Abstract
Writing about the future of health care systems, or about their past, is rather meaningless if the social context is left out. That social context, i.e., the complexity of cultural, economic, and political aspects which, in combina- tion, condition the practical operation of health care systems, is constantly subject to change. Consequently, health care systems are also constantly subject to change.
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References
Chapter 1
Swaan, A. de: Zorg en de Staat. Welzijn, Onderwijs en Gezondheidszorg in Europa en de Verenigde Staten in de Nieuwe Tijd, Amsterdam, 1993.
Sparrow, M. K.: License to Steal: How Fraud Bleeds America’s Health Care System, Updated Edition, Westview Press, 2000, p. vii.
Samuelson, P. A., and Nordhaus, W. D.: Economics, International Edition, McGraw-Hill, Inc., 1995, p. 6.
It is no surprise that the economic order has been an ongoing topic of study. The relevant literature sufficiently addresses the following themes: definitions of the concept of the economic order, attempts to classify economic orders, and descriptions of the development of economic orders (See, for example, Hartog, F.: Economische Stelsels, Groningen, 1970; Bergsma, S.: De Vermaatschappelijking van de Onderneming, Deventer, 1965, chapter 1; Popta, S. van: Inhalen en Voorbijstreven, Rotterdam, 1971; Doel, J. van den: Konvergentie en Evolutie, Assen, 1971; Zijlstra, J.: Economische Orde en Economische Politiek, Leiden, 1956, chapter 2).
Eucken, W.: Die Grundlagen der Nationalökonomie, Achte Auflage, Springer-Verlag, 1965. It should be noted that in Eucken’s view, a central authority does not necessarily have to be a government as we know it. It may also be a tribal chief or the boss of a sheikdom. Regarding the first basic type (Zentralgeleitete Wirtschaft), the author distinguishes between three variations: (a) the totally centrally controlled economic order (Total Zentralgeleitete Wirtschaft) which knows no freedom of exchange between individuals, and where the use of productive resources and the distribution of production and consumption are completely centrally controlled; (b) the centrally controlled economic order where consumers are free to exchange the goods that have been allocated to them (Zentralgeleitete Wirtschaft mit freiem Konsumguttausch); and (c) the centrally controlled economic order with complete consumer freedom (Zentralgeleitete Wirtschaft mit freier Konsumwahl). As for the second basic type (Verkehrswirtschaft), the author describes 25 market forms, based on the two determining characteristics of the idea of the market, i.e., supply and demand, with the price as the regulatory mechanism. Supply and demand know five variations: competition (Konkurrenz), partial oligopoly (Teiloligopol), oligopoly (Oligopol), partial monopoly (Teilmonopol), and monopoly (Monopol) (Eucken,W.: ibid., pp. 80–112). If we add to this the distinction between open and closed market forms from both the supply side and the demand side, or from an open demand side and a closed supply side (and vice versa), the number of market forms will be 100 (Meijer, G.: Neoliberalisme: Neoliberalen over Economische Orde en Economische Theorie, Assen, 1988, p. 72).
In organizing economic activity, prices perform three functions, namely, (1) transmitting information, (2) optimizing efficiency, and (3) determining income distribution (following Friedman, M. and Friedman, R.: Free to Choose: The Classic Inquiry into the Relationship between Freedom and Economics, Harvest Books, 1990, p. 14).
Later on, Friedman adopted a comparable approach, arguing that, fundamentally, there are only two ways to coordinate the economic activities of millions of people. One is central direction, involving the use of coercion, or “the technique of the army and the modern totalitarian state.” The other is voluntary co-operation of individuals, or “the technique of the marketplace.” (Kuttner, R.: Everything for Sale: The Virtues and Limits of Markets, The University of Chicago Press, 1999, p. 33.)
The terms “market economy” and “command economy,” as alternatives to Eucken’s “Verkehrswirtschaft” and “Zentralgeleitete Wirtschaft,” are from: Samuelson, P., and Nordhaus, W. D.: ibid., p. 6.
Dyson, K.: The Politics of the Euro-Zone. Stability or Breakdown? Oxford University Press, 2000, p. 227. This has been the case throughout European history. In this respect, De Swaan points to the fact that even charitable work has not changed that much: “visiting the sick, teaching the ignorant, and feeding the poor. In modern terms: health, education and welfare,” are still a fundamental characteristic of European culture (Swaan, A. de: Dutch Welfare in Europe XL, in: Gier, E. de, Swaan, A. de, and Ooijens, M., (eds.): Dutch Welfare Reform in an Expanding Europe: The Neighbours’ View, Het Spinhuis, 2004, p. 3).
