Abstract
The most dramatic problem of European economic policy is the exploding unemployment rate in the Mediterranean EU-countries. This chapter sets out to explain the causal links leading to this major bottleneck in Europe’s economic dynamics. In the first part the causal chain is described in detail as follows: Unemployment is increased by austerity policy of governments—austerity policy is enforced by rapidly rising government debt—government debt has been rising due to bailout of banks and speculative interest rate attacks on countries—banking crisis and aggressive interest rate policy are a consequence of exploding demand for (uncovered) financial promises at global financial markets—uncovered financial promises are the only remaining channel for capital accumulation if increases in (real) labour productivity are dying away on a global scale. The phenomenon of European unemployment thus is explained by the impasse of the dominant global mode of production, which had surfaced first as the financial crisis in 2008.
The second part of the chapter uses the insights of part 1 to study the contours of a possible EU employment policy, which can keep welfare levels in Mediterranean EU-countries as high as possible. It is evident that welfare mainly is determined by income, which for the majority of EU-households in turn depends on employment. Employment decisions can be divided into three sets:
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1.
Employment decisions of public institutions (e.g. reversing austerity policy?)
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2.
Employment decisions of small and medium size enterprises (e.g. changing work-time regimes?)
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3.
Employment decisions of transnational corporations (e.g. EU regulation and incentive structures transcending national boundaries?)
I all three areas special attention will be on youth unemployment and the inevitable consequences that changes in retirement age will have. In a concluding section it is discussed how far a specific European economic policy [a ‘Pilot Project Europe’, see (Hanappi, H. (2013). Can Europe survive? Ten Commandments for Europe’s next ten years. In A. P. Balcerzak (Ed.), Growth perspectives in Europe?. Torun, Poland: Polish Economic Society.)] that differs from other policies followed in other parts of the world economy is feasible and can be embedded in the global context.
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As a side effect for those who remained employed their labour intensity, i.e. the tasks to be performed in one unit of time, increased tremendously.
- 2.
The malicious influence of inappropriate economic theory, i.e. neoclassical theory, probably has been less important than economists believe. For a state representative of the ruling class to act like the CEO of a large transnational corporation had become attractive enough anyway, both types of leaders despised complicated economic science.
- 3.
It is not always easy to determine the borderline between exploited and exploiters. In the case of one-person-firms and small firms in general the phenomenon of self-exploitation often lets this borderline run right through individual physical persons. Moreover the amount of exchange-rate-exploitation is haunting European class analysis since more than hundred years.
- 4.
In this context it has to be mentioned that the state fraction of the US ruling class since 1980 has focussed on extending its military dominance in the world. In this fraction there is a deeply rooted believe that in the end all economic problems can be resolved by direct coercive intervention.
- 5.
To let the yearly budget deficit not exceed 3 % of GDP (one of the Maastricht criteria from 1992) was just reformulating the wish that any such disequilibrium in flows (yearly government expenditure minus yearly government income) should be possibly be covered by the yearly growth of another flow (GDP). The 3 % of GDP growth was the rather optimistic guess of the average post-war growth rate of real GDP.
- 6.
In that respect recent years have been an outstanding example to show that a law system is an epiphenomenon of a social power structure. Law follows and legitimizes ex post what currently prevails as dominant power structure—and not vice versa. Law accommodates power.
- 7.
Since the quantities of the diverse output commodities and services are measured in qualitatively different physical units, aggregation makes the use of their monetary value indispensable. Note that this implies that all elements of market processes that determine prices therefore co-determine aggregate output. Moreover, total output carries all the deficiencies that GDP measurement has been criticised for (neglect of non-market mediated work, neglect of several reporting biases, etc.).
- 8.
As in the case of output different types of labour time input (e.g. simple versus educated work) will make the use of the mirror image of monetary values necessary to be able to sum-up inputs. But now not only distortions of market peculiarities are interfering, there also is the basic difficulty that any type of hold-up cost and the whole exploding sector of financial services (with its ‘imputed’ cost) make the measurement highly dubious.
- 9.
This productive contradiction between ‘Markets and Hierarchies’ has been studied in detail by Oliver Williamson and his followers (Williamson 1975).
- 10.
See Shaikh (1980) for an interesting assessment.
- 11.
If the labor productivity of growing oranges in Spain changes at a different speed than the labor productivity of the coal industry in Poland, then this does not give any hint on the quality of the division of labor in Europe. To evaluate the latter it is always the overall situation that has to be considered, and not just a comparison of two unrelated scalars.
- 12.
With the help of modern media technology in a milieu of media concentration, market manipulation has become one of the most flourishing activities. For good reasons this is in stark contrast to the propaganda of the agents active in this field, who emphasize the objectivity of financial markets: They are mystified as a kind of ‘weather condition’, exempt from any human influence or manipulation.
- 13.
This line of arguments was also sent as an ‘Open Letter’ to president Barroso answering his request for policy proposals at the Global Jean Monnet Meeting in Brussels in December 2013.
- 14.
The year 1974 has been chosen as starting point because a marked turn in the world economy followed the breakdown of the fixed-exchange rate system (Bretton Woods) in 1971. This was immediately followed by the turmoil at crude oil markets, which it initiated (oil crisis of 1973). Only with 1974 the new system started to consolidate itself.
- 15.
While this disappearance of investment opportunities in Europe is a sign of stagnated entrepreneurship, there were different reasons for the same difficulty in other parts of the world, e.g. China, India, Russia, Latin America, and Africa. The cumulative effect of these different impacts at some point (September 15 of 2007) led to a sudden switch of strategy of some big players in international finance.
- 16.
Compare Hanappi (2012) for a sketch of such a vision.
References
Feenstra, R. C., Inklaar, R., & Timmer, M. (2013). The next generation of the Penn world table. Available for download at www.ggdc.net/pwt
Hanappi, H. (2012). Shangri-La Governance. A sketch of an integral solution for European Economic Policy based on a synthesis of Europe’s problems. Updated version of a paper presented at an EU COST meeting in Stockholm 2010, published in COST working papers series. Available on the Web: http://www.econ.tuwien.ac.at/hanappi/Papers/Hanappi_2012s.pdf
Hanappi, H. (2013). Can Europe survive? Ten Commandments for Europe’s next ten years. In A. P. Balcerzak (Ed.), Growth perspectives in Europe?. Torun, Poland: Polish Economic Society.
Shaikh, A. (1980). On the laws of international exchange, in [Nell, 1980].
Williamson, O. (1975). Markets and hierarchies. London: The Free Press.
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Hanappi, H. (2015). Unemployment in Mediterranean EU Countries: Fighting Youth Unemployment. In: Katsikides, S., Koktsidis, P. (eds) Societies in Transition. Springer, Cham. https://doi.org/10.1007/978-3-319-13814-5_3
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DOI: https://doi.org/10.1007/978-3-319-13814-5_3
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