Professional Documents
Culture Documents
by Andrs Rodrguez-Pose
London School of Economics Oxford University Press ISBN 0-19-874286-X
Part I
ECONOMY
Chapter 1
Competitiveness
Customs union:
Free trade between members and common external trade restriction Common regulatory bodies
Physical barriers
Custom related costs:
Customs controls, border stoppages Paperwork and red-tape Exchange of low-value added perishable goods suffered as a result
And companies:
Higher prices for services than their competitors
Technical barriers
Different product standards and technical regulations:
Problems and additional costs for consumers Cost for firms which had to adapt their products to different national standards Cost premium for SMEs
Fiscal barriers
Different fiscal regimes:
Different regimes for companies Different VAT rates Different national accounting standards: Duplication or multiplication of accounting standards for multinational companies Fiscal suspicion by national authorities in order to prevent tax evasion Premium for SMEs
Result:
The emergence of virtuous cycles of innovation and competition Lowering of prices for consumers Greater job creation
Estimation of benefits
Cecchini (1988): 4 to 7% of Europes GDP Baldwin:
Trade
Sizeable increase in trade across the EU
Greater expansion in absolute terms than in other developed areas of the world But not in relative terms, where the US has expanded more (but not Japan) This means that in a world context the evolution of European trade has been rather disappointing, especially in comparison with countries like Canada or Mexico, which have undergone milder processes of integration
The level of intra-industry trade suggests that the expected specialization may be starting to happen
1980 0.30 0.05 0.49 1.38 1.43 0.13 1.33 0.55 0.70 0.20 1.88 0.50 0.62 0.03
1985 0.26 0.19 0.21 0.50 1.10 0.83 0.25 1.17 1.16 1.19 0.39 1.20 0.56 0.49 0.05
1990 0.41 0.85 0.60 1.10 1.21 1.38 0.59 4.35 3.78 2.84 0.86 3.33 1.46 0.86 0.06
1994 1.08 3.31 1.53 1.19 0.09 0.99 1.55 0.21 2.23 1.44 1.94 3.16 0.90 0.75 0.66 0.02
1997 1.20 1.70 1.78 1.65 -0.02 0.86* 3.63 0.32 2.42 1.68 1.04 4.33 2.96 0.83 1.19 0.08
Economies of scale
Ex-ante reports highlighted that economic integration was to bring about a more efficient concentration of resources And a restructuring of companies
Number of mergers and acquisitions has increased by more than two and a half times between 1987 and 1998 The bulk of this happened in anticipation of the Single Market Transnational M&As have taken off after the Single Market and in anticipation of EMU.
During the 1990s there has been an important increase in the volume of the deals.
The total volume of deals has been multiplied by six between 1991 and 1998 Greater expansion in outward M&As
New mergers increasingly involve companies from two different European countries:
Orange and Mannesman Vodafone and Mannesman
1998
And a diminishing number of European companies can be found among the top 50 in the world
Productivity
European labour productivity has been reducing the gap with the US in the post-war decades Convergence came to an end in the second half of the 1980s
Increasing technology gap between the US and the EU Permanence of fragmented markets in Europe (monopolies which prevented access to new technologies) Rigidity of European labour markets (which kept the young out of work)
1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000
-4
-2
10
12
US
EU
Japan
100 80 60 40 20 0
1960
1965
1970
1975
1980
1985
1990
1995
Growth
On average, the EU has had slightly greater growth than the US and lower than Japan during the post-war decades Precisely at the time of European economic integration, the roles have been reversed
Greater growth in the US (double that of the EMU area) Lower in Japan Strong internal divergence in growth patterns in the EU
Extremely high growth in Ireland and Luxembourg Moderate in Austria, Denmark, the Netherlands and Portugal Low elsewhere in the EU
EU US Japan
4 2 0 -2 -4
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
Conclusion
The impact of economic integration on the economic performance of the EU has not been as spectacular and immediate as predicted by ex-ante studies The gap between the EU and the US has increased in many areas (growth, productivity, trade, M&As) Different economic cycles may have a lot to say about diverging economic performances However, economic integration may be setting the bases for a quicker adaptation by the EU in the future to new economic challenges
Chapter 2
Cohesion
Introduction
Have the alleged benefits of economic integration been evenly distributed? How is uneven development within the EU likely to affect the competitiveness and further economic and political integration in the EU?
