Global Finance and Social Europe

Global Finance and Social Europe

New Directions in Modern Economics series

Edited by John Grahl

With global finance reshaping the world economy, this insightful new book provides a full account of the EU’s financial integration strategy, together with a critical assessment arguing the case for social control over global finance. Written by acknowledged experts in European finance, this book discusses key issues from finance to general social developments, encompassing social security systems, employment relations, household saving and borrowing, and the question of economic stability. Thus far, America has been pre-eminent both in global financial markets and international banking – so how should the European Union meet this challenge? Global Finance and Social Europe constructively argues that an active response is required and highlights the importance of an integrated European financial system.

Chapter 15: Financing Social Protection and Social Equity in Europe

Dominique Plihon

Subjects: economics and finance, financial economics and regulation, post-keynesian economics, social policy and sociology, economics of social policy


Dominique Plihon INTRODUCTION 15.1 Social protection is one of the building blocks of European democracies. A significant measure of social equity has been achieved through a high level of public spending and taxation within quite different national institutional frameworks (section 2). But globalization is threatening European social models through competition among national social and fiscal systems (section 3). Today, there is a need to meet this threat by preventing tax competition, by the harmonization of fiscal policies through cooperation and through new forms of taxation (section 4). In the context of a globalized world dominated by transnational corporations, ‘corporate social responsibility’ can be a way to improve social equity and environmental outcomes provided international standards are binding (section 5). 15.2 SOCIAL EQUITY, PUBLIC SPENDING AND TAXATION IN EUROPEAN COUNTRIES The level of public spending and taxation is much higher on average in European countries than in other industrial countries, such as Japan and the US. One of the major reasons for these differences between European countries and other major industrial countries is the importance of public social expenditure which is higher, on average, in Europe. However one must note that, in the context of globalization, there has been a recent trend towards a narrower gap between European countries and other OECD members, as shown by Table 15.1. Furthermore, as seen in Table 15.2, ratios of social protection expenditures to GDP are, on the average, significantly lower among some of the most recent members of the European Union, the countries previously...

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