Industrial change and globalisation:

1
Industrial change and globalisation Challenges
for the European Social Model
2
Economic growth scoreboard
Afghanistan 29.0 Turkmenistan 23.1 Equatorial
Guinea 20.0 Chad 15.0 Isle of
Man 13.5 Azerbaijan 11.2 Liechtenstein 11.0
Faeroe Islands 10.0 Armenia 9.9 Ukraine 9.4
Kazakhstan 9.2 China 9.1 Lithuania 9.0 A
rgentina 8.7
Qatar 8.5 India 8.3 Bhutan 7.7 San
Marino 7.5 Algeria 7.4 Latvia 7.4 Russia
7.3 Botswana 7.2 Vietnam 7.2 Cook
Islands 7.1 Nigeria 7.1 Albania 7.0 Tajiki
stan 7.0 Mozambique 7.0
CIA World Fact Book 2003-04
3
Balance of payments scoreboard (Billion USD)
Hong Kong 17,4 France 13,8 Malaysia 13,4 Unit
ed Arab Emirates 12,5 South Korea 12,3 Netherland
s 12,1 Belgium 10,7 Finland 10,3 Venezuela 9
,7 . United Kingdom -7,6 USA -541,8
Japan 135,9 Germany 57,2 Switzerland 36,0 Russia
35,9 China 31,2 Norway 29,3 Taiwan 28,6 Singa
pore 26,2 Saudi Arabia 22,2 Sweden 19,6 Canada 1
8,6
4

US FDI - of total (2004 1st 2nd Q)

US Direct investment abroad. US Dep. of Commerce.
5
UK Foreign Direct Investment - of total

Direct investment abroad. UK National Statistics
6
Financially viable
7
EU - US
GDP Growth
Unemployment
Government budget
Balance of Payments
8
US current account 1889 2004 - of GDP
Source OECD Economic Outlook no. 76
9
World Economic Forum scoreboard 2004

• GLOBAL
• Finland
• USA
• Sweden
• Taiwan
• Denmark
• Norway
• Singapore
• Switzerland
• Japan
• Iceland
• UK
• Netherlands
• Germany
• Australia
• Canada

• EU
• Finland
• Sweden
• Denmark
• UK
• Netherlands
• Germany
• Austria
• Estonia
• Spain
• Portugal
• Belgium
• Luxembourg
• France
• Ireland
• Malta

16. Slovenia 17. Lithuania 18. Greece 19.
Cyprus 20. Hungary 21. Czech Republic 22.
Slovakia 23. Latvia 24. Italy 25. Poland
Based on broad concept. Results very similar to
Lisbon benchmarking
10
Economic policies
The introduction of the Euro put focus on
Structural Policies Lisbon was an answer Did
politicians listen?
Monetary Policy Fiscal Policy Structural
Policies
11
The Lisbon process the target
Adopted by Heads of State and Government in
Lisbon Spring 2000 To make Europe the most
competitive, knowledge-based economy in the world
by 2010, based on social cohesion and
environmental sustainability Progress to be
measured by the Open Method of Coordination
Benchmarking and adoption of best
practices Sustainability issues added one year
later in Gothenburg
12
The Lisbon process
Primarily inspired by the growth, jobs and
productivity gap to US A ten-year plan to
restore European Competitiveness Soft rather
than hard law (different from Internal
Market) Open method of Coordination
13
There is a European Economic and Social Model
and it is characterised by large public sector,
focus on welfare state and emphasis on the
environment. Taxes as of GDP
Japan 26
China 16
USA 25
EU-15 40
India 17
14
European Economic and Social sub models
Northern
Anglo-Saxon
Eastern?
Continental
Southern
15
European Economic and Social sub models
Similarities Hands-off approach to
markets Differences Size of welfare state
Northern
Anglo-Saxon
Similarities Large welfare sector Differences
Approach to market
OECD Countries with relatively liberal attitude
to product market regulation UK, Ireland,
Denmark, Slovakia, Sweden, Finland,
Netherlands. Countries with relatively
restrictive attitudes Germany, Spain, France,
Czech Rep., Italy, Hungary OECD Product Market
Regulation 1998-2003. February 2005
Continental
16
European Economic and Social sub models
Similarities Hands-off approach to
markets Differences Size of welfare state
Northern
Anglo-Saxon
Similarities Large welfare sector Differences
Approach to market
Nordic model combines a liberal approach to
markets with high quality welfare sector and
provides flexicurity
Continental
17
Government budgets in Nordic and Anglo-Saxon
models
18
Current accounts in Nordic and Anglo-Saxon models
19
Re-introduction of Structural Policies
Global competition requires flexibility and a
higher knowledge base European population
requires confidence and security Target
Combining flexibility and security Flexicurity
20
Does a big state prevent competitiveness?
Apparently not. This issue is not quantity but
quality.
21
Public sector and competitiveness
WEF score
6
Fin
Swe
Den
UK
Spa
Ger
5
Bel
Fra
Ita
4
Tax of GDP
30
40
50
22
Public sector and competitiveness

