This paper describes the ways in which EU law forces Member States to reorganise their welfare states, focussing on the effects of free movement and competition principles on health care, education, and social insurance. It then considers the consequences of such reorganisations for national identity and social cohesion, for domestic and foreign policy and European integration, and as the creation of a new welfare industry.
The thesis of the first part is this: that the negative harmonisation of welfare services via judicial application of free movement rules is potentially further reaching than often realised, and difficult to reverse. As a result of changes in welfare provision many services are now provided ‘for remuneration’. Moreover, legal, policy, and philosophical factors make it difficult to create a wholesale exemption for welfare. On the other hand, positive harmonisation remains politically unpopular and difficult to achieve, and at more than a very abstract framework level would probably be economically and organisationally undesirable too. Hence Europe is moving towards a continent-wide market for welfare services.
The thesis of the second part, considering the consequences of such a development, is that this probably has far greater implications for national identity and social structure than it does for welfare itself. It is possible to achieve high quality universal welfare service provision in regulated markets, but the absence of the huge public or quasi-public institutions which are a part of European life will change the texture of society. This is potentially threatening to social cohesion, and also to the European sense of our place in the world, in which contrasts with the US, in which welfare states often play a role, are prominent. Any such changed sense of self could – indeed should – have wide-ranging effects on state behaviour, even extending to foreign policy. As well as this, the creation of a European market for welfare provides opportunities for deepening European integration and involving the EU in central aspects of individual life. Finally, welfare is potentially the world’s largest industry. However strange it may be to see it that way, privatising provision in Europe may create actors who can and will become global, perhaps using their expertise to help build welfare states around the world.