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THE BALKAN STATES AS PART OF EUROPE THE POLITICAL ECONOMY OF SUBSIDIARITY? Hardy Hanappi Ad personam Jean Monnet Chair for Political Economy of European Integration University of Technology of Vienna, Economics www.econ.tuwien.ac.at/hanappi/ [email protected] OVERVIEW Motivation The current state of the European unification process Integration of Europe‘s South-East Theory: From subsidiarity to network design Practice: Europe‘s problems – implications for Balkan states MOTIVATION European Studies provide a large amount of interesting material and case studies … … but theory (and practice) synthesising them is rare. Mainstream economic theory is using an interesting mathematical apparatus … … but it is in most cases not applicable to political economy. Europe‘s South-East is a pivotal element in the unification dynamics … … but scientific approaches to model the dynamics of its political economy are missing. THE CURRENT STATE OF THE EUROPEAN UNIFICATION PROCESS - 1 REAL GDP UNEMPLOYMENT 7000000 180000 160000 6000000 5000000 4000000 3000000 WW 1 Great Depression 140000 120000 100000 WW 2 80000 60000 2000000 40000 1000000 20000 0 0 12 European Countries Greece 18 16 14 12 percent 200000 Unemployment Rate in the EU 1990 International Geary Khamis Dollars (for Greece) 8000000 1900 1908 1916 1924 1932 1940 1948 1956 1964 1972 1980 1988 1996 2004 2012 1990 International Geary Khamis Dollars (for 12 countries) GDP (constant 1990 GK $) 10 native born 8 foreign born 6 4 2 0 2007 2008 2009 2010 2011 2012 THE CURRENT STATE OF THE EUROPEAN UNIFICATION PROCESS - 2 GOVERNMENT DEBT Government Gross Debt 2500 14000 12000 2000 10000 bill. Euro NATO EXPANSION 1500 1000 Italy 8000 France 6000 Germany EU 4000 500 2000 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 INTEGRATION OF EUROPE‘S SOUTH-EAST Turkey and Greece become NATO members Greece becomes EU member state in 1981 Balkan War After 2004 in EU: Slovenia, Cyprus, Bulgaria, Romania, Croatia Slovenia, Greece, and Cyprus are in the Eurozone Economic Integration ? (Input-Output Analysis, etc.) Political Integration ? FROM SUBSIDIARITY TO NETWORK DESIGN - 1 Subsidiarity Decision 1 Decision 2 Entity 1 Decision 3 Decision 4 Decision 5 Entity 3 Entity 2 Decision 1 Decision 1 Decision 2 Decision 2 Decision 3 Decision 3 Decision 4 Decision 4 Decision 5 Decision 5 Decisions are only transferred to higher level entities if they cannot be (better) performed at the lower level. FROM SUBSIDIARITY TO NETWORK DESIGN - 2 Problems with the Subsidiarity Principle in Political Economy 1. Two different types of entities: Firms: maximize profit, capital accumulation (growth) side constraint: reproduction Political units: stabilize reproduction, welfare growth side constraint: finance (including feasible debt) 2. Time horizons of feedback loops: Firms: Innovation-banking-competion-cooperation-demand Political units: Election cycles 3. Transnational Corporations versus local SMEs: Political Counterpart of TNCs? Political units as mediators between TNCs and SMEs? FROM SUBSIDIARITY TO NETWORK DESIGN - 3 Network design Internal Model Entity 1 Decision 1 Decision 2 Decision 3 Decision 4 Entity 3 Entity 2 Decision 1 Decision 5 … Decision 1 Decision 2 Decision 2 Decision 3 Decision 3 Decision 4 Decision 4 Decision 5 Decision 5 … Decisions become transitory negotiation results, agreed upon by agents with internal model-building. … Network (re-)design is supported by agent-based simulation in evolutionary political economy approaches. EUROPE‘S PROBLEMS: IMPLICATIONS FOR BALKAN STATES • Unemployment • • Capital Accumulation (“no growth“) • • Control of weapons trade, priority of economic cooperation over military fostered competition Immigration • • Infrastructure investments (EIB), labor time reduction, qualitative growth, growth of leisure time War • • Restructuring of economic activities, flexible labor organization, more public employees Prepare for many immigrants, EU: fostering growth in North Africa and peace in the Middle East Environmental Limits • Local media campaigns, support the global task THANK YOU FOR YOUR ATTENTION Free downloads of book chapters and research papers at: www.econ.tuwien.ac.at/hanappi/publications.html