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Thursday, April 27, 2006

Beyond the European Social Model writes on this new collective book edited by the UK "Open Europe" organisation:
The trendy thing to make reference to in EU discussions right now is clearly the "Nordic model". Acres of newsprint and gallons of ink have been used up in discussions of the Scandinavian knowledge economy, and "flexicurity."
But, the e-paper continues, real sucess in terms of economic growth is to be found not in the North, but in the West:
What happened is that Ireland really had the Thatcherite revolution that Britain only thought it had. While public spending in Britain has varied up and down between 40% and 50% of GDP, Ireland had slashed the size of the state from 55% to 35% of the economy since the early 80s. This ignited a long boom which has seen the Irish economy grow by more 10% in several years.
The Eu-Obs-comment joins the authors of "Beyond the European Social Model" in criticising the "fortress mentality" of mainstream EU policies and pointing out, that a small state plus bigger growth doesn't mean less social protection nor les (social) services:
The social model also means worse public services for the vulnerable. In the longer term, a high tax burden lowers growth and so ultimately means less money is spent on public services in real terms. For example Ireland has cut public spending as a proportion of GDP since the start of the 1980s, while the tax burden across the rest of the EU has stayed roughly the same. But because the tax cuts boosted growth so much, public services are taking a smaller slice of a much bigger pie. That’s why since the ‘80s Ireland has seen real spending on public services increase nearly two and a half times as fast as the rest of the EU.
Of course, this evaluation tells us nothing about the real level of Irish (and British) social protection. Meanwhile, the EU-Obs. conclusion is unambiguous:
EU leaders should stop tinkering around the edges with the failed "Lisbon programme" of marginal economic reforms. EU member states need to go for the plunge, and undertake the kind of free-market revolution which has transformed Ireland - and which can transform the rest of Europe too.
Well. If we consider the state of the Irish economy in the eighties, when the country started to profit from massive EU investments, it is difficult to see the logic of the reasoning given above. Ireland logged far backwards in nearly every respect. The Irish "miracle" is nothing more or less than a vigourous operation of "catching up" with the surrounding economies. A "take-off", like other European countries made at the end of the 19th century and after the end of the 2nd world war. And coming late(r), means also some relative advantages for a country that is catching up: low wages, young population, no former investments to write off, etc.
If it is true, that Ireland applied a "Thatcherite Revolution Model" (which is discutable), we should preferably look at Britain, where such a "revolution" actually took place. Even after ten years of Labour tinkering, the public instruction levels are becoming poorer and poorer, real poverty is growing, the housing market is a disaster and public services have been predated upon.

My conclusion is, that revolutionary changes are necessary in the social models of Germany and France, not in order to lower their levels, but to dynamize them, to adapt them to a more flexible and services-oriented economy. As Sweden and Denmark show, this is a real possibility. It generates a healthy public demand and dynamises professional careers. The actual poverty level is Sweden can be sonsidered as a late sequel to former static policies, a "friction" problem, that will solve itself.

The EU-Obs. invites readers to debate on their proposals.
Join them!

The book (102 pp) can be downloaded in 10 PDF installments or as a whole at the Open Europe website.

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