• Public sector reforms are essential for
  competitiveness agenda
• Value for money
• Combat corruption
• Modernisation (eGovernment)
• Good infrastructures
• From passive to active

23
Globalisation is working
30
85
Consumers get richer, but can we adapt and create
new, sustainable jobs?
24
From the industrial society to today
IT
Logistics - distribution
Production
Design
RD
25
Outsourcing and insourcing
In some countries the debate focusess only on
outsourcing In others a more balanced debate on
outsourcing and insourcing Globalisation is not
just about loosing, also winning The negative
debate shows fear for lack of competitvness and
thus lack of strucutral reform
26
Attitudes towards globalisation in Europe
Source IMD survey 2004. Index 0-10.
27
Need for reform
Reforms are at least needed in labour market
and social welfare Innovation, entrepreneurship
and market
28
Labour market and social welfare
Life cycles are shorter and shorter Need for
constant knowledge upgrade Calls for flexible
labour market with security and Active Labour
Market Policy Ageing population requires
life-long learning and longer working life
29
Innovation entrepreneurship and the markets
Europe must be better to grow SMEs Innovation
must be brought to the markets closer links
between research and real life Europes risk
culture underdeveloped
30
EU budget
EU budget can in general contribute in a limited
way to development of European competitiveness.
Budget is only 1 of GDP and ½ is for
CAP Coordination of national policies would be
stronger Focus and link to overall targets could
help, but the debate is now on marginal issues
on overall size and fight for national corners
31
Some examples of Lisbon benchmarking
32
GDP per Capita 2005 Index. EU-15 100. PPS
US 158,8 Japan 118,9
33
GDP per Capita 2005 Index. EU-15 100. PPS
34
GDP growth rate 2005 Percentage change over
previous year
US 3,0 Japan 2,1
35

Total unemployment rate -2004 ()
USA 5,5
36

Labour productivity per person employed 2005 GDP
in PPS per person employed relative to EU-25 100
37
Gross domestic expenditure on RD of GDP - 2003

US 1.91 Canada 2.67 Japan 3.12
38
Spending on Human Resources Spending on education
as of GDP

US 5,35 Japan 3.60
39
Life-long learning of population 25-64
participating in education and training

40

Internet penetration in EU households - 2004
41

Broadband penetration rate 2004 Number of
broadband lines in of population
42

E-government on-line availability 2003
43
Patent applications to European Patent Office Per
1 million inhabitants - 2002
44
ICT Expenditure 2004 As of GDP
US 5,5 Japan 3,5
45
Energy intensity of the economy Consumption of
energy divided by GDP. Kg of oil equivalent per
1000 Euro. 2002
46
Level of corruption
US 7.5 Canada 8.5
Transparency International 2003
47
Flexibility of business environment
Composite index. Danish Industry
48
Labour market regulation
IMD survey-2004
49
Flexibility and agility
IMD survey, 2004
50
Open method of coordination
Are models transferable No, but solutions are
to a large extent Why did France have to go
through the No vote to discover the Nordic
Model? OMC may now work, but not because of EU
or Lisbon, but because of desperate search for
models that work!