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Europe’s Economy in Global Competition: Notes for Alpbach*)

English Pages, 20. 8. 2001

1.      I think most of us would agree that there are not many reasons to be fascinated with the current state of the European economy, with the last decade of its performance (in the 1993 – 2002 decade, using IMF estimates, the European Union grew at an average of 2,3 %), as well as with its probable, imaginable future.

When discussing it we should be aware of a huge discrepancy between the feelings of the majority of Europeans who live in a nirvana of relative economic affluence, of long holidays and shortening working hours, of a rather permissive, immodest, hedonistic and greedy life-styles on the one hand and the gloomy prophecies of many economists and financial analysts on the other. Who is right and who is wrong? Do we – in Europe – live on shaky foundations and on a borrowed time or is the prevailing criticism the consequence of a fashionable negativism of always skeptical intellectuals?

2.      The hard data do not give us much comfort:

-         Europe is undeniably loosing its position in global competition;

-         European economic growth is relatively slow;

-         European welfare state  (die soziale Marktwirtschaft) has not been ­– in spite of the collapse of communism visibly curtailed. It has been even extended;

-         the Euro is weak and is weak because Europe is weak. (Euro was supposed to dethrone the dollar or at least to create a challenge to US financial hegemony but it has done little of that. No surprise that there is a genuine fear that European financial stability is increasingly being undermined);

-         Enlargement of the rigid, heavy and costly Union to the East will be expensive –surprisingly (or perhaps paradoxically) for all involved, for old members as well as for potential newcomers.

3.      Something must be done. What we in Europe desperately need is a radical dose of liberalism and deetatism. We should initiate new rounds of  liberalization, deregulation and privatization. We live – instead –  in the era of quasi-progressivistic, but comfortable and undemanding Bwhich has become BErsatzideologie. This has become an insurmountable obstacle to better economic performance. Deepening of EU has been connected with increasing regulation and with growing protection (interpreted and advocated as policy harmonization, as improving of competition, as a fight against dumping policies, etc.) whereas we need economic freedom.

Widening of EU should be used as an excuse for the abolishing of all kinds of subsidies and anti-market mechanisms existing in the Union but I am afraid it will not happen. There is a danger that the Union will get bigger, more bureaucratic and more expensive – to the detriment of all of us.

4.      Many Europeans believe – quite naively – in the possibility of converting Brussels into the great liberating force which could accomplish what is otherwise politically difficult, if not impossible, at a national level. This is an illusion, repeated, however, again and again. To expect more of political neutrality, less of lobbying and rent-seeking, more of undetached altruism, less of ambitious politicians and bureaucrats, etc. at a supranational level – with greater distance of politicians and bureaucrats from citizens and voters – is a fatal conceit. History has never experienced anything like that. On the contrary.

5.      As I said we should be prepared for the possible future conflict, breakdown or disturbance. I do not see it in the economic sphere in a narrow sense. The economy can grow slowly, with cyclical ups and downs, with temporary difficulties for  years or even decades. There will arise, probably, in the short- or medium term neither visible increase in economic instability nor a beginning of a destructive vicious circle. The problem may, however, arise from the rapid growing of the expectations-reality gap (E-R gap). The European citizens will become frustrated by the unfulfilled expectations and – as a result of it – the shaky political and social equilibrium, we live in, may be easily converted into a disequilibrium and in a destructive conflict of visions. I see new partial “isms” waiting for their synthesis (or for a new Karl Marx capable of putting them together). The problems will in my opinion, therefore, arise in the political sphere.

6.      Central and Eastern European countries – the future EU members – radically transformed their economies and made them fully dependent on exports to Western Europe. Any economic problem in the West – slowdown of economic activity or growing instability – will have multiplier effects upon their economies. Their vulnerability is very high and the EU – with all its protectionism, import protection, export subsidies, export of “standards”, weakening of competition, etc. – should be aware of it.

Václav Klaus, August 20, 2001 

*) Alpbach Forum, Austria, August 28, 2001. 

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