The Quiet Economic Miracle? The European Economy

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The “New Economy” In late 1990s, Europeans began to talk of new economic paradigm Low wages, low unemployment, low or no inflation, high growth “Goldilocks economy”—not too cold, not too... “new economy” Efficient computerized systems (labor) Global competition in labor markets Lower prices for many industrial raw materials Growth did not spark inflation Jeremy Rifkin views this new paradigm in Europe as a quiet revolution

Rifkin, p. 59 “While we Americans continue to look to the Pacific and Asian economies for signs of quickening competition and greater commercial opportunities, a quiet economic revolution of a different sort is taking place in the land of our European forebears, of which we know very little and to which we are ill prepared to respond.”

European Economic Growth According to Rifkin: EU World’s largest trader in services EU’s GDP higher than US EU’s population 455 million; US 293 million In 2000 EU heads of state agreed to “Lisbon Agenda” To make EU "the most competitive and dynamic knowledge-driven economy by 2010"

European Economic Growth National examples Ireland as “Celtic Tiger”: High tech-informational or ICT (information and communications technologies) economy Dell, IBM, Microsoft, Compaq, Sun Microsystems, Cisco, Gateway, Oracle, Hewlett-Packard, Novell, AOL, and Ericsson.IBM OracleHewlett-Packard Finland and Sweden too Challenged by dot.com bust Dutch “Polder Model” in mid-late 1990s Consensus economic policymaking Between government, unions and employers Led to low wages, no unemployment, high growth Polder model has since collapsed? Decline in Dutch economic growth 1999: 3.9% 2000: 3.3% 2001: 1.3% 2002: 0.2% Unemployment above 5% Turnaround has led to questioning

Economic Miracle? According to study by Dr Fredrik Bergström, President of the Swedish Research Institute of Trade, and Mr Robert Gidehag, President of the Swedish Taxpayer's Association entitled EU vs. USA GDP per capita in EU is well below US Without major structural reforms has no hope of reaching US levels Is failing to live up to Lisbon Agenda “Euroschlerosis”? Burdensome gov’t programs

Economic Miracle? According to study by Dr Fredrik Bergström, President of the Swedish Research Institute of Trade, and Mr Robert Gidehag, President of the Swedish Taxpayer's Association entitled EU vs. USA GDP per capita in EU is well below US Without major structural reforms has no hope of reaching US levels Is failing to live up to Lisbon Agenda EU Commission Report (Jan 26, 2005) pointed to renewed ways to meet Lisbon goals Economic prosperity will follow political solidarity and security Effective EU governance, enforcing legislation Adopting the Constitution!

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US and Europe: ‘Comparing Chalk and Cheese’? GDP is a poor statistical measure of quality of life Measures value of goods and services produced in a country in a year Includes all economic activities as positive value Clean-up of pollution Costs of non-productive social services like prisons, hospitals, defense, policing, courts. Many things that don’t improve quality of life of citizens Need to question GDP as measure of economic wellbeing Fails to account for income distribution and individual debt (actually shows as a GDP gain) Balance of Trade: national debt

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