In the following article two essential documents of the European Union – the Lisbon Strategy and the EU Constitution – are analysed by focusing on their economic and social objectives. The article was printed at the end of 2003 in a Lithuanian bimonthly magazine for intellectuals, Naujasis Zidinys-Aidai.

Instead of a preface. Observations

Observation No.1. As a leading Lithuanian business daily wrote about the “Green Paper” on the EU entrepreneurship by the European Commission, “the EC believes that business policy should support not only the business environment but also the vitality of business. It is planned to do so by increasing entrepreneurs’ motivation and by helping them obtain necessary skills. The EC would like to focus on individuals as potential entrepreneurs, analyse the possibilities of business growth and teach the society to appreciate entrepreneurship” (Verslo zinios, 06/08/2003).

We have almost accustomed to movements of export and investment promotion, although this haven’t made such policy economically more consistent. Well, at least the results of such phenomena can be calculated. However, a natural and inevitable question is how to promote entrepreneurship. First, we should have in mind what kind of individuals become entrepreneurs. Primarily it is such people who wish to make their own decisions more than they fear to do so. Those who prefer listening will probably become business consultants rather than businesspeople. The second questionable ambition is to analyse the possibilities of growth of companies. Such analysis is usually being done by business consultants at a particular company’s request; the results are later discussed by the company’s board which either makes use of it or not and locks the analysis in a safe. Third, if we believe that state institutions are able to teach society to appreciate entrepreneurship, then why don’t they try to teach society to appreciate, for instance, kindness, generosity, honesty?.. This would be unbeatably more effective.

Observation No. 2. After conducting a comprehensive scientific research on why the best European scientists are leaving the Old Continent in hope of a better life in the US or other states, the European Commission decided that A Charter of the Young European Scientist will facilitate human resource and career management in research area, that Education Code of Scientists will be effective in Europe, that a registration system of the achievements of professional scientists will be designed, that the basis for social dialogue among scientists will be created, and that adequate financing for the graduates and minimum social guarantees will be ensured.“

Did anyone understand at least one of the said measures? I didn’t. It is even more unclear how these measures will change the motivation of the talented researchers. What could be the basis for the social dialogue of the scientists? Nice cafeteria? Free lunch? Cigare¬¬ttes and coffee? Discounts on plain tickets? And what is the point talking about minimum social guarantees in the EU if the existing ones are already far from minimum?

Observation No. 3. When looking for scientific research financed by the EU, I came across the following one: “Network of Excellence on gender relation issues in agriculture.” The project is being implemented at the farm-women network of the Agricultural Research Institute in Cyprus under the subject: citizens and government in the knowledge society. To write comments justifying such a project would be very difficult. I don’t think I could do that.

Observation No. 4. In October 2003 Finnish and Swedish officials and the media called Estonia “a little predatory country that has nothing in common with the Nordic States” because of its existing taxes. Estonia has earned such epithets primarily for abolishing the profit tax and for relatively low rates of other taxes. The EU constantly comes up with initiatives regarding further harmonisation of taxes which would include the direct taxes as well – seeking that countries do not engage themselves in harmful competition. Perhaps this is the manifestation of solidarity among the states? We say, thank you, we do not need investments, new companies, and better technologies because this would harm poor Germans or French – it would reduce their salaries, social guarantees or possibilities to realise their positive rights. No, it looks more like the philosophy of a lord: I will not allow my neighbour release his serfs because mine will want the same, too.

The third way: the wolf is satisfied and the sheep is alive

These “observations” show that Europe is lacking everything: companies lack competitiveness, people lack entrepreneurship, scientists lack talent, and Europe lacks scientists, entrepreneurs and, finally, taxpayers. There are no people to work and earn pensions, unemployment and social allowances, which could “enable people [...] to live without loosing their dignity.” It seems it is only the dignified that Europe is not lacking. ¬

Europe is getting older, irrespective of labour productivity, and lazier, regardless of age. Europeans want to work less and under better conditions, earn more and risk less, have more rights and more free time. Looking at these wishes, many Lithuanians would come to realise they are real Europeans. However, there is such a nasty law of limited resources and such nasty science of economics that constantly reminds of this law.

