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Industrial change and globalisation: Challenges for the European Social Model. Economic growth scoreboard. Afghanistan 29.0% Turkmenistan 23.1% Equatorial Guinea 20.0% Chad 15.0% Isle of Man 13.5% Azerbaijan 11.2% Liechtenstein 11.0% Faeroe Islands 10.0% Armenia 9.9%

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Industrial change and globalisation:

Challenges for the European Social Model

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Economic growth scoreboard

Afghanistan 29.0%

Turkmenistan 23.1%

Equatorial Guinea 20.0%

Chad 15.0%

Isle of Man 13.5%

Azerbaijan 11.2%

Liechtenstein 11.0%

Faeroe Islands 10.0%

Armenia 9.9%

Ukraine 9.4%

Kazakhstan 9.2%

China 9.1%

Lithuania 9.0%

Argentina 8.7%

Qatar 8.5%

India 8.3%

Bhutan 7.7%

San Marino 7.5%

Algeria 7.4%

Latvia 7.4%

Russia 7.3%

Botswana 7.2%

Vietnam 7.2%

Cook Islands 7.1%

Nigeria 7.1%

Albania 7.0%

Tajikistan 7.0%

Mozambique 7.0%

CIA: World Fact Book 2003-04

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Balance of payments scoreboard (Billion USD)

Hong Kong 17,4

France 13,8

Malaysia 13,4

United Arab Emirates 12,5

South Korea 12,3

Netherlands 12,1

Belgium 10,7

Finland 10,3

Venezuela 9,7


United Kingdom -7,6

USA -541,8

Japan 135,9

Germany 57,2

Switzerland 36,0

Russia 35,9

China 31,2

Norway 29,3

Taiwan 28,6

Singapore 26,2

Saudi Arabia 22,2

Sweden 19,6

Canada 18,6

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US FDI - % of total – (2004: 1st + 2nd Q)


US Direct investment abroad. US Dep. of Commerce.

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UK Foreign Direct Investment - % of total


Direct investment abroad. UK National Statistics

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GDP Growth


Government budget

Balance of Payments

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US current account 1889 – 2004 - % of GDP

Source: OECD Economic Outlook no. 76

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World Economic Forum scoreboard 2004


  • Finland

  • USA

  • Sweden

  • Taiwan

  • Denmark

  • Norway

  • Singapore

  • Switzerland

  • Japan

  • Iceland

  • UK

  • Netherlands

  • Germany

  • Australia

  • Canada

  • EU:

  • Finland

  • Sweden

  • Denmark

  • UK

  • Netherlands

  • Germany

  • Austria

  • Estonia

  • Spain

  • Portugal

  • Belgium

  • Luxembourg

  • France

  • Ireland

  • Malta

16. Slovenia

17. Lithuania

18. Greece

19. Cyprus

20. Hungary

21. Czech Republic

22. Slovakia

23. Latvia

24. Italy

25. Poland

Based on broad concept. Results very similar to Lisbon benchmarking

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Economic policies

The introduction of the Euro put focus on Structural Policies

Lisbon was an answer

Did politicians listen?

Monetary Policy

Fiscal Policy

Structural Policies

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The Lisbon process – the target

Adopted by Heads of State and Government in Lisbon Spring 2000:

To make Europe the most competitive, knowledge-based economy in the world by 2010, based on social cohesion and environmental sustainability

Progress to be measured by the Open Method of Coordination: Benchmarking and adoption of best practices

Sustainability issues added one year later in Gothenburg

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The Lisbon process

Primarily inspired by the growth, jobs and productivity gap to US

A ten-year plan to restore European Competitiveness

‘Soft’ rather than ‘hard’ law (different from Internal Market)

Open method of Coordination

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There is a European Economic and Social Model

and it is characterised by large public sector, focus on welfare state and emphasis on the environment.