However, wealth is and has been unevenly distributed across the EU:
Until recently a core/periphery was visible The core: Austria, Belgium, Denmark, Finland, France, Germany, Luxembourg, the Netherlands, Sweden, the UK, and Northern Italy The periphery: Greece, Ireland, Portugal, Spain, and Southern Italy
Internal economic disparities are evident in almost every single country in the EU
Italy (GDP Lombardy 132.5 .... Calabria 59.2) (Unemployment Trentino 3.8% .... Campania 25%)
Has this effort paid off? Have the reform of the Structural Funds and the introduction of a Cohesion Fund led to greater territorial cohesion?
Since the Reform, the four Cohesion countries have converged to the EU average
Greatest convergence in Ireland Lowest convergence in Spain
Convergence has also been fuelled by slow economic growth in the core
Especially in Finland, Germany, Italy, and Sweden
EUR15=100
90 80 70 60 50
1977
1980
1983
1986
1989
1992
1995
1998
European convergence
EU
200
100
0 0 100 200
EU
Mean annual growth between 1986 and 1993
200
100
0 0 100 200
EU
Mean annual growth between 1993 and 1998
200
100
0 0 100 200
Italy
Mean annual growth between 1980 and 1986
150
Spain
Mean annual growth between 1980 and 1986
150
100
100
50 50 100 150
50 50 100 150
Italy
Mean annual growth between 1986 and 1993
150
Spain
Mean annual growth between 1986 and 1993
150
100
100
50 50 100 150
50 50 100 150
Italy
Mean annual growth between 1993 and 1998
150
Spain
Mean annual growth between 1993 and 1998
150
100
100
50 50 100 150
50 50 100 150
Greece
between 1980 and 1986 150
Mean annual growth between 1980 and 1986
150
UK
100
100
50 50 100 150
Greece
150
UK
Mean annual growth between 1986 and 1993
150
100
100
50 50 100 150
50 50 100 150
Greece
Mean annual growth between 1993 and 1998
Mean annual growth between 1993 and 1998
150
UK
150
100
100
50 50 100 150
50 50 100 150
Since the implementation of the Reform, mixture of national convergence and regional divergence
Inequalities across States have fallen by 25%, but regional inequalities within states have risen by 10%
trends
Conclusion
European development policies have evolved from a minor and rather haphazard policy in the 1980s to the second most important policy of the EU Achieving economic cohesion is, however, proven more elusive than expected
National convergence... But regional divergence
There are voices starting to question this degree of intervention, since it may lead to the formation of sheltered economies
Chapter 3
Ageing
Introduction
Western Europe is ageing As a consequence of:
Higher life expectancy Falling birth and fertility rates
Ageing is likely to become a serious economic, social, and political problem once the baby boomers start retiring
Pressure on the already well-developed European welfare systems Consequences for the economic potential of the EU
Average annual population growth in the EU, Japan and the USA
2.5 2 1.5 1 0.5 0 EU15 Japan USA
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
10
15
20
25
10
15
20
25
10
15
20
25
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996
1996 1996 1992 1992 1988 1988 1984 1984 1976 1976 1972 1972 1968 1968 1964 1964
1960
1960
FRANCE
NETHERLANDS
AUSTRIA
1980 1980
Birth r. Death r. Birth r. Death r.
Evolution of birth and death rates in selected European countries, the US, and Japan 1960-97
Birth r. Death r.
10
15
20
25
10
15
20
25
10
15
20
25
10
15
20
25
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 1988 1992 1996 1984 1980 1976 1972 1968 1964
1960
UK
DENMARK
SWEDEN
GREECE
Birth r. Death r. 10 15 20 25
Birth r. Death r. 10 15 20 25
0 5
Birth r. Death r.