People have been concerned about limited resources for ages. Shaking lambs that produced golden coins, brownies, table-cloths with food emerging on it, various fishes that make your dreams come true, fairies and wizards, and, finally, treasures in desert islands or in your own cellar – all these were the tools to turn an ordinary man into a hero. The hero gets the princess, half of the kingdom and then can live happily ever after. Hardly any character could make do without these magic things. Others resorted to some smarter methods to expand the resources: they drank the invigoration drink, found rescue in life potion, flew, travelled in time, or became invisible. One can rarely become a hero without miracles; one can only become a businessman without them. Since in Europe the goldfish have been divided into fishing quotas, the lambs have been earmarked, and swamps have been drained, the room for miracles is shrinking. It seems as if the time to change the hero’s career into a businessman’s, but that desire to just live happily ever after does not leave us in peace.

Lithuania’s former chief negotiator Mr. P. Austrevicius have said once: „Membership is a set of instruments. It does not change the laws of economics.“ That is logical. Yet, one gets to doubt increasingly more about whether many people think the same way.

The goals of the EU’s key documents – the European Constitution and the Lisbon Strategy – are formulated in such a way as if economic laws did not exist at all. As if material resources were unlimited and personal motivation could be swapped like socks. Let us have a closer look at the economic and social objectives raised in these two essential documents.

Targets of Lisbon

The main target of the Lisbon Strategy is to achieve that within a decade the EU becomes “the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion.“ This formulation reflects the key focuses of the strategy: competitiveness, economic growth, employment and social cohesion. Competitiveness, as any other economic category, has been discussed in piles of studies and books, but in practice this term is quite clear: it is the ability to compete, i.e. spend less and earn more. We can also guess what economic growth (or the growth of GDP) is: it means new supermarkets - always crowded with customers, city streets being repaired, ongoing constructions, more cars on the streets and so on. Economic growth does not always reflect in your own pocket, particularly if you do not work efficiently; yet, if you look around, such reflections can be noticed and it is possible to understand where they come from. Employment is also quite a clear phenomenon that can be evaluated by the number of relatives and friends who have jobs. But how does the social cohesion look like? Is it when we live in poky blocks of flats? Theoretically, no, but, I’m afraid, that in practice it is yes.

The Lisbon strategy sets the target to promote social cohesion, i.e. to achieve that differences of welfare were diminished. For this purpose, various political measures are applied, and taxes in the first place, because their purpose is to collect money to the budget and to redistribute it the way redistributors feel is right and fair – for subsidies (e. g., agriculture), various benefits (e. g., pensions), allowances, social programs (e. g., drug prevention) and the so-called public welfare (roads, education services and so on). If those taxes are progressive (which they are in EU countries), redistribution is even more extensive: people with higher income pay taxes that are higher than those paid by people with lower income not proportionally but progressively, i. e. not just the amount of taxes is higher but also the percentage of the income. Social cohesion is increased by special allowances and subsidies for certain social groups (e. g., the unemployed) or people with low income. Besides, various tax privileges (e. g., bigger non-taxable minimum), price subsidies (subsidised rent, compensations for utility services, compensations for medicines, and transport discounts), so¬cia¬l services, etc. are applied.

It is a different issue whether and to what extent these measures increase social cohesion. What is more interesting here is that this target is presented along with the goal of competitiveness. This implies the belief that social cohesion can be increased without affecting competitiveness and economic growth. Following the logics of economy, it is impossible to enhance social cohesion by direct policy measures without affecting economic goals, and if we were to choose between these two targets, economic growth must be given priority, since no social welfare can be achieved without it. This is particularly obvious in post-soviet countries which, according to the evaluations of the European Commission, have finished transitional from planned economy to market economy. In other words, they have finished transition from social cohesion to a state of growing economy.

Some targets of the Lisbon Strategy prompt a complete surprise. For instance: “to create preconditions for the flourishing of e-commerce” - why not flourishing of commerce in general? “To promote third generation mobile services” – it sounds strange, having in mind that they have come to a deadlock just because of the big license fees and other public obligations. “To increase expenditure for research and development to 3 percent of GDP by 2010” – there will surely be no lack of those able to “absorb” this money, but what kind of research will they produce? “To achieve that the business share used for financing research and development went up to two-thirds of the total amount by 2010” – perhaps it’s better just to write it off from their bank accounts as delayed taxes?

Yet, the most interesting are the targets of social cohesion.

