Where Now for European Social Democracy? - Policy Network

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Growth Policies for Europe:Is there a Common SocialDemocratic Agenda?JEAN PISANI-FERRYAssessmentThe growth performance of the EU is disappointing. The long termstatistics are telling: income per capita in the EU has for three decadesbeen stagnating at 70 per cent of the US level and since 1980, theshare of the EU in world GDP has declined by 4.5 percentage pointsfrom 23.9 per cent to 19.4 per cent in 2003, against a mere 0.5 percent drop for the US. Recent developments are also worrying, as labourproductivity growth has accelerated markedly in the US since 1995,increasing by one per cent per year between 1995 and 2002 comparedto 1990-1995; while it has decelerated in the EU, falling by one percent each year. While the slowdown in European labour productivitygrowth partially results from employment policies that have succeededin bringing low-skill, low-productivity persons back into employment,this cannot account for the whole story. There is also something wrongin the working of the engine.Finally, it is hard to be satisfied with the record of the euro areaduring the recent slowdown. Growth has been one per cent per year in2001-2003, against two per cent in both the UK and the US. It can beargued that things would have been worse without the euro – or, to putit differently, that the common currency cannot be held accountablefor the weaknesses and policy mistakes of its constituent memberstates. Nevertheless, the accomplishment is clearly inferior to whathad been expected by the supporters of monetary union.This underperformance questions the sustainability of theEuropean social model(s), as persistently slow growth makes the fiscalcost of social protection increasingly difficult to bear. It also questions49
50WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?the legitimacy of the EU in the eyes of citizens who regard prosperityas the number one European public good, and Europe’s ambition toplay a role in the world economy – in this respect, the ultimate threatis irrelevance.Against this background, it would be unfair to blame Europeanpolicymakers for having been inactive. They have successively launchedthree major programmes to rejuvenate old Europe and fosterprosperity through common policies: the Single Market in the 1980s;the euro in the 1990s; and the Lisbon Agenda in 2000. But while eachof those endeavours has requested adaptation and effort from Europe’scitizens, none has consistently delivered the growth that had beenexpected and promised. For that very reason, our depressing economicrecord undermines support for European integration.If this assessment is correct, 1 European social democrats must putgrowth on the very top of their policy agenda. They cannot afford, asthey often did in the past, to take it as given and concentrate ondistributional or qualitative issues. They must address the growth issuehead on, thoroughly investigate the underlying causes, and put forwardtheir specific responses.ExplanationsThere are different views on the balance of factors that accountfor the economic performance of the EU. What can be called thestructuralist view holds that (almost) all difficulties can be traced backto dysfunctional markets and especially to home-made rigidities inthe labour markets or excess regulations in the market for goodsand services. This view is widespread in Europe and among outsideobservers. At the other end of the spectrum, the unreconstructedKeynesian view holds that macroeconomic policy failures account for(almost) all of our growth shortfall and that structural factors play aminor role. This approach is well represented on the Left in severalEuropean countries.While there can be elements of truth in both explanations, nonecan really account for the facts. The structuralist view cannot explainwhy the same economic institutions that had been conducive to growth
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Page 8 and 9: Notes on the ContributorsTony Blair
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Where Now for European Social Democracy? - Policy Network

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