10 15 20 25
Birth r. Death r. 10 15 20 25
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996
ITALY
SPAIN
USA
JAPAN
Birth r. Death r.
Birth r. Death r.
Birth r. Death r.
Birth r. Death r.
1960
1966
1972
1978
1984
1990
1996
Predicted evolution of the total and elderly population in selected European countries, the EU and the US 2000-50
Total population 2000 59.08 82.22 57.30 58.83 375.28 278.35 2050 59.88 73.30 41.20 56.68 331.31 349.32 Pop. Elderly population Change (65+) 2000-05 2000 2050 1.35 9.41 15.26 -10.85 13.44 20.79 -28.10 10.41 14.37 -3.65 9.43 14.11 -11.72 61.60 95.60 25.50 34.83 75.90 % Elderly 2000 15.93 16.35 18.17 16.03 16.41 12.51 2050 25.48 28.36 34.88 24.89 28.86 21.73 Support ratio (1564/65+) 2000 2050 4.10 2.26 4.17 2.05 3.72 1.52 4.06 2.37 4.08 1.96 5.28 2.82
Population in millions
Source: Own elaboration with United Nations Population Division data. Medium variant.
Social factors:
Relative wealth of European societies Reduction in the number of hours worked during life
However this argument is found wanting when we notice that the countries with the lowest fertility rates also have the lowest female employment
UK
Means testing and tackling child policy Low-income mothers benefit the most from support meassures
Conclusion
Ageing poses a serious challenge for the future of European societies:
Society may become more conservative and riskaverse, less open to innovation and foreign influences, and less dynamic and able to compete Ageing represents a challenge for public finances More and better targeted policies may be needed Even if the perception of an aged society as a less dynamic society may be rather reductionist.
Chapter 4
Introduction
While Europe ages, neighbouring countries have young and dynamic populations who find few outlets in their local labour markets:
Result: development of large migration flows towards Europe
Many see this trend as a solution for population ageing and to ease social and economic pressure in the country of origin of migrants Many others see migration as a threat, leading to xenophobia and the emergence of racist attitudes and parties
European legislation has been tightened in order to restrict migration into Europe
Forms of migration:
Individual or group migration Regional, inter-regional, international or intercontinental Temporary or permanent Legal and illegal
The second half of the 20th century has seen a reversal of this trend
Outward migration has been replaced by migration within and into Western Europe
First, 25 million refugees back to their places of origin (mainly flow east-west, including 12 million Germans) Then migration from former Communist regimes to the West (3.8 million East Germans until the erection of
1987 326 863 136 18 3714 4241 77 572 103 592 95 335 401 1839 13312 3247 3908 14080
1997 733 903 250 81 3597 7366 114 1341 148 678 175 610 522 2066 18584 3908 4971 24600
1987 4.3 8.7 2.7 0.4 6.8 6.9 2.2 1.0 26.8 4.0 1.0 0.9 4.8 3.2 3.6 20.8 15.4 6.2
1997 9.1 8.9 4.7 1.6 6.3 9.0 3.1 2.2 34.9 4.4 1.8 1.5 6.0 3.6 4.9 21.1 17.4 9.3
Differences between migration in the 1950s and 1990s (I)division has been The traditional North/South
completely slashed: Finland, Greece, Ireland, Italy, Portugal and Spain are no longer sources of emigrants, but have positive migration balances (in the case of Italy since as early as 1972) Intra-EU migration is no longer South/North but occurs in both directions (case of Ireland, Sunbelt phenomena) The Mediterranean sea (and the former Iron Curtain) are becoming the new Rio Grande of Europe
Differences between migration in the 1950s and 1990s (II) almost become Employer initiated migration has
a thing of the past: In contrast to more common practices in the US, Canada, or Australia. European employers and governments are more reluctant to initiate migration.
