The financial crisis, poverty and vulnerability: from social investment to an EU social union

Abstract

The financial crisis of 2009 has had a devastating impact on the people of Europe, throwing millions into unemployment and poverty. The impact was most severe in the Southern and Eastern members of the EU. The EU's response was more concerned with the impact of the crisis on the viability of the banking and financial sector than on employment, poverty and livelihood. Following a brief discussion of the empirical evidence on the social impact of the crisis, this paper provides a critical appraisal of a major EU initiative in 2013: the Social Investment Package (SIP). The social investment (SI) approach to social policy has its origin in the social democratic response to the Great Depression of the 1930s. In Sweden Ava and Gunnar Myrdal argued for a new approach to social policy that would focus on social investment in human capital. Notwithstanding the intrinsic merits of a SI approach this paper argues that it is a policy paradigm without a foundation in any specific economic theory, and its adoption has been influenced by country specific historical, social and economic institutions and developments. The SIP has been primarily focused on the supply side of the labour market in order to increase people's skills and their participation in the labour market and society at large. It also covered other related key areas of early childhood education, housing and social protection. The SIP has been complemented by the launch of the European Pillar of Social Rights that if backed up by appropriate legislation and setting up of rules similar to the European Monetary Union would strengthen the social dimension of the EU leading to a Eur