On Monday this week, former Italian PM Mario Draghi published his long-awaited report on the future of Europe’s competitiveness. In a grim period for many European industrial workers, assertive action is needed to better support Europe’s industrial fabric, to massively invest in it and to foster an ambitious social agenda with quality employment at its core, to ensure a fair green and digital transition. While Draghi’s report includes some convincing and powerful proposals, unfortunately it also overlooks important features of the European model, such as social dialogue and collective bargaining
The report on the future of Europe’s competitiveness is based on a thorough analysis of the European economy in a global perspective. Using an impressive collection of data, Draghi offers a comprehensive approach to industrial strategy, with assessments and proposals covering a wide range of policy fields such as innovation, skills, trade, competition and energy markets.
“Starting the new European policy cycle with a report that stresses that the future of industry is the biggest battle the EU faces is certainly something we warmly welcome – it reinforces the arguments we have been making since the start of the energy crisis in 2021. In the same way, the fact that Draghi’s report challenges some of the EU’s holy cows such as competition law, trade policy or energy markets clearly shows that keeping a strong industrial base is in his strategic priority, ” stressed Judith Kirton-Darling, industriAll Europe’s General Secretary.
The report also delivers 10 deep-dive sectoral analyses which reflect the real world challenges faced by our sectors. “We particularly welcome the fact the report considers both cutting-edge technology sectors and traditional industries like extractive, energy-intensive or foundation industries. Trade unions have insisted for years on the importance of considering industrial sectors as complementary and interrelated. Europe can’t be an industrial power if it only looks at the ‘sexy bits’ in clean tech and neglects these basic industries which are crucial for clean tech supply chains. From that perspective, the proposal to decouple electricity prices from gas prices is the kind of bold measure that we see as dramatically needed to tackle the energy price issue for energy-intensive industries,” continued Judith Kirton-Darling.
If the report is convincing from an industrial strategy point of view, it fails to recognise the existing Achilles Heel in the EU’s strategy – the intrinsic link it to a genuine social agenda. The report is right in saying that today’s competitiveness must not be predicated on reducing labour costs and that competitiveness must go hand in hand with social inclusion, but it fails to address specific proposals to make sure this happens. In the same way, social dialogue, collective bargaining and social conditionalities on investment and support, are barely mentioned in its 400 pages.
“Nice words and a couple of interesting proposals such as the right to training for all workers do not make a social agenda. Key aspects of Europe’s social models are clearly missing from Draghi’s policy balance,” stated Isabelle Barthès, IndustriAll Europe’s Deputy General Secretary.
Furthermore, the report provides a one-sided vision of productivity as it explains that growth in the EU is driven by weakening productivity growth, claiming that this in turn results in slower income growth and weaker domestic demand in Europe. While it correctly indicates that “wage repression should not be used to lower relative costs”, in the attempt to improve competitiveness, Draghi’s report overlooks the role that low-wages played in the weakening of demand, boiling everything down to weaker productivity.
Moreover, the report also ignores the decrease in private investments in Europe during the previous years of record profits that ended up in shareholders pockets, instead of investments in innovation or of boosting internal demand through real wage increase. Hence, the report misses the issue of fair distribution of the wealth created between profits, wages and investments.
“The lower productivity is also the consequence of corporate greed and low wage policies. For instance, the drop in the labour share of income from the early 1980s, is not only a possible effect of automation, but the direct result of the massive increase in the profit share of income during the same period,” claimed Isabelle Barthes.
We welcome the call for massive investment to digitalise and decarbonise the economy, urging for an increase of the total investment-to-GDP rate to rates similar to the 1960s and 1970s, by increases of about 5 percent. Ambitious investment are needed to ensure a Just Transition to a decarbonised economy and fair digitalisation for workers. However, “public investment need to be accompanied with social conditionality that will ensure that public money only goes to companies investing to produce in Europe and provide good unionised jobs for the long run while respecting collective bargaining and workers’ rights. Furthermore our industries rely on quality public services to ensure safe, educated and healthy societies. Austerity as agreed by EU governments is an anathema to this vision of investment,” reiterated Judith Kirton-Darling.
The report also claims that regulatory burden is an obstacle for Europe’s industry but without providing convincing arguments to substantiate its claims except the views of the business community itself. If Europe is performing much better than other regions in the world, including the US, in terms of life expectancy at birth, it might be to a large extent because EU regulations better protect workers and society than in many regions in the world.
“Simplification and efficiency is always welcome but EU rules are also there to ensure that private companies behave. We need strong social and environmental safeguards to ensure that the changes in regulations do not happen at the expense of core European societal interests,” warned Judith-Kirton Darling.
Finally, the key question will be how this report will translate into action, in the context of rising nationalism and with fiscal consolidation leading to harsh austerity plans in most member states.
“The truth of the pudding is always in the eating. If the European Commission and governments continue with cost-cutting plans and labour market flexibilisation, this report will remain an academic exercise. We now need political will to implement a genuine European industrial strategy with based on investment and social conditionalities for quality jobs,” concluded Judith Kirton-Darling.