In a conference organised by Policy Network in London this week, Lord Tony Giddens argued, in a session I had the honour to chair, that the problems we are facing at the moment are not just European but also global. The key question facing Europe, as well as the US, China, India and Africa, is “Where are the jobs coming from?”
Therefore, Europe needs to fundamentally rethink its policies in order to respond to global challenges. It is a question of acting and reacting quickly as a continent to the rapid and persistent transformations in the world. When we are currently talking about how the European Union is tackling unemployment during the Euro crisis we have to realise that the numerous mechanisms installed since 2008, such as the European Stability Mechanism, the European Semester, Six-Pack, Two-Pack etc, are slow. Consequently they fail to respond to the effective recalibration of Europe’s place in the globalised world.
Ex-post coordination, as is currently the dominant method in Europe, is disastrous. It is an attempt at an ad hoc repair policy. In the words of Jacques Delors, invoked recently in Strasbourg by Irish President Michael D Higgins, it is fire fighting and not architecture, the type of operational coordination that could bring Europe further in creating jobs and growth. Consequently the EU Commission has to constantly revise its mechanisms and readapt when there is no positive result as it is the case now for France. As Le Monde reported, Commissioner Rehn announced this week in Brussels that France will have a longer period to fulfil the criteria of the Growth and Stability Pact. To problem is that nearly all the EU member-states do not fulfil the criteria of the Stability and Growth Pact, even Germany! This so-called coordination has in reality no real effect on the economic policies of the member states! The Spring Growth survey shows clearly this lack of future-oriented job creation policy. In the official announcement the EU commission stipulates, “we remain some distance from a recovery”.
We have known for a long time that austerity does not have the expected and necessary impact. Austerity is too severe, even according to the IMF and conservative newspapers like the Economist in this week’s Charlemagne blog. It is a real threat to growth and social cohesion.
Already last years’ debate on the multi-annual framework led to a reduced budget in research and development. This in turn led to a reduced willingness to go further in the question of vision and prosperity and showed clearly that this kind of Europe cannot bring positive results for job creation and sustainable growth. China is still the driving force of world recovery, the US is now recovering faster than Europe and in recent years even developing countries in Africa and Latin America are growing than any European economy. And what is the answer of Europe: “Cutting the budget!” But:
• Jobs, and hence growth, are generated from investment and risk taking, but are also generated from willingness to be attractive for new technologies and new methods of production in manufacturing sectors. This is what produces growth in emerging economies, brings new jobs to the US, and it is what in the last two decades has established high growth rates in Asia and Latin America.
• Jobs, and hence growth, are also generated from an effective fiscal policy in ensuring high levels of aggregate demand. As long as investments in the private sector are not recovering, with the banks not passing on their low interest rates to small and medium size enterprises, the state has to play its role via fiscal policy. In Europe it is up to the EU Commission to ensure that role. The budget should help to give incentives tor investment promotion and employment-focused growth policies
Thus, Europe definitely needs to elaborate an alternative growth narrative. Such an alternative approach is only possible if solidarity and mutuality become more central to European policy. Pooling more sovereignty and therefore fostering an overall European interest is needed to stimulate a stable, influential and competitive Europe.
The globalised world is not waiting for Europe. The world is ruthless, as Al Gore writes in his new book “The Future of Democracy”.
Like all other continents, Europe has to face a rapid and all-encompassing industrial transition. We don’t know what the new production patterns, like 3D printing, the advance of “robotisation” and the development of nanotechnology will bring, but Europe has the obligation to manage these transitions democratically and mutually.