Europe's wake up call
"We've made it!" That was the predominant feeling among leading continental politicians and officials in the weeks after January 1st. The many merchants of doom had been proven wrong. Not only had EMU gone ahead on schedule, with more countries participating than many had envisaged, but the hazardous project did not founder in its first weeks as some sceptics had predicted – and perhaps secretly hoped. To be sure, economic growth figures still had to go up and unemployment had to go down. But what was not in doubt was the conviction – for that was what it was – that the successful launch of the euro would herald a new and very promising age for Euroland, an age characterised by the now well-known virtuous circle of lower and falling interest rates, greater price transparency, a surge in cross-border investment, and so on.
Not everyone, however, is as convinced. A group of 50 young Europeans has published a report entitled "Wake up, Europe!" at the Davos World Economic Forum. The group is led by Hubert Joly (Electronic Data Systems, France), Fields Wicker-Miurin (A. T. Kearney, UK), and Ulrich Schumacher (Siemens, Germany). It specifically attacks much of the complacency that currently permeates the European debate. Crucially, the starting point for their critique is not the Eurosceptics' arguments of why monetary union simply cannot work. Equally important and striking is that they distance themselves from the policy prescriptions of the neo-liberal school. Many people of the neo-liberal persuasion have argued incessantly that, with or without EMU, Europe will only have a future insofar as it manages to make vast strides towards what is loosely called "structural reform".
These neo-liberal incantations have been countered with equal force, frequency and predictability by the advocates of the "Rhineland" model, who say that though Europeans want to live in a market economy, they prefer not to live in a market society. In addition, they claim, the Anglo-Saxon model produces less economic growth in the medium- and certainly in the longer-term. These arguments are merely the latest version of a fruitless controversy that has gone on for decades. In the late 1980s, when Michel Albert wrote of the two models in Capitalisme contre Capitalisme, the Rhinelanders seemed on the winning side. But the Anglo-Saxons have subsequently staged a confident comeback and are now intellectually dominant.
Calling themselves "global leaders for tomorrow", the Davos group has given Europe a wake up call. They have transcended both tired debates, of EMU-enthusiasts versus EMU-sceptics, and of lean-but-mean neo-liberals versus comfortable-but-complacent Rhinelanders. In essence they argue that these arguments are besides the point and ignore what will really determine Europe's future well-being. That Europe is now more productive and richer than ever before is clear. But how, they ask, will Europe fare in the next fifty years?
The young Turks directly question the adequacy of the current European socio-economic system. Its main shortcomings are listed as a compulsive search for security, borne out by the priority of price stability in determining monetary policy; an ever more expensive welfare state incapable of delivering help to those that really need it; and a fossilised economic system that protects inefficiencies through the lack of effective competition and inadequate access to venture capital. In addition, they go on, European societies risk disintegration through social and economic exclusion, and suffocation through rising yet unfunded pension liabilities.
The main concept of their report is a "Future Readiness Index". The point of the index is to help determine the preparedness of societies to face the challenges of 2050. Contemporary definitions of success must be tackled and reshaped, and go beyond the simple maximisation of economic growth. A successful society, they argue, is typified by sustainability (as measured by economic growth, wealth creation, environmental sensitivity and viable social safety nets); fairness and justice (social inequities, income differentials, work and health care opportunities and costs, and protection of human rights and freedoms); harmony and the perception of security (crime and internal social or cultural tensions) and preparedness (quality of leadership, mobility and quality of workforce, funding of pension systems, educational enrolments and internet connections).
When applied to the 15 EU member-states, plus the US, Canada and Japan, the Future Readiness Index produces surprising results. Top three are Denmark, Austria and Ireland. The bottom places are filled by Spain, Greece and Italy. The UK and US are placed sixth and seventh respectively.
Three broad patterns emerge. Generally, north European countries did better than the southern ones, although Portugal is ahead of Germany. Belgium is the main exception. Secondly, small economies tend to do better than larger ones, both inside the EU and in comparison with the US, Japan and Canada. The UK, France, Germany and Italy are all below Denmark, Austria, Ireland, Sweden, Finland and Luxembourg. Thirdly, and perhaps most interestingly, the results do not give a clear victory to the Anglo-Saxon model. The US scores well on economic criteria and the penetration of the internet, but is a laggard on pollution, social inequalities, the cost of its healthcare system and the impact of crime on business and society. However, the Rhineland model hardly does any better. France and Germany not only score low on economic growth and (youth) employment, but also on internet connections and other variables such as viable social safety nets and pension liabilities.
It is tempting and easy to question both the methodology of the study and start nit-picking the choice of variables – which cannot be anything but selective and hence debatable. But that would miss the main point of the report which is provocation. The Davos group has given a welcome warning shot to the EMU-enthusiasts who believe that the euro will in itself solve Europe's economic woes. At the same time, their results should perhaps make neo-liberals rethink their self-confidence, at times bordering on triumphalism, for it is far from clear that the undiluted adoption of unadulterated free market remedies is what the patient really needs. Young Turks are supposed to question existing arrangements and conventional wisdoms. On that criteria, at least, they have scored well.