Juggling politics and economics: Europe
I was reminded by Bismarck's juggling of politics in Europe as I read with interest the article on "when growth and social protections clash" (economist, 28 Oct).
As an economic bloc, the EU has to juggle the interests and concerns of the various nations within it. Bismarck managed to juggle interests during the early 20th century to balance these interests and to the advantage of his country. Maybe one day a Bismarck will rise to juggle the interests within EU, for the EU.
The resistance of the French to reduction in subsidies, the resistance of several European countries to reducing the social safety nets... all these are contributing to an inflexibility in the European economic system as a whole. Globalization requires countries to be flexible, adaptable and nimble. Europe has to fit the bill to compete! We're not looking at a one-country-to-world model here... but an entire bloc-to-world scenario which can possibly be either a hinderance or a big advantage.
Thinking about how the Asian countries are now becoming more competitive, particularly in East Asia, probably sheds some light on the possible reforms required in Europe... even if these reforms are gradual, they are necessary and of use!
1) Allowing market forces to operate. Be it Stiglitz or other economists, there has been much economic claims to the benefits of removing unnecessary, overall self defeating subsidies in economic systems.
2) Allowing labor market flexibility... it's especially crucial in the age where there is a trend of "drive to the bottom" and constant structural disequilibrium. Increased inflexibility of the labor market will contribute to a greater lag in adjustment of economies to "equilibrium" (and hence proving Keynesian stickiness is particularly fundamental and stark in the labor aspects... such as wages).
3) Focusing on increasing value-add. Europe has the brain power. It needs to exploit this considerable capability to its advantage. Chirac's recent comment on focusing on R&D is really a great idea where synergy in the European bloc may yield considerable results. Looking at countries such as Japan, the lag in innovation and slowdown in growth seems to be coherent. Hence, Europe needs to improve on its research aspects.
4) Paradigm shifts of outsourcing. Yes, outsourcing may mean a reduction in jobs in certain countries... (particularly in cases where jobs shift from Western to Eastern Europe)... but it is especially necessary. I remember reading Krugman's article on the hot-dog stand. What countries often fail to see in the short term is the long term gain in creation of more high value jobs... hence, the key is "TRAINING"!
I shall end off here... au revoir!
As an economic bloc, the EU has to juggle the interests and concerns of the various nations within it. Bismarck managed to juggle interests during the early 20th century to balance these interests and to the advantage of his country. Maybe one day a Bismarck will rise to juggle the interests within EU, for the EU.
The resistance of the French to reduction in subsidies, the resistance of several European countries to reducing the social safety nets... all these are contributing to an inflexibility in the European economic system as a whole. Globalization requires countries to be flexible, adaptable and nimble. Europe has to fit the bill to compete! We're not looking at a one-country-to-world model here... but an entire bloc-to-world scenario which can possibly be either a hinderance or a big advantage.
Thinking about how the Asian countries are now becoming more competitive, particularly in East Asia, probably sheds some light on the possible reforms required in Europe... even if these reforms are gradual, they are necessary and of use!
1) Allowing market forces to operate. Be it Stiglitz or other economists, there has been much economic claims to the benefits of removing unnecessary, overall self defeating subsidies in economic systems.
2) Allowing labor market flexibility... it's especially crucial in the age where there is a trend of "drive to the bottom" and constant structural disequilibrium. Increased inflexibility of the labor market will contribute to a greater lag in adjustment of economies to "equilibrium" (and hence proving Keynesian stickiness is particularly fundamental and stark in the labor aspects... such as wages).
3) Focusing on increasing value-add. Europe has the brain power. It needs to exploit this considerable capability to its advantage. Chirac's recent comment on focusing on R&D is really a great idea where synergy in the European bloc may yield considerable results. Looking at countries such as Japan, the lag in innovation and slowdown in growth seems to be coherent. Hence, Europe needs to improve on its research aspects.
4) Paradigm shifts of outsourcing. Yes, outsourcing may mean a reduction in jobs in certain countries... (particularly in cases where jobs shift from Western to Eastern Europe)... but it is especially necessary. I remember reading Krugman's article on the hot-dog stand. What countries often fail to see in the short term is the long term gain in creation of more high value jobs... hence, the key is "TRAINING"!
I shall end off here... au revoir!
posted by dk | 11:34 AM
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