INTERVIEW WITH MARIA JOÃO RODRIGUES, VICE-PRESIDENT OF THE GROUP OF SOCIALISTS AND DEMOCRATS

Tuesday, 15 November, 2016

 Europe is facing overlapping crises: financial, refugees and climate. At the same time, populists all over Europe are gaining momentum because of people’s fear for the future and disappointment with the current handling of social inequalities and unemployment. Furthermore, people in the UK have voted to leave the EU. How can Europe respond to these crises? What should be our common solutions?

Europe can respond to these crises only by acting together. The European Border and Coast Guard is one example: Member States are pooling resources and sharing responsibility for protecting the external border and controlling population flows. The organisational structure must of course be European, not a patchwork of national guards. This should also make it possible to develop a proper European asylum system.

Another good example is the recent decision of the European Commission that Apple needs to repay to Ireland (and possibly to other Member States) €13 billion which should have been paid in taxes over the past decade. Through an opaque structure agreed with Ireland, Apple managed to avoid paying almost any taxes on the profits which it had made all over Europe. No individual Member State has been able to capture these tax payments on its own. It is only thanks to the European Commission, a common institution serving a common European interest, that this big social injustice is finally being corrected.

We should not be surprised that European citizens are frustrated about lack of control on the external border, about declining real incomes and about weakening of public services like healthcare or education for lack of budget. These problems have arisen, most of all, because Europe has not acted together enough. Individual countries are much too weak faced with the main problems which people worry about. Together we can manage.

This doesn’t necessarily mean that the EU institutions should be in charge of every little thing, but Europe definitely does need common action and common instruments for major challenges like weak economic growth, social inequalities, climate change, security or global instability and the arrival of refugees.

The relationship between investment and innovation is key to creating long-term growth. But what kind of investment is needed to create a more innovation-driven economy?

An innovative economy with a high-level of productivity requires all kinds of investment - not only in high-tech equipment at research labs, but also in good-quality education for all children from an early age. The state has a crucial role to play in shaping markets and providing public services without which an advanced economy could not function - including healthcare and social protection.

Many people fear that Europe and other advanced economies have entered an era of low growth or ‘secular stagnation’ and that it will be difficult to improve productivity much further, at least without much greater automation and rising social inequalities. These concerns are well-founded, but I think there is a path towards sustainable growth and broadly-shared prosperity. The key condition is that people making investment decisions should not look only (or even mainly) at financial returns, but at the overall economic and social impact which they can create by allocating money for a particular purpose.

Energy efficiency, for example, might not be a very profitable investment while energy prices are low, but it makes full sense for the planet and for our quality of life. Likewise, taxation of wealth for the purpose of better public education and renewal of run-down neighbourhoods is a very good use of money.

Many people in my generation currently worry about low interest rates and the fact that their pension pots have stopped growing. But low interest rates are completely natural in a slow-growing economy. Investment would be even scarcer if interest rates were higher.

What governments and the whole financial sector should be focused on is directing money to areas and purposes where they can make the greatest positive impact on the lives of present and future generations. The European Fund for Strategic Investments should be used in a more targeted way, with less strict requirements of financial return. The European Central Bank could also think about ways to direct newly printed money towards investments in sustainable development.

We often think of the state and market in a very static way. But many progressives want the state to play a more active role in creating and shaping markets. Is it realistic for the state to be an efficient strategic actor, and under what conditions can market and state stimulate growth without being competitors? When we refer to a state as a strategic actor, shouldn’t we refer to a supra-state such as the European Union?

The main condition for a well-calibrated involvement of the state in the economy is to maintain democracy. The vast majority of people do want public investment in all the necessary foundations of economic growth. They want fair, civilised, regulated markets without massive inequalities. Only a minority of economic liberals want the state to be weak and unable to invest and protect. These people want to protect inherited private advantage and to perpetuate inequalities. But a vast majority of people want broadly-shared prosperity with equal opportunities, and they do want the state to be active. So I do think it is realistic, as long as democracy is alive.

In many areas, it is indeed also more efficient for the EU to act, as with the big Investment Plan for Europe or in helping to tackle tax avoidance. That’s why we need to build democracy also at the European level.

Many experts say we are in need of a bigger vision for Europe, and perhaps even more so after Brexit. Why is it important to have an overall narrative and how does it influence concrete policy making?

I think the basic “big vision” for Europe after Brexit can be quite simple, namely that we are stronger together and it is in our interest to act together. Detailed ideological battles about federalism or intergovernmentalism are not so useful. But most people can probably agree on “better Europe” which should work together for efficient and effective solutions to real-world challenges.

Beyond big visions, however, it is important to have a concrete plan for what needs to be done in practice. The European Parliament has agreed a post-Brexit roadmap in July and the Commission has built on it in the State of the Union speech and its 2017 work programme. On this basis, the EU27 can move ahead and tackle all big challenges. Of course this assumes that we won’t get more and more national leaders in the EU27 actively trying to destroy the European project.

More and more leading economists are questioning the way we look at growth today, with a focus on growth in GDP. But do we need a different perspective on growth? And why? And what could a new type of growth look like? Isn't it just a way of changing perspective rather than changing politics in depth?

Definitely we need to go “beyond GDP” and integrate social and environmental considerations in economic policy-making much more seriously. The Europe 2020 Strategy is all about that, and so are the UN Sustainable Development Goals for 2030. In practice, though, one of the biggest challenges is to avoid these improvements getting blocked by national finance ministries and some short-sighted financial and industrial lobbyists. We have seen in the mid-2000s and early 2010s how the EU’s sustainable development strategies were hollowed out when conservative forces imposed cost-cutting and deregulation in the name of competitiveness, based on a very narrow understanding of competitiveness.

To be sure, there are some enlightened finance ministers who understand the notion of sustainable development and the complexity of the investments necessary. The crucial challenge is to build, quite urgently and with the help of trade unions and civil society, a powerful progressive majority within parliaments, governments and European institutions, which will ensure that the sustainable development agenda is really put into practice. Another neoliberal backlash at this stage would mean a total disaster for the European project.