Lecture One

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Transcript Lecture One

Diversity and common features
Main theme - similarities and differences
within Europe and their implications for
European integration and for business
– Similarities
– Differences
– Cultural issues
– Implications
Common characteristics of
European economies
• Mixed economies - details vary
• Similar trends in economic structure
– Decline of primary and secondary (i.e.
agriculture and industry)
– Shift to service economy
• 1960s – services c. 45% GDP in most countries
• Early 2000s – services c 65-70%.
Convergence in economic
– Western Europe - Keynesianism displaced by
neo-liberalism to varying degrees –
– Spain, Portugal, Greece – political
dictatorship/economic isolationism –
converged to Western Europe
– Central and Eastern Europe - 45 years as
Soviet satellite and command economy - 15
years transition – convergence with Western
Subject to similar domestic and
international challenges
increased competition
from Asia
• technology changes
• international
economic cycles
• increased capital
• economic
• economic and political
Europe - unity and
• Diversity within broad general parameters
• Diversity from interaction of:
– economics
– politics
– history
– social preferences and culture
• Diversity leads to difference in emphasis
for policy and business
National differences
• Different organisational structures
– legal and finance structure
– ownership
– family firms, Mittlestand
• Each country has own strengths
Germany: machinery/equip, motor, chemicals
UK: food &beverages, publish./printing, chemicals
France: food & beverages, chemicals, metal prods
Swed: Motor, machinery/equip, pulp/paper
Sapir’s socio-economic
1. Nordic model (Dk, Fin, Swe,
Highest level of social protection and welfare
Active labour market policy
Strong unions and compressed wage
2. Anglo-Saxon (UK and Ireland)
– Social assistance of ‘last resort’
– Weak unions, wide and increasing wage
– High incidence of low paid work
– Most market-oriented and little employment
– Still differences to US where little insurance
against labour market risk
3. Continental model (Austria, Belgium,
France, Germany and Luxembourg)
– The old social market model
Market to be regulated for socially acceptable
– for efficiency (now questioned) and equity
Those with stake in the system will be committed
to it
– Heavy reliance on insurance-based,
non-employment benefits and pensions
– Declining but still strong unions
4. Mediterranean (Spain, Portugal, Greece
and Italy)
– Much of social spending to pensions
– Social welfare systems dominated by early
– Collective bargaining – strong compression
– Strict employment protection
Where do new member states fit
• Differences but all have reconfigured their
economic, political and social systems in last 15
• In general – accepted economic liberalism
– Baltic States ‘joining the EU would mean adopting
rather more socially-oriented policies … Indeed a
signficant part of the Euroscepticism has been based
on the notion that the EU is ‘far too socialistic’.
(Paas, 2003: http://www.ezoneplus.org/archiv/
– Bigger new members, not so aggressively liberal
New vs old Europe
• Not just an international relations issues
(e.g. Iraq)
• Also – economic. New member states
probably most in common with AngloSaxon.
Above leads to Sapir’s model
• Ideal = high equity/high efficiency
• Framework does identify economies most
in need of reform
– German economy weak – outcome of election
stalemate crucial for Germany but also for the
rest of Europe
• Different models help explain why
agreement can sometimes be difficult at
European level