The Open Method of Co-ordination - An example of good governance?

Table of Contents

1. Introduction

2. The Commission White Paper on Good Governance

3. OMC – History and workings

4. Assessing the Open Method of Co-ordination under the Criteria of Good Governance
4.1 Transparency
4.2 Participation
4.2.1 Direct Participation in the EES and the Inclusion OMCs
4.2.2 Participation in the Pensions OMC
4.2.3. Some General Concerns about Participation in the OMC
4.3 Effectiveness
4.4 Accountability and Responsibility
4.5 Coherence

5. Conclusion

1. Introduction

Growing European economic, social and cultural integration has implied an ever rising and ever more direct impact of the European Union on various aspects of the lives of its citizens. Although it remains uncontested that integration has brought a long period of stability and economic growth to the region, questions have increasingly been raised about the democratic legitimacy of the EU rule. After all, members of the most important Community Institutions are not democratically elected for the tasks they carry out and methods of policy-making are often too complicated for being traced by the public.

There is one policy area which has a very direct effect on citizens’ lives and which is more and more concerned by integration: social policy. This is why it is preferred to other areas which would of course also have been suitable to serve as a concrete example in this investigation. In consideration of the facts that the settings of European welfare states are too diverse to find a one-fits-all solution, and that national leaders have been reluctant to cede this policy area to the supranational level, a new method has progressively been applied to the different fields of social policy: the Open Method of Co-ordination (OMC), a very prominent example of multi-level and multi-actor governance. At first, guidelines - which are not legally binding - are passed by the Council. Their implementation is then completely left to the member states. Important features of this method include the identification of best practices in member states, benchmarking and peer review.

In 2000, the Commission, aware of a growing distrust of the citizens towards the EU, decided to initiate a governance reform, setting out five principles of good governance to be observed in EU policy making: transparency, participation, accountability, effectiveness and coherence.

This paper will outline the processes of OMC and, referring to different stages of the policy chain, examine the question to what extent the OMC as applied in social policies meets these criteria at this stage and where there is still a need for improvement. The following section will present some considerations on democracy and accountability and introduce the criteria for good governance as defined in the Commission White Paper on European Governance. Section three will then examine the history and functioning of the Open Method of Co-ordination. Section four consists of the actual analysis of the democratic quality of the OMC. Section five concludes.

2. The Commission White Paper on Good Governance

There have been different approaches to tackle the problem of democratic legitimacy in the European Union. Newman^[1] first of all presents two theoretical approaches as put forward by intergovernmentalists and federalists. Intergovernmentalists, who see the member states as gatekeepers of the European Union, emphasise that democracy and accountability need to be strengthened at state level, since they consider the Union as a mere contract between states. Federalists, on the other hand, stress that the Union itself should become more democratic. This would imply more powers for the European Parliament as well as a democratisation of the Commission, e.g. by direct or indirect elections.

At the practical level, some attempts have been made to strengthen legitimacy and democratic accountability. Besides others, Treaties have been streamlined in order to increase transparency and to simplify decision-making procedures. Moreover, the powers of the European Parliament have been reinforced in nearly every amendment treaty. Newman furthermore emphasises how member states and Community organs have tried to create a common identity among European citizens in order to increment the legitimacy of Union policies. This was done through the creation of symbols, such as a European flag, an anthem and European citizenship. Also, there have been efforts to enhance the popularity of the Union by paying more attention to social factors and human rights.

The Commission White Paper on European Governance was issued in July 2001. Pointing at the long period of peace and economic prosperity that European integration has brought to the European citizens, it nevertheless recognises that the citizens’ trust in European policy making has been decreasing in the last years. It identifies several reasons for this. First of all, there is a perceived inability of the European Union to act effectively in policy areas clearly falling under its competencies. Second, where the Union does act effectively, it rarely takes credit for it – if policy decision are successful and welcomed at home, national governments tend to attribute them to themselves. By contrast, unpopular policies are readily blamed on Brussels. Third, many citizens do not know the difference between the Institutions, are unaware of who takes decisions and do not feel that “the Institutions act as an effective channel for their views and concerns”^[2].

Under these circumstances, the White Paper states, reforms seem inevitable. Thus in 2000, the Commission defined a governance reform as one of its four strategic objectives, not only in the light of the upcoming enlargement and the debate on the future of Europe, but also under the current Treaty arrangements. Such a governance reform should open up “the policy-making process to get more people and organisations involved in shaping and delivering EU policy”^[3]. To achieve this, the White Paper recommends, inter alia, the use of more differentiated and hence more suitable policy-making modes and a better communication strategy.

It furthermore sets out five principles of good governance. The first principle concerns openness or transparency. The Institutions are to work in a more open manner and communicate about what the EU does in an accessible language. The second criterion is participation throughout the policy chain, necessary in order to improve quality, relevance and effectiveness of EU policies and to create more confidence in results and Institutions. Third, accountability and responsibility shall be enhanced. It should be clear who does what, and Institutions and member states are to take responsibility for their actions. Fourth, EU policies need to be effective. Objectives should be clear, and evaluation of future and, if possible, of past experiences should take place. Decisions, moreover, have to be taken on an appropriate level, and implementation has to be proportionate to the aims. Coherence is the fifth aspect of good governance as defined by the Commission. Policies must be coherent and easily understood, especially since the number of tasks has increased considerably throughout the years^[4].