Some exceptions: Attempt by the German government in 2000 to recruit IT experts in India
almost
exclusively
Differences between migration in the 1950s and 1990sand illegal immigration (III) Increase of clandestine
As a result of the tightening of national and European immigration legislation More migrants decide to come and stay in Europe illegally:
Flourishing of mafias, racketeers and organised crime syndicates trying to smuggle immigrants into Europe
Diversification of immigrant groups Highly qualified migrants Low-skilled economic migrants and clandestines Refugees and asylum seekers
The main beneficiaries has been the financial centres and large urban areas of the Continent (London, Paris, Frankfurt, Berlin, Madrid, Milan, Amsterdam) Increasing importance of airport hubs Recruitment in many of these sectors is increasingly happening at a European, if not global, level
This migration is however tiny in numbers (5.5 million EU nationals living outside their country, in comparison with 12 million in the early 1970s)
Informal sector
From working as street sellers to criminal activities.
Free mobility of labour for EU nationals: Abolition of red-tape Equivalence of qualifications Social security and welfare recognition Removal of physical border controls Right of vote to non-nationals in local and European elections
Emergence of xenophobic and racist parties (France, Belgium, Austria, Germany, Italy) Increase in the acts of violence against immigrants (attacks on refugee hostels in Germany, razzias virtually everywhere else)
0%
Xenophobic discourses by fundamentally rightwing (but not only right-wing) politicians General portrayal of immigration as a burden, rather than as an asset
Conclusion
Renewal of mass migration in and towards the EU since the 1990s:
Qualified migration within EU Unskilled migration from outside the EU towards it.
Effects of the new migration wave Western Europe becoming more diverse and cosmopolitan But also generating rejection:
Negative attitude towards migrants and their descendants in most EU countries Restrictive migration and asylum laws across the EU Migration being driven underground
Chapter 5
Introduction
The post-war economic boom brought about nearly full employment across most of Western Europe However the oil crisis, socio-economic restructuring, and globalization have provoked a radical change in the panorama
Greater participation of women in the labour market... But a significant rise in the levels of structural unemployment
Unemployment phenomenon:
rates
as
European
10
15
20
10
15
20
10
15
20
25
0
0 5
5
1970
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997
France
1985
Italy
Finland
Male
Total
Male
1970 1973 1976 1979 1982 1985
Male
Female
Total
12 10 8 6 4 2 0
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997
Total
Unemployment
Female
Female
4
1970 1973 1976 1979 1982 1985
35 30 25 20 15 10 5 0
Spain
Japan
USA
Male
Male
Male
Total
Total
Total
Female
Female
Female
Unemployment (II)
Regional unemployment differences are even greater:
Unemployment in excess of 20% in Southern Italy, Southern and Western Spain, and the former East Germany High rates in many old industrial regions of Northern France, Belgium, and West Germany Low unemployment in the peripheries of large urban regions... And in many intermediate regions
Social exclusion
Large sections of the population are excluded from the labour force Increase in long-term unemployment rates
Long-term unemployment
Long-term unemployment is positively linked to total unemployment
Highest long-term unemployment in the poorest regions of Spain, Greece, and the South of Italy... But also in West Germany and Belgium Lowest long-term unemployment in the UK and Scandinavia
linked
to
total
Power of trade unions increased by having their participation in centralized collective bargaining by law Trade unions thus represent a much larger share of the workforce than their membership may suggest Trade unions are much less powerful in the US or Japan
More important is the level of the minimum wage Minimum wages in Europe tend to be much higher than in the US Countries with the highest minimum wages have endured high unemployment The relationships is again far from perfect
Workers rights
Workers rights still reflect the situation of the post-war social compromise
But the timing of the reforms has coincided with a period of economic expansion
And in the past economic growth has been associated with job creation
Informal employment:
Family work The informal or underground economy:
Difficult to calculate, but growing across Europe Most important in Southern Europe and Scandinavia
According to some (Harvey, 2000) this represents a return to the period prior to the mid-century compromise
Proletarianization of the labour force Employer having increasing control to the detriment of workers rights and stability
