Transcript The Quiet Economic Miracle?

The Quiet Economic Miracle?
The European Economy
In the News . . .
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French Oui vs. Non campaign
http://news.bbc.co.uk/1/hi/world/europe/4
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Basque Nationalists Win Seats
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http://news.bbc.co.uk/1/hi/world/europe/4
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The “New Economy”
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In late 1990s, Europeans began to talk of
new economic paradigm
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Low wages, low unemployment, low or no
inflation, high growth
• “Goldilocks economy”—not too cold, not too. . .
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“new economy”
• Efficient computerized systems (labor)
• Global competition in labor markets
• Lower prices for many industrial raw materials
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Growth did not spark inflation
Jeremy Rifkin views this new paradigm in
Europe as a quiet revolution
Rifkin, p. 59
“While we Americans continue to look
to the Pacific and Asian economies for
signs of quickening competition and
greater commercial opportunities, a
quiet economic revolution of a different
sort is taking place in the land of our
European forebears, of which we know
very little and to which we are ill
prepared to respond.”
European Economic Growth
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According to Rifkin:
EU World’s largest trader in services
 EU’s GDP higher than US
 EU’s population 455 million; US 293 million
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In 2000 EU heads of state agreed to
“Lisbon Agenda”
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To make EU "the most competitive and
dynamic knowledge-driven economy by
2010"
European Economic Growth
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National examples
• Ireland as “Celtic Tiger”: High tech-informational or ICT
(information and communications technologies) economy
• Dell, IBM, Microsoft, Compaq, Sun Microsystems, Cisco, Gateway,
Oracle, Hewlett-Packard, Novell, AOL, and Ericsson.
• Finland and Sweden too
• Challenged by dot.com bust
• Dutch “Polder Model” in mid-late 1990s
• Consensus economic policymaking
• Between government, unions and employers
• Led to low wages, no unemployment, high growth
• Polder model has since collapsed?
• Decline in Dutch economic growth
• 1999: 3.9% 2000: 3.3% 2001: 1.3% 2002: 0.2%
• Unemployment above 5%
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Turnaround has led to questioning
Economic Miracle?
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According to study by Dr Fredrik
Bergström, President of the Swedish
Research Institute of Trade, and Mr Robert
Gidehag, President of the Swedish
Taxpayer's Association entitled EU vs. USA
• GDP per capita in EU is well below US
• Without major structural reforms has no hope
of reaching US levels
• Is failing to live up to Lisbon Agenda
• “Euroschlerosis”? Burdensome gov’t programs
Economic Miracle?
• According to study by Dr Fredrik Bergström, President of
the Swedish Research Institute of Trade, and Mr Robert
Gidehag, President of the Swedish Taxpayer's Association
entitled EU vs. USA
• GDP per capita in EU is well below US
• Without major structural reforms has no hope of
reaching US levels
• Is failing to live up to Lisbon Agenda
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EU Commission Report (Jan 26, 2005)
pointed to renewed ways to meet Lisbon
goals
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Economic prosperity will follow political solidarity
and security
Effective EU governance, enforcing legislation
Adopting the Constitution!
pp. 3-4
US and Europe: ‘Comparing
Chalk and Cheese’?
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GDP is a poor statistical measure of quality
of life
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Measures value of goods and services produced in
a country in a year
• Includes all economic activities as positive value
• Clean-up of pollution
• Costs of non-productive social services like prisons,
hospitals, defense, policing, courts.
• Many things that don’t improve quality of life of citizens
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Need to question GDP as measure of
economic wellbeing
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Fails to account for income distribution and
individual debt (actually shows as a GDP gain)
Balance of Trade: national debt
Best Place in the World
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http://news.bbc.co.uk/1/hi/world/euro
pe/4020523.stm