Vathorst, S. van de: Your Money or My Life: Justice, Solidarity & Responsibility in Dutch Health Care, dissertation, Free University of Amsterdam, 2001, p. 54.
The philosopher Van der Wal distinguishes between three levels of meaning regarding the solidarity principle. First, there is the descriptive level. This is “the actual realisation of solidarity [...] which exists between people and the resulting preparedness to share existence with others, in particular where the dark sides are involved” (author’s translation). The second level, the analytical level of the solidarity principle, involves “the central notion of a theory of society” (author’s translation). At the third level, solidarity is “a yardstick to promote the quality of interpersonal relationships” (author’s translation): Wal, G. A. van der: Solidair, Hoe en Waarom? Over de Betekenis van Solidariteit bij de Bekostiging van de Gezondheidszorg, in: Jacobs, F. C. L. M. and Wal, G. A. van der, (eds.): Medische Schaarste en het Menselijk Tekort, Ambo, Baarn, 1988, pp. 85–87).
Leijnse, F.: Verzorgingsstaat: Last of Lust? Rotterdam, 1994.
Gooijer, W. J. de: On Solidarity in Changing Health Care Systems: Europe in Search of a New Balance, Leuven, 1996.
For a discourse on different types of solidarity see, for example, Beer, P. de: Insluiting en Uitsluiting: de Keerzijden van de Verzorgingsstaat, in: Entzinger, H., and Meer, J. van der, (eds.): Grenzeloze Solidariteit: Naar een, Migratiebestendige Verzorgingsstaat, De Balie, 2004, pp. 26–42.
Loo, H. van der and Reijen, W. van: Paradoxen van Modernisering, Bussum, 1997, p. 103. This does not imply that systems of social security are a mainstay of equal importance in other societies. Asian countries, for example, differ from the countries of the Western world in the sense that pursuing personal ambitions, and striving for economic productivity, are thought to be mainstays of society (among other things). In these countries, social security is, to a large extent, thought to be the responsibility of family circles.
Rifkin, J.: The European Dream: How Europe’s Vision of the Future Is Quietly Eclipsing the American Dream, Tarcher/Penguin, 2004, p. 282.
The government is not necessarily the only preserver of the quality of society’s cement. Throughout history, the church, for example, played an important role in looking after the sick and vulnerable members of society. Also, unionized labor has contributed much to improving the faith of the less well-off. Nowadays, voluntary organizations, particularly in the United States and Great Britain, are important instruments for maintaining “ civil society.” Therefore, the withdrawal of government from the economic process may be compensated for by other members or organizations of society. Nevertheless, in whichever direction a country chooses to move along the continuum, in democracies, governments are always expected to act as the guardian of the “general interest” or “common good,” no matter how fictitious these concepts may be (in this respect, see Kleerekoper, S.: De Fictie van het Algemeen Belang, Deventer, 1963, and Schumpeter, J. A.: Capitalism, Socialism and Democracy (Dutch Translation), Hilversum, 1963, pp. 213–228).
Eucken, however, provided some examples which not only demonstrated that one should be careful about taking definite positions in this respect, but also that it is disputable whether it is possible to distinguish between irreversible series or stages in the development of economic orders. History shows that there have been severe regressions, with people falling back to a preceding economic order again. For example, the well-known scheme of the development from a “natural” economy, via a “monetary” economy, to a “credit” economy, which had already existed in the Eastern Mediterranean countries during the 300s BC, was reversed from a “credit” economy, via a “monetary” economy, to a “natural” economy again when these countries were impoverished under the Roman Empire. Comparable things happened around the same time in Egypt. The fact that, during the 300s BC, the Hellenistic states had reached the stage of a “national” economy, did not prevent them from falling back to a “natural” economy five centuries later. During the third century AD, the use of coins as the circulating medium was confined to some sectors of the economy, with the rest using a barter or “natural” economy (Eucken, W.: ibid., pp. 70–75). It is equally wrong to assume that the extensive national economies (Volkswirtschaft) of Europe developed directly out of the medieval city economies (Stadtwirtschaft). The long-distance traders of those days, who were the engines of economic development, had the whole of Europe as their field of economic activity. Craft industries not only worked to meet local requirements. It was a free-trade “European Union” ahead of its time (in this respect, see Bauer in: Eucken, W.: Die Grundlagen der Nationalökonomie, English Translation, Springer Verlag, 1950, p. 73). Around the end of the sixteenth century, this union fractured as a consequence of the power plays of state creation. In the 1500s, Europe had more than 500 states, many of which were no larger than a city (Zakaria, F.: The Future of Freedom: Illiberal Democracy at Home and Abroad (Dutch Translation), Contact,Amsterdam/Antwerpen, 2003, p. 31). These were states that saw the world as “a battle arena where import prohibitions, prohibitive tariffs and other weapons of mercantilist policy might be employed” (Eucken,W.: Die Grundlagen der Nationalökonomie, English Translation, ibid., p. 74). As a consequence, the economic order did not advance from a city economy to a regional (European) economy. Instead, it resulted in the breaking-up of the pre-existing European unity, very much to the disadvantage of the various small countries on the European continent. According to Eucken, it may therefore be concluded that a higher form of economic order does not necessarily result from a gradual transition from a lower one. History has shown several times that the opposite may also happen.
