The State of the European Union. The European Parliament faces its most important elections yet

THE STATE OF THE EUROPEAN UNION 86 would be difficult to calculate: it would threaten the fundamentals of the European lifeworld of democracy, freedom, peace, cultural diversity and prosperity, and consequently also the op- portunity to maintain an alternative social mod- el to US or Asian capitalism. This is especially important with the challenges of digitalization. What is at stake is the construction of a so- cial union, not the harmonisation of social mod- els. Social union means an environment which favours the national welfare systems and fosters convergence. After the peace model, however, the social model is now the main European mandate. At both a national and a European level, social de- mocracy is seeking a conceptual reorientation, which, against the backdrop of current chal- lenges, would mould core social democratic val- ues into new policy packages. The regulation of globalised European capitalism offers an oppor- tunity: if social democracy previously helped to contain the market economy in the nation state, it now faces the challenge of developing new regulatory patterns for globalised capital. Such Europeanised policies only make sense if they genuinely operate in a way that limits the scope of the market and not, as has been the case up to now, serve as a political and institutional framework for economic globalisation in the name of single market and competition policy. Instead of introducing a balanced budget amendment, Germany, as the largest country in the EU, could have proposed a much more promising model: regulated capitalism in a so- cial market economy. The term “social market economy” was coined by the German professor of economics Alfred Müller-Armack, who con- sidered it to be a formula that could combine the principle of market freedom with the princi- ple of social balance. In an international con- text, this economic system is sometimes known as “Rhine capitalism”. The concept is of course open to interpretation and can be construed in a way that favours either “more free market” or “more government”, social justice and vibrant trade unions in the spirit of social democracy and underpinned by the relevant policies. In terms of Germany’s Basic Law, it is in line with the constitutional principle of the social state (Article 20.1 of the Basic Law) or the “‘social state governed by the rule of law’ (Article 28 of the Basic Law). Despite all the differences in welfare state systems, there are some connecting factors that favour a European extension of the social mar- ket economy with distinctive social democratic characteristics. According to the Lisbon Treaty of 2009 (Article 3), the EU’s aim is to establish a “competitive social market economy”. Amidst all the diversity, however, European societies are characterised by a set of economic and social structural features that reflect the core constitu- ents of a social market economy: a state that is capable of intervening effectively; a robust so- cial system; vibrant and capable trade unions with social policy ambitions supported by legis- lation rooted in economic democracy; a consen- sus on maintaining social cohesion; and a long- term view of corporate management. These core constituents can be gradually developed even further. Even in Germany, interpretations have dif- fered and continue to differ as to the social policy direction that a social, competitive mar- ket economy should take. Depending on the political camp, a conflict arises between social capitalism and progressive social policy reorien- tation. 10 10  Still a seminal work in relation to the earlier German de- bate: Hans-Hermann Hartwich, Sozialstaatspostulat und ge- sellschaftlicher Status quo , Opladen, 1970.