Bradford University School of Management Stimulating Employment and Growth : Do we need an Anglo- Saxon or a Nordic Model? Frank McDonald

Bradford University School of Management National Business Systems Countries have different national business systems determined by their institutional systems and norms of behaviour National business systems largely determine the rules of the game for business transactions

Bradford University School of Management National Business Systems These systems are path determined by history and normally they change slowly. They however can experience rapid change in periods of crises eg the UK in the 1980s or with radical change in the views of elities eg China in the 1990s

Bradford University School of Management Types of national business systems in the EU Anglo-Saxon Nordic Rhenish Issue of the emerging national business systems in new member states

Bradford University School of Management Anglo-Saxon Model National business systems geared towards open economies (active participation in globalisation process), emphasis on extension of internal market of the EU based on social protection at minimal level, and flexible labour markets - UK and to a lesser extent Ireland

Bradford University School of Management Anglo-Saxon Model Strong market based reforms Social model conditions largely determined by needs of competitiveness Increased growth and employment Business friendly policies Open to globalisation process Economic stability

Bradford University School of Management Anglo-Saxon Model - Benefits High growth and low unemployment relative to Rhenish model countries Conducive to high levels of inward foreign direct investment from outside of the EU Fast adjustment to process of globalisation

Bradford University School of Management Anglo-Saxon Model - Benefits High proportion of population economically active Some internationally competitive sectors eg financial & business services in London, Pharmaceuticals

Bradford University School of Management Anglo-Saxon Model - Problems Growth and unemployment not better than Nordic model countries Low level of labour productivity compared to both Rhenish and Nordic model countries Large income inequalities - regionally and across types of jobs

Bradford University School of Management Anglo-Saxon Model - Challenges Improve labour productivity Reduce problems of low income for labour with low or the wrong skills Reduce regional inequality Keeping up with fast pace of change caused by technological change and globalisation

Bradford University School of Management Nordic Model National business systems geared towards globalisation process and development of high employment (with reformed social benefits systems) founded on knowledge- based industries, labour markets geared towards encouraging high productivity with high wages – the Scandinavian countries and the Netherlands

Bradford University School of Management

Nordic Model - Benefits High growth and low unemployment High labour productivity High social welfare benefits

Bradford University School of Management Nordic Model - Problems High proportion of GDP is accounted for by the state Low proportion of population are economically activity Not as attractive as the UK and Ireland for non EU based inward foreign direct investment

Bradford University School of Management Nordic Model - Challenges Maintaining high proportion of GDP accounted for by the state Dealing with low proportion of population that are economically activity Creating enough high wage/high productivity jobs in the face of increasing international competition

Bradford University School of Management Rhenish Model National business systems concerned to protect social benefits system (or to have slow pace of reform of this system) and to protect and encourage national (European) champions in key industries, major concerns about the globalisation process, and strong emphasis on protecting employment conditions – France and to a lesser extent Germany, Italy and Spain

Bradford University School of Management Rhenish Model Slow market based reforms Social model conditions determined by strong EU laws and policies to enhance social cohesion Increased growth and employment Business policies geared towards European champions Cautious approach to globalisation process Economic Stability

Bradford University School of Management Rhenish Model - Benefits High labour productivity – especially France and Germany High social welfare benefits Some leading international companies – VW, EADS, Siemens, Thales

Bradford University School of Management Rhenish Model - Problems Low growth and high unemployment compared to Nordic and Anglo-Saxon models High proportion of GDP is accounted for by the state Low proportion of population are economically active

Bradford University School of Management Rhenish Model - Problems Not as attractive as the UK and Ireland for non-EU based inward foreign direct investment Many of the large internationally competitive companies in France are strongly connected to the State For advanced economies have a relatively large share of GDP in basic manufacturing

Bradford University School of Management Rhenish Model - Challenges Boosting growth and reducing unemployment Adjusting to the decline in manufacturing jobs Increasing proportion of the population that are economically active

Bradford University School of Management Rhenish Model - Challenges Maintaining high proportion of GDP accounted for by the state Creating enough new jobs in high wage/high productivity work in the face of increasing international competition and technological change

Bradford University School of Management Emerging Models Emerging national business systems with an evolving orientation towards social benefits systems and the globalisation process Challenge what kind of national business system will help them to catch up to the labour productivity levels of the richer members of the EU and to maintain international competitiveness

Bradford University School of Management Nirvana Model High productivity High growth and low unemployment High welfare benefits

Bradford University School of Management Nirvana Model - requirements Business system which can deliver high productivity in the face of increasing international competition and technological change by overcoming problems of inappropriate characteristics in labour force, eg low economic activity, low or the wrong skills, low adjustment capacity, poor levels of education

Bradford University School of Management Realistic models Countries with high degree of consensus about social norms and highly educated populations – versions of the Nordic model Countries with diverse and conflicting views on social norms and high proportion of unskilled or wrong skilled labour with high proportion of poorly educated labour – versions of the Anglo-Saxon model

Bradford University School of Management Realistic models Countries with diverse and conflicting views on social norms and highly educated populations with appropriate skills – versions of the Rhenish model However, it is not clear if even France and Germany have the conditions necessary to sustain Rhenish models

Bradford University School of Management Role of the EU Flexible social and economic policies that permit development of different national business systems that can tackle the different challenges that face the member states A flexible EU with inner-core members in some areas and peripheral members in many areas Problems of labour migration within the EU from low to high income countries

Bradford University School of Management Role of the EU Creation of a nirvana model by strong and uniform social and economic policies with large scale transfer of income to help poorer member states to compete with high social costs Systems that generate sufficient high wage/high productivity jobs to finance high social welfare benefits A very difficult project to create, implement and sustain