Kahn, H. and Wiener, A. J.: The Year 2000: A Framework for Speculation on the Next Thirty-Three Years, Macmillan, New York, 1967, table 18.
Krugman, P.: Competitiveness: A Dangerous Obsession, in: Foreign Affairs, March/April, 1994, pp. 28–44.
For several reasons, one can argue with Eucken’s ideas regarding possible regressions in the development of economic orders. Firstly, his examples of regression from before the beginning of our era cover very long periods of time, even up to five centuries. And, as we know, in the light of eternity, everything is relative. Secondly, one queries whether it is accurate to underline one’s point of view with examples from troublesome times. The regression in the Eastern-Mediterranean countries occurred in the centuries after the Roman Empire had conquered the area, and the period from 1550 to 1650 involved several religious wars on the European continent (such as the war between the Low Countries and Spain from 1568 to 1648, the war of the Huguenots, and the Thirty Years War from 1618 to 1648). Troublesome times may lead to shock reactions, which are not normative for general developments. Likewise, after the Second World War, the natural economy was reborn, with barter trading under special circumstances. In Germany, cigarettes replaced money as the medium of exchange for some time after the war (Urwin, D. W.: A Political History of Western Europe Since 1945, Fifth edition, Longman, 1997, p. 29). The collapse of the Russian economy after the fall of communism led to a return of barter trading in several Russian regions for some time (Todd, E.: Après l’Empire: Essai sur la décomposition du système américain (Dutch Translation), Prometheus, 2003, pp. 171–172). Nevertheless, we do not speak of a “regression” in these circumstances. The increasing information and communication of modern times has led some fundamentalist religious groups to conclude that it is better not to take part in these developments. Consequently, they withdraw, closing themselves off, or they choose to oppose modernity. But again, this is not normative for a general development of the economic order. Therefore, it is difficult to see the error in distinguishing between different consecutive developmental stages of the economic order, provided these stages are not considered too rigidly.
Cowles, M. G., et al., (eds.): Transforming Europe: Europeanization and Domestic Change, Cornell University Press, 2001.
Conant, L.: Europeanization and the Courts: Variable Patterns of Adaptation among National Judiciaries, in: Cowles, M. G., et al.: ibid., chapter 6.
