1. 1 Living in a Globalised World lecture 4 George Irvin & Pam Shaw www.george.irvin.com/sussex

2. 2 n Are there alternative models of ‘advanced capitalism’ or is US model best? n How do EU and USA compare? n Equality, prosperity, growth and employment? n Is EU model too ‘welfare heavy’ and uncompetitive? (ie, is budgetary stringency the only answer to globalisation?) This Session

3. 3 n EU-25 pop is 455m (USA 275m) and combined GDP is €9.3 tr (€ 9.0 USA) n EU-15 runs CA surplus (v large US deficit); Germany world’s largest exporter n EU-15 is a net capital exporter (creditor); USA is largest debtor n EU-15 companies doing better: 61 in Fortune 500 v USA 51 n EU-15 citizens enjoy better levels of education, excellent public services, job security, longer holiday entitlements, and better health care and retirement benefits; more stringent environmental standards; far lower rates of violent crime. EU v USA: Europe’s advantages

4. 4 Gini Coefficients (EU-15 & USA) Sweden 1995.221 Finland 1995.226 Luxembourg 1994.235 Netherlands 1994.253 Belgium 1997.255 Denmark 1997.257 Germany 1994.261 Austria 1995.277 France 1994.288 Spain 1990.303 Ireland 1987.328 Italy 1995.342 UK 1995.344 Greece (CHER, 1999).362 Portugal (CHER, 1999).375 EU-15 average.288 USA 1995.372 EU v USA: equality

5. 5 But US has done better: n Per capita Y (EU-15) 70% of USA;$27,535 for the EU-15 and $38,093 for the USA in 2003. n over the past decade, US growth has been higher than that in the EU, n average unemployment has been lower in USA. unemployment rts Prosperity, Growth Productivity 1974 1996 2004 EU-15 2.8 10.8 9.9 USA 5.5 5.4 6.5

6. 6 However: Productivity per hour per worker higher in Germany, France than USA, but USA works longer hours: (USA = 1800 pa v EU = 1500 pa) Per capita growth difference very small: Sooo … Unemployment is the crucial problem! Labour Productivity, Growth & Unemployment 1980-95 1995-2000 2001-2004 EU-15 1.8 2.1 1.4 USA 1.9 2.3 1.5

7. 7 Competing views: n ‘Minimum wages & Inflexible labour markets’: OECD Jobs study (1994); US economists argue that high benefits remove incentive to be employed n ‘Inadequate aggregate demand’ Keynesian view: more recent agreement that French & German C-demand too low; danger of deflation; Britain & US demand sustained by asset boom Unemployment in EU Core Economies

8. 8 n Examine debates in the EU: u does globalisation mean the end of the ‘welfare state’? u Is the euro an answer to globalisation? n (with Pam Shaw): Look at the complex issues of environmental change and sustainable growth Where From Here?

9. 9 Two groups (of your choice) should form to debate the ‘motion’: ‘High unemployment in the Eurozone is mainly caused by excessively generous welfare schemes and inflexible labour markets’ Question