Posted: 6 Feb 2012
Date Written: November 1, 2011
Europe must return to the Delors agenda of industrial policy and an active European role in the globalization process and a social welfare state to manage the multiple tasks of integration and social cohesion. In the light of our results, European policy-making must dare finally to take the globalization-critical organizations of European ‘civil society’ seriously (Brand, 2005; Brand and Raza, 2003; Brand et al., 2000; Brand et al., 2001). According to our analysis, industrial policy is the sine qua of a real European answer to the Chinese and United States Keynesian global power strategy that always put the well-being of the Chinese and US transnational corporations ahead of ideology.
Our analysis is a theoretical and empirical development of the contribution of the Austrian political economist Josef Steindl (1912-1993), whose work nowadays enjoys a renaissance (see also: Lavoie, 1996), especially championed vigorously by researchers from the Austrian Institute for Economic Research in Vienna, as a policy alternative to the current and dominant Brussels/Paris neo-liberal consensus of the European Commission and the OECD. In Steindl (1946), the author already analyzed the process of increasing concentration of capital and the oligopoly of the market. In Steindl (1952), he established a relationship between economic stagnation and the growth of oligopoly in advanced capitalist countries. Oligopolistic or monopolistic firms avoid cut-throat price competition (see especially Guger/Marterbauer/Walterskirchen, 2006). For this reason, the share of cumulated investments of multinational, oligopolistic corporations in the GDP of host countries is one of the most important variables, emerging as a long-term bottleneck of European development. This absolutely non-mainstream message has a solid foundation in the results of empirical, quantitative sociology (Bornschier, 1975, 1976, 1980, 1981, 1982, 1983, 1996, 2002, 2005; Bornschier and Chase-Dunn, 1985), replicated in the present study. Already Steindl expected a secular tendency to stagnation in mature capitalist economies, brought about by monopolization. Growth rates of GDP are low and unemployment is high in relation to long-run averages and to the USA. Economic policy in the EU seems to have an inherent anti-growth and pro-unemployment bias.
The present overview of recent quantitative studies first introduces a summary about recent results of a research project about contemporary global development since the end of Communism in East Central Europe and the former USSR in up to 175 nations, using 26 predictor variables to evaluate the determinants of 35 processes of development on a global scale.
Presented with signs of failure and decay all around, European decision makers should start finally to take serious lessons on why some countries in the world system develop better than others. We criticize the hitherto existing pro-globalization strategy of the EU-Commission, and maintain that it is to be held responsible for the failure of the attempt to make Europe the world’s leading economy by 2010, the so-called ‘Lisbon strategy’. To judge from the results of this study, the successor strategy (the so-called ‘EU-2020’ strategy) will also fail, just like the ‘Lisbon strategy 2010’.
Our analysis of the time series perspectives of globalization and development revealed astonishing results, again confirming the globalization critical paradigm. Our data analysis for the last four decades highlights the following main trends:
• Rising economic globalization is the defining element of the development trajectory of humanity in the 1970s, 1980s, and 1990s until the beginning of the new Millennium – from Spain with the most rapid globalization process to Burkina Faso. 90.57 per cent of humanity, living in 108 countries of the 117 countries with complete data, was affected by that process.
• Only in nine countries were we confronted with a negative time series correlation between the time axis and economic globalization. These countries amount to just 1.90 per cent of the world’s population.
• The brave new world of rising economic globalization is a world of rising inequalities. 75.92 per cent of the global population live in countries in which there was a rising linear trend towards inequality over time. For 54.05 per cent of humanity, this trend was especially strong, and the time series correlation coefficient of the time axis with inequality was 0.500 or above. Among the EU-27 countries, there are 13 nations corresponding to this very strong trend towards rising inequality over time.
• 79.61 percent of humanity also experienced the dire fact that, according to the available time series, globalization in their countries was positively correlated with higher inequality.
• For 48.97 per cent of humanity, living in 55 countries, this trend was especially strong. The time series correlation was 0.500 or above. 13 of the 27 EU countries are among them and their experience gives testimony to the Latin Americanization of the European continent.
• Only 35 countries experienced some positive promises of globalization, i.e. a negative time series correlation between globalization and inequality. The inhabitants of these countries are a fortunate global minority, and comprise 12.86 per cent of the global population. Only seven EU-27 countries are among them
Former Commission President Delors used to say that nobody can fall in love with the single market. Mario Monti, a former EU-Commissioner, now recognizes that when the market is regarded as a superior entity, as if it were always able to deliver efficiently and did not need appropriate regulation and rigorous supervision, dangers are likely to lie ahead, as shown by the financial crisis. It was – Monti says - forgotten by many that the market ‘is a good servant but a bad master’.