The most famous representative from the left side of the continuum and a fierce critic of the market economy was Karl Marx. He was convinced that the productive powers of capitalism, markets and competition, needed to be controlled in order to prevent them from causing depressions and misery for workers. For Marx, the best way to do so was government ownership of the means of production, together with the power to enforce decisions regarding their use. Marx’s influence is difficult to overestimate. At its peak, almost one-third of the world was ruled by the Marxist doctrine (Samuelson, P. and Nordhaus, W.D.: ibid., p. 7), organized in left-leaning political parties that supported a socialist or communist economic order. However, Marx himself did not intend to interpret the world and capture it in a doctrine [“Moi, je ne suis pas Marxiste”]. Instead, Marx believed that government ownership of the means of production would make the world a better place by rooting out the many abuses of the Industrial Revolution. Therefore, Marxism can only rightfully be approached as a doctrine if one is prepared to do so from the perspective of an entity of tensions, resulting from economical, political, sociological, philosophical, historical, and ethical motives (Banning, W.: Karl Marx: Leven, Leer en Betekenis, Utrecht/Antwerpen, 1960, pp. 57–59). The most famous representative from the right side of the continuum and a strong supporter of the market economy was Adam Smith. The ingredients of his market economy were private ownership of the means of production, with the price mechanism as the coordinating instrument for all the individual plans of economic subjects. In Smith’s line of reasoning, the role of the government is twofold. First of all, it has to protect its citizens against external aggression. This legitimizes a defense system. Secondly, individual citizens have to be protected from attacks by other citizens against their lives, health, freedom, and private ownership. This legitimizes the police, a judiciary, and legislation; in short: internal legal protection (Meijer, G.: ibid., chapter 2). However, two important matters should be taken into account regarding Smith’s liberalism. First of all, he and fellow thinkers expected their ideas on the economic order to provide liberation from the pressures of mercantilism of the preceding era. This liberation was expected to bring increasing wealth. Secondly, it should not be forgotten that An Inquiry into the Nature and the Causes of the Wealth of Nations (1776), the manual for a liberal economic order, had been preceded by Smith’s The Theory of Moral Sentiments, 17 years before. If one is to understand the philosopher Adam Smith, these two books should be read together, i.e., he believed that people dealt with “built-in restraints derived from moral, religion, custom and education when they strive towards self-interest” (Hirsch, F.: Social Limits to Growth, London, 1995, pp. 137–138). The two studies together envisage a balanced approach to self-interest. Smith uses the term “sympathy” in this respect. To him, this is a feeling of compassion with others, which he regards as the only element of ethical behavior, and which imposes a moral obligation to take one’s fellow citizen into account (Handy, C.: The Empty Raincoat (Dutch Translation),Amsterdam/Antwerpen, 1994. pp. 22 and 83), from the perspective of a “personal responsibility for making the world a better place (Green, D. G.: From Welfare State to Civil Society: To Welfare that Works in New Zealand, New Zealand Business Round Table,Wellington, 1996, p. 12). Consequently, “the marketplace of Adam Smith did not exist in some imaginary land of autonomous, amoral individuals, but within an interdependent social fabric in which virtue was extolled and a moral conscience constrained individual actions” (Wight, J. B.: Saving Adam Smith:A Tale of Wealth, Transformation and Virtue, Prentice-Hall, Inc., 2002, pp. 199–200). From this it follows that, to Smith, the market was not the neutral instrument for allocating efficiency that some present-day supporters of neo-liberalism assume it to be. It never has been. Instead, the idea of a self-regulating market is a “utopian experiment” (Polanyi, K.: The Great Transformation: The Political and Economic Origins of our Time, Beacan Press, 1957, p. 250). Polanyi would have regarded the neo-liberal view as a-historical. In The Great Transformation, he says in this respect, “Economic history reveals that the emergence of national markets was in no way the result of the gradual and spontaneous emancipation of the economic sphere from government control. On the contrary, the market has been the outcome of a conscious and often violent intervention on the part of the government which imposed the market organization on society for non-economic ends.” Although Smith had, and still has, many supporters, this does not mean that his ideas have never been contested. Even in 1885, List argued strongly that there may be good political reasons for governments to interfere in the economic process (List, F.: The National System of Political Economy, Augustus M. Kelley Publishers, Reprints of Economic Classics, New York, 1966). Essentially, both Marx and Smith wanted to make the world a better place. In order to achieve that, both focused on the market. Marx wanted to eliminate it completely, because of the morally and ethically reprehensible excesses it produced in his days. Apparently, he was not confident that the market would provide a situation of checks and balances in society. In contrast, Smith wanted to regulate the market in order to prevent it from producing these same excesses. Apparently, he feared that an unregulated market would destroy an existing situation of checks and balances in society.
Samuelson, P. and Nordhaus, W. D.: ibid., p. 6.
Friedman, M. and Friedman, R.: ibid., p. 284.
Urwin, D.W.: ibid., p. 126.
Myrdal, G.: Beyond the Welfare State (Dutch Translation), N. V. De Arbeiderspers, Amsterdam, 1963, pp. 34, 73, and 90.
Keynes, J. M.: The General Theory of Employment, Interest and Money, The Easton Press, Collector’s Edition, Norwalk, Connecticut, 1995.
Mueller, D. C.: Public Choice II: A Revised Edition of Public Choice, Cambridge University Press, 1995, pp. 2–3.
Besides, this was the time of a mechanistic economic worldview, which led economists to become social technocrats who developed planning instruments laid down in econometric models, which were meant to serve as anchors of security in a world of crises, wars, and ideological conflicts. In this respect, Klein’s ideas on “statistical significance,” Samuelson’s “proofs on paper,” and Tinbergen’s belief in a “ manageable society” are examples which, according to McCloskey, were all attempts to create an atmosphere of independence which was not susceptible to conflict (McCloskey, D. N.: The Vices of Economists—The Virtues of the Bourgeoisie (Dutch Translation), Amsterdam University Press, 1997).