Taxes as % of GDP:

Japan: 26%

USA: 25%

China: 16%

EU-15: 40%

India: 17%

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European Economic and Social sub models






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European Economic and Social sub models

Similarities: Hands-off approach to markets

Differences: Size of welfare state



Similarities: Large welfare sector

Differences: Approach to market

OECD: Countries with relatively liberal attitude to product market regulation:

UK, Ireland, Denmark, Slovakia, Sweden, Finland, Netherlands.

Countries with relatively restrictive attitudes:

Germany, Spain, France, Czech Rep., Italy, Hungary

OECD: Product Market Regulation 1998-2003. February 2005


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European Economic and Social sub models

Similarities: Hands-off approach to markets

Differences: Size of welfare state



Similarities: Large welfare sector

Differences: Approach to market

Nordic model combines a liberal approach to markets with high quality welfare sector and provides ‘flexicurity’


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Re-introduction of Structural Policies

Global competition requires flexibility and a higher knowledge base

European population requires confidence and security

Target: Combining flexibility and security = Flexicurity

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Does a big state prevent competitiveness?

Apparently not. This issue is not quantity but quality.

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Public sector and competitiveness

WEF score













Tax of GDP




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Public sector and competitiveness

  • Public sector reforms are essential for competitiveness agenda:

  • Value for money

  • Combat corruption

  • Modernisation (eGovernment)

  • Good infrastructures

  • From passive to active

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Globalisation is working



Consumers get richer, but can we adapt and create new, sustainable jobs?

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From the industrial society to today


Logistics - distribution




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Outsourcing – and insourcing

In some countries the debate focusess only on outsourcing

In others a more balanced debate on outsourcing and insourcing

Globalisation is not just about loosing, also winning

The negative debate shows fear for lack of competitvness and thus lack of strucutral reform

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Attitudes towards globalisation in Europe

Source: IMD survey 2004. Index 0-10.

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Need for reform

Reforms are at least needed in :

labour market and social welfare

Innovation, entrepreneurship and market

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Labour market and social welfare

Life cycles are shorter and shorter

Need for constant knowledge upgrade

Calls for flexible labour market with security and Active Labour Market Policy

Ageing population requires life-long learning and longer working life

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Innovation entrepreneurship and the markets

Europe must be better to grow SME’s

Innovation must be brought to the markets – closer links between research and real life

Europe’s risk culture underdeveloped

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EU budget

EU budget can in general contribute in a limited way to development of European competitiveness. Budget is only 1% of GDP – and ½ is for CAP

Coordination of national policies would be stronger

Focus and link to overall targets could help, but

the debate is now on marginal issues on overall size and fight for national corners

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GDP per Capita – 2005 Index. EU-15 = 100. PPS

US: 158,8 Japan: 118,9

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GDP per Capita – 2005Index. EU-15 = 100. PPS

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GDP growth rate – 2005Percentage change over previous year

US: 3,0 Japan: 2,1

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Total unemployment rate -2004 (%)

USA: 5,5

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Labour productivity per person employed 2005

GDP in PPS per person employed relative to EU-25 = 100

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Gross domestic expenditure on R&D % of GDP - 2003


US: 1.91 – Canada: 2.67 – Japan: 3.12

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Spending on Human Resources Spending on education as % of GDP


US: 5,35 – Japan: 3.60

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Life-long learning % of population 25-64 participating in education and training


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Internet penetration in EU households - 2004

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Broadband penetration rate – 2004

Number of broadband lines in % of population

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E-government on-line availability 2003

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Patent applications to European Patent Office

Per 1 million inhabitants - 2002

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ICT Expenditure 2004

As % of GDP

US: 5,5 – Japan: 3,5

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Energy intensity of the economy Consumption of energy divided by GDP. Kg of oil equivalent per 1000 Euro. 2002

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Level of corruption

US: 7.5 – Canada: 8.5

Transparency International 2003

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Flexibility of business environment

Composite index. Danish Industry

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Labour market regulation

IMD survey-2004

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Flexibility and agility

IMD survey, 2004

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Open method of coordination

Are models transferable:

No, but solutions are to a large extent

Why did France have to go through the No vote to discover the Nordic Model?

OMC may now work, but not because of EU or Lisbon, but because of desperate search for models that work!