Changing patterns of economic management

Harlow program, fall 2008 Politics and Society in Contemporary Europe: Britain and Ireland from Partition to Present ******** Information meeting Thursday, March 20 th 12:15-1:00AA2071

Changing patterns of economic management From more state intervention to less state intervention From more state intervention to less state intervention Embrace liberalism in several countriesEmbrace liberalism in several countries UK from Thatcher UK from Thatcher Netherlands Netherlands From public ownership to private ownership From public ownership to private ownership From Keynsianism to monetarism From Keynsianism to monetarismHowever, Maintenance of welfare states, albeit in modified forms Maintenance of welfare states, albeit in modified forms Still important differences between coordinated market economies and liberal market economies Still important differences between coordinated market economies and liberal market economies

State intervention Less impulse to plan or direct economies from above Less impulse to plan or direct economies from above But social partnership & concertation continue in many countriesBut social partnership & concertation continue in many countries Less inclination to favour national champions Less inclination to favour national champions National champions go transnational – end up as multinationalsNational champions go transnational – end up as multinationals Less inclination to rescue failing firms Less inclination to rescue failing firms Experience with steel and shipbuilding in the 1970sExperience with steel and shipbuilding in the 1970s

Privatization In many countries, nationalized industries privatized In many countries, nationalized industries privatized Examples: Examples: AirlinesAirlines Post, telephone & telegraph (PTT)Post, telephone & telegraph (PTT) Energy supply & deliveryEnergy supply & delivery Rail (Netherlands, UK)Rail (Netherlands, UK) OthersOthers Transport (UK) Transport (UK) Water (UK) Water (UK)

From Keynsianism to Monetarism Increasing problems with counter-cyclical management in the 1970s Increasing problems with counter-cyclical management in the 1970s Growing inflation and unemployment: stagflationGrowing inflation and unemployment: stagflation Swedish case: stock-building as counter-cyclical technique failsSwedish case: stock-building as counter-cyclical technique fails As a consequence, policy-shift & paradigm shift As a consequence, policy-shift & paradigm shift Move to monetarism paradigm:Move to monetarism paradigm: Steer economies not by managing demand, but rather by managing money supply Steer economies not by managing demand, but rather by managing money supply Reinforced by conservative think-tanks in the UK & USReinforced by conservative think-tanks in the UK & US

Factors leading to change Increased openness/exposure of national economies to the international economy Increased openness/exposure of national economies to the international economy European integration European integration Single European Act (SEA) 1987,Single European Act (SEA) 1987, completion of the single market by 1992 completion of the single market by 1992 Maastricht Treaty, (Treaty on European Union) 1991Maastricht Treaty, (Treaty on European Union) 1991 Shift from monetary union (EMU) to single currency Shift from monetary union (EMU) to single currency Deficit and debt targets reduce scope for counter-cyclical management Deficit and debt targets reduce scope for counter-cyclical management Deficits to be no more than 3% per annumDeficits to be no more than 3% per annum Overall debt no more than 60% of national incomeOverall debt no more than 60% of national income Reinforced by Stability and Growth PactReinforced by Stability and Growth Pact

Liberal v. Coordinated Market Economies Coordinated market economies: Social partners (unions & employers) continue to play role Social partners (unions & employers) continue to play role Meet with government to discuss, if not determine, broad direction of national economic policies Meet with government to discuss, if not determine, broad direction of national economic policies May launch special initiatives – e.g. efforts to deal with long term unemployed May launch special initiatives – e.g. efforts to deal with long term unemployed Compliance: Compliance: More likely to voluntary than compulsoryMore likely to voluntary than compulsory Examples Examples NetherlandsNetherlands GermanyGermany SwedenSweden AustriaAustria NetherlandsNetherlands

Problems with coordinated market economies Special role accorded to social partners: Special role accorded to social partners: Trade union federations and national employers associations must be able toTrade union federations and national employers associations must be able to explain what they are doing to their members explain what they are doing to their members show that any compromises reached are to their benefit, e.g. show that any compromises reached are to their benefit, e.g. Foregoing additional wage increases for more jobs, greater social protectionForegoing additional wage increases for more jobs, greater social protection Foregoing additional profits for a broader national interestForegoing additional profits for a broader national interest Typically requires organizations which are more rather than less centralized Typically requires organizations which are more rather than less centralized Government must be able to explain why special privileges accorded to certain groups & not othersGovernment must be able to explain why special privileges accorded to certain groups & not others Tendency of cooperation to wax and wane Tendency of cooperation to wax and wane Ebbs when no deal to be made, members upsetEbbs when no deal to be made, members upset Returns in the event of crisis & sometimes because the structures and practices are there (e.g. Netherlands)Returns in the event of crisis & sometimes because the structures and practices are there (e.g. Netherlands)

Liberal market economies State withdraws State withdraws Primary example: UK Primary example: UK Impact of ThatcherImpact of Thatcher Continue under BlairContinue under Blair Use of low wage strategy, liberal economic climate to attract industry Use of low wage strategy, liberal economic climate to attract industry