The criteria set up by the Commission can be loosely grouped into the concepts of input and output legitimacy as presented by Scharpf - input legitimacy meaning that policy decisions are responsive to evident preferences of those affected by them, output legitimacy meaning that policies adopted will present effective solutions to common problems of the governed^[5]. Transparency, participation and accountability broadly correspond to the concept of input legitimacy – since they enable citizens to make their concerns known and allow their representatives to respond to them - whereas the degree of effectiveness and coherence determines whether problems of the citizens are actually solved.

3. The Open Method of Co-ordination

3.1 History

Mosher/ Trubek, whose article this section is based on, trace the emergence of OMC in EU social policies, a policy area which member states have pooled only to a rather limited extent^[6].

Since the late 1980s and early 1990s, domestic pressures - like an ageing population and high unemployment –as well as external pressures – such as an increased need for competitiveness as a consequence of globalisation and also of the Common Market - have put the European welfare states under an acute strain. Unemployment further increased in the mid 1990s, making it harder and harder to finance the existing welfare states. At the same time, state leaders began to realise that the welfare states themselves might contribute to the unemployment problem. On the one hand, the methods of financing the welfare state - especially the corporatist one^[7] - made it hard to create low-wage jobs and make work pay. On the other hand, early retirement and income maintenance programs led to further drop-offs in workforce participation, closing the vicious circle of financing the social system.

European state leaders were very much aware of the fact that action was needed in order to preserve the generous welfare benefits and the relative wage and income equality. The option of adopting a more liberal approach and thus cut down on social welfare did not correspond to the traditional and institutionalised ideas of the continental welfare state and would have been impossible to “sell” to the electorate. The only chance to maintain an extensive welfare state was to ensure its financing by increasing overall employment. Thus, policy makers began to focus on promoting employability and thus increasing participation rather than just concentrating on keeping unemployment rates low.

Since the problem concerned almost all European welfare states and was difficult to solve on a national level due to various externalities - resulting from the establishment of a common market - many turned to Brussels in looking for a solution. However, as already briefly mentioned in the Introduction, the Union lacked both competence and capacity to deal with welfare state policy. Competence, since member states had been reluctant to cede social policies or industrial relations to the supranational level, and capacity because social policy was (and still is) organised very differently in each member state, making a one-fits-all approach impossible^[8].

These factors led to the emergence of the European Employment Strategy (EES) – the legal basis of which was laid in the 1997 Treaty of Amsterdam – in the late 1990s, aiming at co-ordinating national social policies by means of a soft law governance mechanism called the Open Method of Co-ordination. Its purpose was to link the EU-level to national and local levels in policy areas which had not been touched before by the EU. The strategy focuses on the supply side of the labour market and is organised in four different pillars (namely employability, adaptability, entrepreneurship and equal opportunities) which provide different approaches of increasing eligibility for employment.

The EES did not remain the only policy field where the OMC was applied. Especially the Lisbon Agenda, launched in 2000 in order to make the European Union “the most dynamic and competitive knowledge-based economy in the world”, led to the set-up of OMCs in various fields such as Social Inclusion (2000), Pensions (2001), Health Care and Social Protection (2002), Education (2002) and Environment (2002). Apart from the EES, this paper makes reference to the Pensions and Social Inclusion OMCs.

The OMC on Pensions was set up by the Commission with two main objectives: first, finding a strategy for modernising social protection while taking into account the effects of population ageing on existing social protection systems, and second, reforming the pensions system so as to reverse the trend of early retirement. De la Porte/Pochet interpret the current structure of the pensions OMC as the result of a struggle between “those who regard this primarily as an economic matter […] and those who consider it first and foremost a matter of social policy”^[9]

The OMC on Social Inclusion was installed with the aim of eradicating poverty by 2010. The legal basis for this decision was laid down in the Amsterdam Treaty, stating that combating social exclusion was one of the aims of the Union. Prior to that, competence of the EU for social inclusion and poverty issues had been contested especially by the UK and Germany^[10]. The Nice Council adopted the Social Inclusion strategy in December 2000, with its main objectives being the improvement of access to employment, resources, rights, goods and services for everybody. Moreover, the strategy’s objectives included the prevention of risks of social exclusion, the setting up of actions for disadvantaged groups and the mobilisation of actors concerned in policy formulation.

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^[1] Newman 2001, p. 364

^[2] European Commission 2001, p.7

^[3] ibid., p. 3

^[4] ibid, p. 10

^[5] cf. Scharpf 2003

^[6] cf. Mosher/Trubek 2003

^[7] cf. Esping-Andersen 1990

^[8] Europe comprises liberal and social-democratic as well as conservative-corporatist welfare states, the policies and practices of which are deeply embedded in national institutions. (cf. Esping Andersen 1990)

^[9] De la Porte/Pochet 2003 , p. 12

^[10] De la Porte/ Pochet 2003, p.9