Conclusion
Europe seems to be stuck between a rock (unemployment) and a hard place (atypical work) Unemployment has decreased as a result of the flexibilization of labour markets... But, inequalities have increased
Managerial and executive wages have been rising at a greater rate than those of stable employees And the gap between stable employees and those in precarious employment has also been widening
Part III
POLITY
Chapter 6
Enlargement
Introduction
The fall of the Berlin Wall in November 1989 marked the beginning of the end of the postWWII polarized world Countries to the East of former the Iron Curtain looked immediately towards the prosperous and democratic West Membership of the EU became an indicator of future stability and prosperity for central and eastern European countries (CEECs) The EU, despite a warm welcome, was somewhat slow to react:
Because of the economic, social and political situation of countries in CEE Because of the degree of internal restructuring needed in order to accommodate new members
to
economic
Shock therapy: Rapid demise of socialist economic institutions and their replacement by market institutions (Poland and Hungary, to a lesser extent) Gradual and incremental transition: step by step change of institutions (Czech Republic)
Transition to capitalism has often implied the loss of one generations worth of income (Fischer, Sahay, and Vgh, 1997)
Evolution of GDP
First wave countries
15 EU15 5 -5 -15 -25 1991 1992 1993 1994 1995 1996 1997 CZE EST HUN POL SVN
-25 -35 1991 1992 1993 1994 1995 1996 1997 -5 -15
Ex-Soviet countries
15 5 -5 -15 -25 -35 1991 1992 1993 1994 1995 1996 1997 EU15 BLR MDA RUS UKR
Turkey
10 5 0 -5 -10 1991 1992 1993 1994 1995 1996 1997 EU15 TUR
Source: Own elaboration with World Bank World Development Indicators (2000) data.
43.96 38.51 -
23.70 20.55
23.80 15.94
25.32 15.48
Source: Own elaboration with World Bank World Development Indicators (2000) data.
Enlargement, however, played second fiddle to economic and political integration until the implementation of the single currency It is only since the arrival of the Euro that enlargement has become the EUs greatest priority
Enlargement may revive the large flows of east-west migration of the early 1990s
Conclusion
Enlargement will transform the EU
It will increase political and economic stability across Europe It will increase the budgetary burden on the EU if no thorough reform of current policies is undertaken It may lead to institutional paralysis without thorough reform It will tilt the balance of power in the EU, probably in Germanys favour
Chapter 7
Introduction
An important challenge to the European nation-state is emerging from below
Recently most European countries have witnessed a revival of regionalism This revival has triggered processes of regionalization and devolution Centralized states are increasingly becoming the exception to the rule (a Europe of the Regions)
Main questions:
How and why did the process of regionalization come about? Are we really witnessing the emergence of a Europe of the Regions?
Austria, Germany, and Switzerland (with Yugoslavia on the other side of the Iron Curtain) as the main exceptions to the rule
'Regionalized' states France Portugal UK Centralized states Denmark Finland Greece Ireland Luxembourg Netherlands Sweden Scotland
London
The whole country The whole country The whole country The whole country The whole country The whole country The whole country
Result: a complex territorial structure with five territorially overlapping subnational entities
provided
for
5 special status regions, with a high level of autonomy (Sicily, Sardinia, Valle dAosta, Trentino, Friuli) 15 ordinary status regions, with a much lower level of autonomy
The transfer of power from the nation state to the regions (II)
Recent steps are, however, going in the direction of granting greater resources to regional governments
The tax varying powers accorded to the Parliament award the Scottish executive a significant capacity to raise revenue During the 1990s Spanish regions have been granted access to 30 per cent of the income tax revenues generated within their territory Fiscal federalism is advancing in Italy with the introduction of new forms of regional taxation
We seem to be closer to a Europe with the regions than to a Europe of the regions
Conclusion
The revival of regionalism has triggered a profound transformation of the territorial organization of European states Devolution processes have both advantages and disadvantages
Advantages:
Greater diversity of policies and possibly greater transparency and adjustment to local and regional needs
Disadvantages:
Greater competition among regions Possibly a lower capacity of poorer regions to compete in a globalized world