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 The
Myth of the Scandinavian Model
"America's social model is flawed, but so is France's," the Parisian
newspaper Le Monde recently wrote. According to Le Monde Europe should
adopt the "Scandinavian model," which is said to combine the economic
efficiency of the Anglo-Saxon social model with the welfare state
benefits of the continental European ones. The praise for the Nordic model comes from
Bruegel, a new
Brussels-based think tank, "whose aim is to contribute to the quality
of economic policymaking in Europe." The think tank is a Franco-German
government initiative and is heavily funded by EU governments and
corporations. In October Bruegel published a study "Globalisation and
the Reform of European Social Models" [pdf] propagating the Nordic
model.
However, despite Bruegel, distorted
academic studies and the European
media's praise, the efficiency of the major Scandinavian economies is a
myth. The Swedish and Finnish welfare states have been going through a
long period of decline. In the early 1990s they were virtually
bankrupt. Between 1990 and 1995 unemployment increased five-fold. The
Scandinavian countries have not been able to recover.
The implosion of the welfare state.
In 1970, Sweden's level of prosperity was one quarter above Belgium's.
By 2003 Sweden had fallen to 14th place from 5th in the prosperity
index, two places behind Belgium. According to OECD figures, Denmark
was the 3rd most prosperous economy in the world in 1970, immediately
behind Switzerland and the United States. In 2003, Denmark was 7th.
Finland did badly as well. From 1989 to 2003, while Ireland rose from
21st to 4th place, Finland fell from 9th to 15th place. Together with Italy, these three
Scandinavian countries are the worst
performing economies in the entire European Union. Rather than taking
them as an example, Europe's politicians should shun the Scandinavian
recipes.
 Europe's Ailing Social Model: Facts &
Fairy-Tales.
Europe's social model is unable to tackle the modern challenges of
globalization, and has left Europe with gigantic problems: an
unsurmountable public debt and pension liabilities, a rapidly ageing
population, 19 million unemployed, and an overall youth unemployment
rate of 18%. The unemployment figures may easily be doubled to account
for hidden unemployment. The untold reality is that Europe's real
unemployment stands at the level of the 1932 Depression. The very
essence of the welfare state is at stake.
A man-made
Disaster : Europe's
social disaster is
unfolding while the rest of the world is booming at its fastest rate in
three decades. 2004 and 2005 were record years for China and India,
which have double-digit growth rates, and for the USA, which fully
enjoys the benefits of globalization. The world's economy is booming at
an average rate of over 4%, but Europe's growth has stagnated at an
inflated 1.5%. Martin De Vlieghere, Paul Vreymans
Taxation, tax reform and monetary
policy
The present Governor of the Bank of England, Mr Mervyn King, once
observed that "Central banks are often accused of being obsessed with
inflation. This is untrue. If they are obsessed with anything, it is
with fiscal policy."[1] I would not go quite as far as to call it an
obsession. But it is certainly true that central bankers in general,
and European central bankers in particular, take a close interest in
public finances. And this is hardly surprising. Perhaps it is not by
chance that having a strong public finance background -experience
either in academia or in government, or in both - is not uncommon
amongst central bankers.
I would not
elaborate
more on whether and how the professional career of central bankers
affect their interest in public finance issues. But on a more factual
note, it is key to remark that in the euro area close to 50% of GDP is
channelled through the government accounts and governments are by far
the largest issuers in securities markets. Government taxation and
expenditure have a considerable impact on the macro economy. And this
cannot be ignored when formulating monetary policy....
Speech
by José Manuel González-Páramo, Member of
the Executive Board of the ECB. Universidad Complutense Madrid, 13 May
2005.
As Britain
watches the birth of the Euro and euro-integrationists advocate Britain
joining euro-land as soon as possible it is surely time for an honest
debate to begin? Many have forgotten the personal suffering and the
huge disincentives to enterprise and investment induced by a culture of
high taxation. They need to remember fast, before advocating such a
colossal folly. Whether by accident or design, many have misled
when explaining the meaning of EMU and the emergence of a European
Single Currency. EMU does not stand for European Monetary Union, as
they have tended to suggest, but instead stands for Economic and
Monetary Union. This is a crucial error to make and neglects one of the
key effects of the introduction of EMU: the harmonisation of nations'
economic and monetary policies and ultimately of fiscal and taxation
policies. As the current president of the Bundesbank, Hans Tietmeyer,
remarked in October 1995 "it is an illusion to believe that the States
will retain their independence in fiscal policy."
From
1984 to 2002 Irish prosperity grew with over 167%. Belgian wealth with
just 42%. In Ireland industrial jobs increased with 35%, whereas
the Belgian industrial employment caved in. In half a generation
Ireland became the second most prosperous country of Europe. What
are the causes of the Irish economical and social success? The
Irish socio-economic model is distinguished from the rest of Europe by
its fair-tax model.
Economists and politicians agree that
Europe's economy has been
suffering from a serious disease. In 2000 the Lisbon Agenda identified
the symptoms of this disease – high unemployment and low economic
growth.
In
his presentation
- Petr Mach argues that the Lisbon Agenda
misunderstood the real cause
of the underperformance of European economy, and therefore prescribed
wrong treatment.
- Petr Mach shows that now
that the time for Lisbon Strategy is halfway
through, the economic situation in Europe is even worse than it was in
2000 when the agenda was set, and that this is due partly to the wrong
diagnosis of the disease.
- Petr Mach argues that
there is a direct link between the European
economic underperformance and European legislation which allows
spreading of many of those bad and rigid policies that are underlying
cause of the slow growth and high unemployment in Europe.
- Petr Mach argues
that by extending majority voting in the Council of
Ministers to other areas including labour legislation, the
Constitutional Treaty actually extends the list of rigid economic rules
that can be imposed on European nations from above. According to my
opinion, this can only hinder the dynamics and competitiveness of
European economie
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