Authors Iain Begg | Gabriel Glöckler | Anke Hassel ... - The Europaeum

Firstly, they should include policy actions aimed at correcting past policy
and regulatory failures. Secondly, they should include measures designed
to reinforce “policy success stories” associated with earlier reforms.
Thirdly, they should address the long-term challenges facing European
economies and societies.
The question is whether the economic crisis has produced a politically
sustainable reform dynamic, thereby making the Lisbon strategy
superfluous, or, on the contrary, whether implementation of structural
reforms has now been linked in a much tighter way to the revival of the
Lisbon process. In that case, what might the revival of the Lisbon strategy
involve and how could its effectiveness be raised? These issues are
discussed in the following sections, where there is an analysis of the
rationale of the Lisbon strategy and an account of its inherent weaknesses
and its likely strengths.
Why are we still concerned about EU-level coordination
of market policy and institutional reforms?
The Lisbon strategy was meant to narrate, shape and frame the EU’s
response to a relatively weakening economic performance. Since the mid-
1990s, this dip in performance has put an end to 25-years of almost stable
relative per capita output and therefore led to a widening gap in average
living standards between Europe and the US. The relatively slow level of
output growth in Europe has been associated with relatively slow labour
productivity growth, which has no longer been sufficient to offset Europe’s
relatively deficient labour input. This labour input is largely a function of
Europe’s lower rates of employment and shorter working year compared
to the US. Growth accounting has revealed that the post-1995 slowdown
in European productivity growth has been driven less by lower capital
deepening in information and communication technology and more by
much slower growth of multifactor productivity – multifactor productivity
being directly or indirectly related to the use of information and
communication technology (ICT). The total contribution of the so-called
knowledge economy to productivity growth has therefore been much
lower in Europe compared with the US. This has resulted in the relatively
slower growth of European labour productivity. 2 Moreover, the shift in
risk aversion and reductions in R&D and innovation that followed the
financial and economic crisis resulted in lower multifactor productivity
growth. It is conceivable this may lead to a permanent loss of Europe’s
long-term output potential, particularly if policy responses amplify those
risks and/or fail to address structural deficiencies that may prolong the
impact of the crisis on labour markets. 3
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After the crisis: A new socio-economic settlement for the EU