But the most basic vision of the post-war world of peace and prosperity was spelt out by President Franklin Delano Roosevelt already on 6 January 1941: the four freedoms of the freedom of speech and expression - everywhere in the world. The second is to worship God in his own way everywhere in the world. The third is freedom from want. The fourth is freedom from fear. Our 13 social cohesion regressions, confirmed the globalization critical paradigm, and showed that current realities of the world economy suggest a Rooseveltean reading of four freedoms, which might be undermined or even threatened by what Mario Monto called the bad master, which by the European political elites is definitely regarded as the superior entity, as if it were always able to deliver efficiently and did not need appropriate regulation and rigorous supervision. Our results, in particular, suggested, as we already hinted above:
• World economic openness does have a significant negative effect on the Human Development Index, in many ways THE master variable for the social situation in a country.
• Low comparative price levels, and hence, implicitly, a low level of services of general interest, are a bad precondition for the levelling of the income differences between rich and poor.
• High foreign savings are indeed a driver of unemployment, and income inequality.
• MNC penetration increases income polarization and infant mortality.
Under such circumstances, Europe must return to the Delors agenda and a social welfare state to manage the multiple tasks of integration and social cohesion. The often-hailed beneficial effects of foreign capital penetration do not materialize, or materialize completely. As correctly predicted by the sociological and political science ‘dependency’ literature in the tradition of Osvaldo Sunkel, social polarization dramatically increases by a development model, based on a very high foreign capital penetration.
This essay finally also touches on the issue of political economic long-cycle debate. Our analysis, using advanced statistical techniques, also re-iterates empirical results, recently published by Korotayev and Tsirel (2010) and has shown in addition the following things:
1) liberal and ‘Marxist’ analyses of all ‘denominations’ are right in emphasizing the severe cyclical fluctuations of the capitalist system on a global scale
2) there is a world political and world strategic swing of societal systems, which accompanies the economic ups and downs
3) and there is a striking similarity in the logic of the globalized period of the second half of the 19th Century with our age.
Globalization and monopolies lead towards stagnation. Some great political economists of the instability of the international order, like Rosa Luxemburg and Otto Bauer, foresaw the dark clouds of major inner-capitalist wars on the horizon, and in the light of our analysis, we are not too far away from such dark times, if the logic of ‘madness’ called contemporary globalization is not corrected.
Our re-discovery of the issue of European industrial policy in the framework of an otherwise relatively free economy is based on the solid empirical evidence in this study, which shows the strong gnegative effects of high coefficients of MNC penetration and the low coefficients of European MNC headquarter status. Thus the old critical questions addressed in the direction of neo-classical theory by such economists as Celso Furtado, Michal Kalecki, Gunnar Myrdal, Francois Perroux, Raul Prebisch, Paul Rosenstein-Rodan, Kurt Rothschild, Dudley Seers, Hans Singer and others can be taken up anew. De-regulation helps, but it helps the dominant centre to maintain and even increase its leading position, and certainly not the technologically and politically weaker nations of the periphery and semi-periphery. So, it is French former EU-Commission President Jacques Delors (1992) and not economics Nobel Laureate Prof. Krugman, who seems to have gained the upper hand in the debate started by Professor Paul Krugman in ‘Foreign Affairs’ in 1994 on industrial policy and global economic competitiveness (http://www.foreignaffairs.org/19940301faessay5094/paul-krugman/competitiveness-a-dangerous-obsession.html). Is European wisdom reduced forever to the magic number of 3 per cent budget deficit, i.e. the Maastricht criteria? Or is the single market indeed being regarded as the superior entity, as if it was always able to deliver efficiently and did not need appropriate regulation and rigorous supervision, as Mario Monto warned in his quoted report, 2010?
In our opinion, European policy-making should dare finally to take the globalization-critical organizations of ‘civil society’ seriously (Brand, 2005; Brand and Raza, 2003; Brand et al., 2000; Brand et al., 2001). Without a proper European industrial policy there will no answer to the BRIC country and United States Keynesian global power strategy that always puts the well-being of their economies and corporations ahead of ideology.
Notes: Downloadable document is in German.
Keywords: International Relations and International Political Economy, International Migration
JEL Classification: F5, F22
Suggested Citation: Suggested Citation
Tausch, Arno, Globalisierung Und Die Zukunft Der Eu-2020-Strategie (Globalization and the Future of the EU-2020 Strategy) (November 1, 2011). Available at SSRN: https://ssrn.com/abstract=1998081 or http://dx.doi.org/10.2139/ssrn.1998081