Mon Oct 17th, 2005 at 11:20:31 AM EST
In today's Financial Times Wolfgang Munchau writes a dirge for economic renewal in Europe. Apparently those pesky voters have confounded good Mr Blair's plans to save them from themselves by failing to give Angela Merkel a free hand in Germany. Poor Tony's " European Union summit on the future of the European economy" is to be derailed by nasty Mr Schröder.
It is no accident that what was once hailed as a “make-or-break” summit has now been reduced to a low-key, one-day working session. The renewal of Europe’s economy will have to wait for another day. The tragedy of Britain’s approach to the European economy is that it is right on so many aspects, yet incapable of translating this into policy success.
Last week, Gordon Brown, the UK chancellor of the exchequer, produced what I would consider one of the most coherent texts on the impact of globalisation on Europe. His pamphlet Global Europe: Full-Employment Europe* is a sophisticated analysis of the type of policy changes needed for Europe to prosper in the 21st century. It deserves to be widely read.
We'll have a look at this sophisticated analysis after the fold, but in summary it uses questionable comparisons to establish that the EU is underperforming and them proposes further "free-market" reforms in order to improve the situation.
The title of the document is "Global Europe: full-employment Europe".
In the summary on it's website the Treasury says:
The paper highlights that Europe is losing ground on its global competitors in growth, labour markets, skills, innovation and enterprise; and calls for action in three areas to create a Global Europe that becomes more competitive as the route to delivering full employment:
- Boosting productivity and competition: speeding up the process of completing the Single Market in key sectors; opening up the market for services; eliminating untargeted and distortive state aids that prevent full and fair competition; implementing pro-active competition policies; and a sustained commitment to regulatory reform.
- Skills and Employability: the development of modern social and labour market policies to help those without work find new jobs; childcare to help parents overcome barriers to work; reform of tax and benefits to make work pay; and national education and skills policies that equip people to adapt to change work in new areas of comparative advantage.
- Openness: Europe to take a leading role in the forthcoming Hong Kong trade talks and beyond to reject protectionism and to press for the conclusion of an ambitious trade deal that will completely open markets to exports from poorer countries.
I've read the document through and it seems to me that the enumeration of the the problems is the normal hotch-potch of stuff, with the Yellow and Brown menace coming to steal Europe's lunch on one page and becoming a massive new market on the next. Innovation is measured by patent applications whatever their merits, growth by the ever dodgy real GDP per capita - which makes Ireland look great even though a lot of the wealth flows directly to corporate HQs in the US - and low labour participation among the over 55s is necessarily a bad thing. A statistic I find curious is that, according to the OECD, only 20% of the French population between 25-64 have education to a 'tertiary level', whereas 45% of the corresponding US population does. The relevant report isn't publicly available, but appears to define tertiary education in such a way as to include "university-level education and high-level vocational programmes".
The one part of their analysis that rings unreservedly true for me is the lower level of entrepreneurial activity in the EU, which I put down to much less support of failure. I'll have to write a diary on that sometime.
As for solutions, we can rest easy that Mr Brown holds that we don't all have to become peasants in order to survive:
There are some who argue that the only way Europe can retain its unique balance of prosperity and
fairness is to retreat from globalisation into a new protectionism and act at the EU level to erect new barriers to global trade and investment. Others look at the rapid pace of change and argue that
nothing can be done in the face of globalisation and technological advance, that it is impossible
in the modern world to sustain prosperity and fairness together, and that individuals must be left
alone to adapt to far-reaching change.
We reject both. Protectionism cannot work in a global economy where production processes are
increasingly spread across continents, and businesses and consumers depend on international
trade and investment links. In a world of global capital flows, protectionism can only bring about
higher unemployment and higher prices. At the same time a laissez-faire approach leaves people
defenceless against change when we should be enabling them to master that change.
Some thoughts on the solutions bit:
- Benefit and tax reform is phrased in terms of "making work pay". This sounds like code for forcing lazy bloodsucking welfare recipients into the workforce.
- He's in favour of promoting childcare to help parents get back to work. I wonder if that's whether they want to or not?
- "flexibility matched by fairness" is another watchword.
- Budget reform away from the CAP towards research.
- Free markets for all. Reduce regulation, introduce "competitive" tax systems. Tax harmonisation is a no-no.
- "inefficient state subsidies" must go. Does this mean that efficient ones are ok?
- The document uses "pro-active" several times. This is not a good sign in any document.
After reading this I am left with the impression that Brown is a true believer: he is trying to make the world a better place for everyone. He is also deeply committed to the conventional economic wisdom. He also makes no reference at all to any of the energy or environmental related changes that will have to be faced. Not a word. A true believer with an unrealistic view of the world and a great deal of power.
There are few more dangerous things, as Blair has shown.
Update [2005-10-17 13:44:7 by Colman]: Changed the last paragraph of the intro.