Hayek, F. A.: The Road to Serfdom, University of Chicago Press, 1994.
This may seem new, but it is not. As early as 1933, Oppenheimer, a neo-liberal, published his “Weder so noch so. Der Dritte Weg.” Furthermore, Röpke, Proudhon, and others have used the term, together with labels like “revisionist liberalism,” “liberal revisionism,” “liberal conservatism, ” and “constructive liberalism.” These authors all rejected the rigid development of laissez-faire liberalism after Smith, as well as socialism (Meijer, G.: ibid., pp. 2 and 30). In this respect, laissez-faire liberalism can be distinguished as the “first way” capitalism. It ruled during the time of the Industrial Revolution, with the “robber barons” in power. It was replaced by the “second way,” state capitalism, which shifted power to public-sector bureaucrats.
Gates, J.: Democracy at Risk: Rescuing Main Street from Wall Street, Perseus Publishing, 2001, p. 23.
Gates, J.: ibid., pp. 92–94.
Gusmorino, P. A., III: “Main Causes of the Great Depression,” in: Gusmorino World (May 13, 1996), available from: http://www.gusmorino.com/pag3/ great_depression/index.html. It reads, “ According to a study done by the Brookings Institute, in 1929 the top 0.1% of Americans had a combined income equal to the bottom 42%. That same top 0.1% of Americans in 1929 controlled 34% of all savings, while 80% of Americans had no savings at all. [...] This maldistribution of income between the rich and the middle-class grew throughout the 1920s. While the disposable income per capita rose 9% from 1920 to 1929, those within the top 1% enjoyed a stupendous 75% increase in per capita disposable income.”
In this respect, see: Urwin, D.W.: ibid., chapter 3.
Calleo, D. P.: Rethinking Europe’s Future, Princeton University Press, 2001, p. 180.
Stiglitz, J.: The Roaring Nineties: Seeds of Destruction, Allen Lane, 2003.
McCloskey, D. N.: ibid. To this author, these economists have been doing nothing more than playing in a sandbox, an activity, which is very different from operating in the real world.
The fact that we would be on our way to the end of history, with one universal homogeneous state, does not imply that history will not, temporarily, repeat itself. In this respect, Fukuyama’s use of the term isothymia is important. It refers to the desire of people to be recognized as equal to others (Fukuyama, F.: The End of History and the Last Man (Dutch Translation), 4th edition, Olympus, 1999).
Rawls in: Sen, A.: Development as Freedom (Dutch Translation), Amsterdam/Antwerpen, 2000, p. 135.
Fukuyama admits, however, that the end of history may be a dull time, leading people to get history started again from a powerful nostalgia for the time when history still existed (in: Wheen, F.: How Mumbo-Jumbo Conquered the World, Harper Perennial, 2004, pp. 68–70).
Albert, M.: Capitalism versus Capitalism (Dutch Translation), Amsterdam, 1992; Dawson, A. D.: The Two Faces of Economics, Longman, 1996; Galbraith, J. K.: A Journey through Economic Time: A Firsthand View (Dutch Translation), Baarn, 1995; Handy,C.: Beyond Certainty:The Changing World of Organisations, London, 1996; Huntington, S. P.: The Clash of Civilizations and the Remaking of the World Order, New York, 1996; Peterson,W. C.: Silent Depression: Twenty-Five Years of Wage Squeeze and Middle-Class Decline, Norton and Company, 1995; Reich, C. A.: Opposing the System, New York, 1995; Thurow, L. C.: The Future of Capitalism. London, 1996; Buchanan, P. J.: The Great Betrayal: How American Sovereignty and Social Justice are Being Sacrificed to the Gods of the Global Economy, Little, Brown and Company, 1998; Kelly, C. M.: Class War in America: How Economic and Political Conservatives are Exploiting Low-and Middle-Class Americans, Fithian Press, 2000.
NRC/Handelsblad, February 17, 1996.
Fukuyama, F.: The End of History and the Last Man, ibid., p. 162.
Mestrum, F.: Globalisering en Armoede: Over het Nut van Armoede in de Nieuwe Wereldorde, Berchem, 2000, p. 24.
Gates, J.: ibid., p. xxxvii.
Offe, C.: Contradictions of the Welfare State, Keane (ed.), the MIT Press, Massachusetts, 1993, p. 147.