“To provide conditions for all to use resources, rights, goods and services: social security systems must guarantee that everyone could live as human dignity requires and that employment would guarantee higher income; to implement measures that would allow everyone to purchase an appropriate housing with conveniences according to local conditions,¬ receive health and long-term care services, receive education, legal consulting and other public and private services, including culture, sports and leisure.“

First of all, using a popular term of human dignity in economic contexts is incorrect in principle. Human dignity is a spiritual category which does not depend on material factors at all. Therefore no economic conditions can destroy human dignity and no economic measures can create it. And despite our sincere indignation at poverty, no social security systems can guarantee life, such as human dignity requires.

Second, since all the earlier mentioned benefits are limited, it is possible to create preconditions for using them only to a certain degree, but not absolutely. This degree is basically determined by economic potential of a particular country: the richer the people, the more goods, services and resources they can purchase and the more positive rights they can exercise, and people do that according to their priorities. When the state starts “realising” these rights, it can happen so that pigs will be “realising their right to sports and leisure,” while people will be unable to get or even buy proper medical treatment.

“To apply political measures that help avoiding life crises, such as indebtedness, expulsion from school or loss of home.”

Even if we came to believe that political measures might help to avoid some of the life crises, we would be forced to acknowledge that it concerns only certain predictable crises (how else would support measures be created?). Since life crises are individual in each separate case (although social engineers believe otherwise), the state will not help to avoid all of the crises; yet, wide application of such measures and advertising may create the illusion of safety. Expecting to receive help in any crisis and when facing a crisis that is not envisaged in policy measures, people will be completely unable to cope with it. It is impossible to isolate people from all potential crises, and partial safety “protects” people from developing skills of how to avoid them (such results of active social security policy can already be observed in the countries with old traditions of the welfare state). Attempts to achieve these specific targets by policy measures find place in Lithuania, too: a proposal regarding obligatory screening of all schoolchildren for drugs can be attributed to similar initiatives.

“To apply measures that would help maintain family solidarity in all forms.”

The formulation of this target in an overall context of EU’s politically correct speaking sounds nearly sarcastic. But it is the active measures of social policy of the welfare state that destroy the solidarity of families by offering payment for taking care of their own family members at home, additional incentives for women’s employment, long-term care of dependant people at specialised institutions and, in particular, by paying allowances to children. Those additional incentives further distort people’s motivation in taking basic family-related decisions and destroy the solidarity of families.

Lithuania has also started implementing the Lisbon Strategy. Like a number of other strategies, inter-sectorial and long-term strategies in particular, it is being approached formally: all policy measures taken by the ministries are placed in the implementation plan by fields, without analysing their objectives and the latter’s attainability by these measures. For instance, to increase competitiveness, it would be quite logical to plan bigger investments into training centres of the Labour Exchange or into the establishment of some competition board. On the one hand, it would be a waste of resources. On the other hand, such a formal approach protects from more sophisticated and thus more harmful measures of social engineering. But for how long? Application of “good practice” and “benchmarking” is so popular in Europe after all, so it will not take long to learn the ways to protect people from life crises or preserve family values by policy measures. I wonder if these will include “friendly trials” for alcohol-addicted fathers. Just add “and mothers” and it will suit the general style of collective agreements, the role of trade unions and public responsibility.

Many may argue – why then it works in EU countries? It’s true, people in many European countries are interested in problems plaguing society, and bureaucrats are more helpful and less corrupted there. Still, even there governments are unable to handle people’s personal life crises or preserve family values, even if it assigns huge amounts for doing that. The motivation of young people to manage their life by themselves is diminishing, the number of dependants is growing and those willing to start their own business become a national rarity. This is a key reason why the EU is lagging behind the US in the field of innovation and productivity.

European Constitution

A draft Treaty establishing a Constitution for Europe (unanimously adopted by the European Convention in 2003) lays down the following common goals, inter alia, of the Member States are set forth and to achieve them powers in the EU are granted. These goals are: sustainable economic growth, social market economy, high competitiveness and striving for full employment and social progress; promotion of research and technologies; social justice and social security;¬ equality of men and women; solidarity of generations; economi¬c, so¬cial, territorial cohesion and solidarity of the Member States.¬

First of all, most of the targets identified here are very vague. What does sustainable economic growth mean? Does it mean that it might be too great and in such a case political measures to reduce it would be applied? But how? By limiting production through quotas? By increasing taxes? In that case, it would be good to know in advance where this limit is, so that we don’t overdo.

