produce digital content or trade over the internet, but only a handful of them will achieve success on an international scale.
The profit made in the digital economy can be a lot more disproportionate to the effort undertaken and resources used than is the case in other sectors.
Many companies can develop a search engine or a voice-over-internet service, but only a couple of them will become global giants while the others will remain small-scale.
By contrast, a plumbing company or a transport company will never grow as fast or to such a scale.
There is nothing inherently bad about this kind of a “black swan” effect in the digital economy, and nothing we could really do about it.
But growing inequality of income is a reality and at some point it becomes necessary to mitigate it, at least if we want to maintain what we call the European Social Model based on social justice, solidarity and equality of opportunity.
More equality in the distribution of resources is also good from a purely economic point of view, as organisations like the OECD or the IMF have amply demonstrated.
Greater equality is good from the point of view of demand in the short term, as poorer households spend most of their income, which fuels the economy immediately.
But reducing income inequality is also crucial from a longer-term perspective, because otherwise people are not able to develop their abilities and productive potential.
The reasons for growing income inequalities of course do not lie exclusively in technology, but also in the liberalisation of capital movements, in the globalisation of trade and shortcomings of our tax systems.
Successful multinational companies in the digital economy as well as in other sectors sometimes resort to aggressive tax planning.
Income is very often invested elsewhere than it was created, and often it is not invested in productive assets that could help create prosperity for a wider group of people.
The point is that as the economy changes, governance systems must also evolve if we want to maintain social justice.
Governments need to get a lot more serious in tackling tax avoidance. We may also need greater taxation of wealth and lesser taxation of labour, given how quickly wealth can sometimes accumulate in the 21st century economy while labour incomes are on a downward trend. And it is only logical and appropriate for governments to explore new sources of taxation where digital technology can help with tax collection, lie in the case of the Financial Transactions Tax.
In short, society and the institutions of government have some catching up to do vis-à-vis the digital economy.
When it comes to the contribution of the internet to equality of opportunity, things are slightly better.
The key question is whether technological progress leads to social progress. This is of course not automatic, because upper classes can turn technological progress to their own advantage, without much regards for the impact of growing inequality on lower-income groups.
But public policy can help avoid inequality of opportunity precisely by working with digital technology.
Public policy can promote everybody's access to digital technologies and social integration through digital technologies.
I am speaking here also about public policy at the European level, because one very important instrument for supporting digital inclusion is the European Social Fund. This is the key part of the EU budget when it comes to social inclusion and human capital investment.
I have had the opportunity to visit a number of projects that help spreading digital knowledge to disadvantaged people, for example in Dublin where young unemployed people learn digital skills and are then placed with small companies to help them go online. Another good example is an ESF-supported project in Gdansk, where digital skills are taught to elderly people in order to help them age actively and productively.
Beyond e-inclusion, digitalisation is also benefitting the economy by creating a growing number of direct job opportunities, and ICT is also an important factor for improving productivity in the rest of the economy. The jobs of ICT specialists are quite well-paid because they require high level of skill and competence.
The number of ICT practitioners employed in Europe has been rising even during the economic crisis at around 3% and the growth in vacancies is now accelerating to about 5%.
Europe is facing a shortage of people with the necessary skills to fill these jobs. It needs to invest in training and placement of potential candidates in order for this growing labour demand to be met.
This is also why the Commission launched earlier this year the so-called Grand Coalition for Digital Jobs as a platform to engage with industry, and encourage the formation of partnerships between ICT companies, education institutions and employment services so that they manage together to train and place a sufficient number of people into the jobs that are projected to be created in the digital economy.
If you are disabled or from a social minority you can get a very good job in the digital economy if you have a good background in science and maths and if you are trained to meet the specific requirements of the job on offer.
A great example of this can be found in Spain, where the ONCE Foundation has helped place a number of people with disabilities into digital jobs. They have recently also received the prestigious Prince of Asturias award for this effort.
In all these respects, the digitalisation of the economy does help improve equality of opportunity, especially if we consider that people can learn many digital skills on their own, drawing on Open Educational Resources.
But of course it continues to matter whether people have received good basic and secondary education and whether their households are actually equipped with a computer and access to high-speed internet.
If somebody’s parents are struggling to pay utility bills, her chances of becoming one day a well-paid software developer are clearly lower than in well-off households, unless the country has a good quality and affordable educational system that can mitigate such disadvantages.
But the internet increases work opportunities not just for ICT specialists. It makes labour more mobile as it is less difficult to keep up with family and friends when you are working abroad. Internet also makes it easier to find a job abroad or to recruit abroad. Here the effect on equality of opportunity is clearly positive.
Finally, what does the internet change in terms of solidarity within the society?
Instant availability of information and the possibility for nearly anyone to share information online of course make our societies more transparent.
ICT can move us closer to the ideal of good governance, although it also makes data protection more difficult and creates new opportunities for spying and censorship.
In the political sense, the internet helps people from various backgrounds to know and understand each other. This can be particularly useful in a place like Europe, and especially at a time when differences between countries and social groups are growing, like now. The internet makes it easier to develop a European public sphere and strengthen our political union.
But then again, we should not assume that everyone in Europe reads the foreign press on their smartphone and discusses European politics over social media.
Much of the European public sphere is still an elite debate. The majority of people’s concerns are local or national and we should not have illusions that online communication would soon replace physical discussions between people or that it would displace printed and audiovisual media as crucial information sources.
Yes, easier communication and greater transparency can increase trust and solidarity between people, but it still matters a lot whether those who produce or communicate information do so with the purpose of uniting or dividing people.
It is also possible to learn from the internet such information about one another that people start hating each other, and in such cases it’s probably better to clarify matters face-to-face.
We can all be online and up-to-date but we can still be very distant unless we actually talk and listen to each other.
Ladies and Gentlemen,
Let me finish by saying that I am very happy for all the value creation opportunities and productivity gains that digital technologies bring. I am also happy for the possibility of instant communication and access to information over the internet.
I am not calling for innovation to be restrained.
But it is clear in my view that spontaneous market development will not, on its own, necessary generate balanced economic development, equality of opportunity or social justice. Technology will not make us more enlightened and solidaire unless we try to be like that.
Digital technologies are transforming our social model. We can use them to strengthen it, and we can use them to destroy it. All depends on the choices we make in terms of regulation, redistribution and economic policy in general.
It is clear, however, that governments cannot catch up with the digital economy unless they fully embrace digital technology in the first place.
Thank you for your attention, and I look forward to your questions.