What does social justice and progress mean? Does it mean that everybody has equal rights to work or equal rights not to work? Does it mean that allowances are paid both to individuals in real and in formal need, or that they will get an equal share? What does equality of men and women mean? Does it mean that all will have to carry equal boxes and equally represent people in the Parliament, or will they have equal rights to perform this according to the law? There is a heap of other questions whose different answers would fundamentally change the contents of provisions and policy measures dictating them.

Second, some of the targets are at odds with each other. Seeking of full employment obviously contradicts such targets as competitiveness and family solidarity. Employment can never full because there are always people who do not seek for jobs, although they are employable. The motivation to behave like this is boosted directly by social support and guarantees provided by the welfare state. Targeted inclusion of certain social groups into the labour market directly destroys family solidarity which is supposed to be rescued. By the way, women’s employment in Lithuania is already exceeding the EU average. It is also important to have in mind a detail that all these measures for “increasing,” “promoting” or “equalising” cost taxpayers’ money.

The pursuit of all kinds of cohesion and equality, including gender equality, also runs counter to competitiveness because it means that individuals/companies/regions do not use their competitive advantages but instead rely on faculties that are equal. The bitter fate of solidarity is being illustrated by the crisis of the pension systems in European countries which - whether dealt with or not - set different generations against each other.

The Constitution’s section on values enumerates: respect for human dignity, freedom, democracy, equality, superiority of the law and human rights. These values are said to be characteristic of the pluralistic, tolerant, fair, solid and non-discriminating societies of the Member States.

Some people miss Christian values. No wonder that they miss them. After all, both values and laws are trade-off values and laws. But neither of them tolerates trade-off. It is just that “sustainable” values vanish, and laws punish (by lower income in the first place).

So, when the wolf is satisfied and the sheep is alive, we should seriously get concerned about the shepherd.

About the shepherd

It is time to explain what this entrepreneurship is needed for. It would be natural to think that for everybody: the more enterprising people are, the more value will be created and the more people will participate in creating this value; therefore, people’s welfare will increase. But, as mathematicians say, whatever seems obvious can and must be proved. There is also a different opinion professed by the ideologists of social democrats and not just them. True, entrepreneurship is needed because then more value will be created and more people will participate in creating it, therefore... more taxes will be collected. Having collected more taxes, it will be possible to redistribute more – people will feel happy then and will let those in power live long and keep expanding. And the latter do not believe that high taxes are bad for the economy because they undermine the motivation to work. On the contrary, the more an individual earns, the higher taxes should be imposed on him. Remember the saying: those who carry get the burden. And then, being sucked in a whirlpool of amplifying expenses (because the higher the salary, the higher the social status: designer suits, new cars for you and your spouse, tennis for your children, pres¬tigious sports clubs, etc...), you work increasingly more without days-off or holidays until you finally die before you reach the retirement, most probably, of a heart attack. What a perfect client for the state – high income and no costs: no allowances or compensations for medicines or health care services (does a busy working individual have time to stand in a queue in public health centres?), and even pension doesn’t have to be paid. Indeed, following such logics, the above mentioned contradictions between competitiveness and cohesion disappear, and the laws of economy don’t work any longer.

It’s difficult to say whether this is a real explanation to contradictions and paradoxes of EU policies. There are always two explanations of some negative actions: either it is done on purpose, pursuing certain interests, or because of ignorance. The results may be the same but it would be nicer to think that the reason is ignorance. At least there would be nothing to be angry about. As my colleague puts it, integration into, and membership, of the EU (just like the entire political action in general) follow the bicycle principle: in order not to fall off, one has to pedal all the time – to solve real or imaginary problems. But one cannot go far without thinking, therefore every one will be discontented. But not entirely, just a little bit. The discontentment is distributed among all, so that its concentration is smaller (yet another application of solidarity law).

However, there is one good “but” which can turn this entire version here into nothing, whether deliberately planned or spontaneous. I am talking about that same human dignity, which, being impervious to economic factors, may suddenly lead an individual out of this whirlpool of the expenses. The history shows that somehow, entirely beyond the understanding of social engineers, the striving for freedom, with the help of economic laws, sometimes overcomes the short-lived material desires, and the project “from everyone according to the abilities, to everyone according to the needs” fails.