Self, P.: Rolling Back the Market: Economic Dogma and Political Choice, MacMillan Press Ltd., 2000, p. 89.
Handy, C.: Beyond Certainty: The Changing Worlds of Organisations, ibid., p. 21. Looking back, one can wonder how unexpected the end of the communist dream was. Although Henry Kissinger, from the perspective of power politics, as United States Secretary of State declared in the 1970s that communism would never disappear, Fukuyama presents a list of 13 events in China and the Soviet Union that indicated that communism was on the way to its end, starting in the 1980s (Fukuyama, F.: The End of History and the Last Man, ibid., pp. 51–53). Regarding the dangers that threaten present-day capitalism, Lacher remarks that “the gravediggers of Marxism are many, alone the corpse will not lay still” (Lacher, H.: “Making Sense of the International System:The Promises and Pitfalls of Contemporary Marxist Theories of International Relations,” in: Rupert, M. and Smith, H., (eds.): Historical Materialism and Globalization, Routledge, 2002, p. 147).
Berman, P.: Terror and Liberalism, W.W. Norton & Company, 2003, p. 162.
Becker, U.: Europese Democratieën: Vrijheid, Gelijkheid, Solidariteit en Soevereiniteit in Praktijk, Het Spinhuis, 1999, p. 23. One could also argue that communism was instrumental in keeping capitalism alert in maintaining a fair society. With the end of communism, however, capitalism has been thrown back upon its own characteristics. In this respect, it may be reassuring that each economic system demands a certain ethical behavior. Capitalism is no exception to that. In the longer term, its success not only depends on self-interest, but also on a complex and subtle system of values and norms with ingredients like dependability, trust, and honesty. Consequently, a solid system of values and norms, reaching beyond the market economy, is instrumental to an effective capitalist economic order. To put it more strongly; from its origins, the basic ethics of behavior have enormously contributed to the success of capitalism. The challenge for present-day neo-liberal capitalists is to take these origins to heart, by maintaining elementary social provisions of fairness and justice as additional elements of a market economy (Sen, A.: ibid., pp. 141, 252, 256, and 268). In Gates’ words, free enterprise has to be “guided by rules that put some limits on greed so that more of us can afford to give expression to that innate yearning for connectedness” (Gates, J.: ibid., p. 3). This will make the difference between an economic order that is directed at economic growth and one that pursues development (Sen, A.: ibid.).
Wilkinson, R. G.: Unhealthy Societies: The Afflictions of Inequality, Routledge, 1996, pp. 223–224. I do not want to suggest that the Asian tigers represent a more preferable society. After all, countries like Malaysia and Thailand know much poverty. Nevertheless, while moving to the right side of the continuum in search of a new balance, it is good to remember how these Asian countries used political means to become, indeed, economic tigers.
Popta, S. van: De Gemengde Economische Orde en de Christelijk-Sociale Gedachte, Kampen, 1974, p. 5.
Myrdal, G.: ibid., p. 87.
Gooijer, W. J. de: Beheersing van Technologische Vernieuwing, Alphen a/d Rijn, 1976.
Some countries, like the United Kingdom, have a liberal tradition; France is known for its Parisian dirigisme; the Netherlands, Belgium, Luxembourg, Germany, Austria, and the Scandinavian countries favor a democracy of mutual consultation; and the political process in Italy shows characteristics which are difficult to combine with democracy. Moreover, if we look at the institutional frameworks, countries like Belgium, Germany, and Austria are federations, whereas other democracies have a central government. Some countries are monarchies and others are republics. Electoral systems may be based on constituencies or on proportionate representation. In short, a study of European democracies would show an enormous complexity, which in turn would contribute to explaining the difficulties of European integration (Becker, U.: ibid.). In order to bring some structure to this complexity, Becker distinguishes between four typologies of the political process. The first is the typology of arena politics. This is the most pluralistic model, with many participants in the decision-making process who can, to a certain extent, operate autonomously. Participants compete and check each other. In the context of arena politics, innumerable organizations try to influence the policy areas of their interests. Politics is a market here, but it is a market that also knows compromise and deal-making. The second typology is that of state imposition. Here, centrally formulated policies are dictated to the members of society by an elected majority government that feels entitled to do so. Negotiating is less developed here, and consultation is rather elitist and selective. The third typology relates to a situation where the political process is channelled through an institutionalized framework of consultation. Here, the objective of social integration is paramount. Therefore, consensus-building is characteristic for this typology. The alternative name for this typology is corporatism. Finally, the fourth typology is clientelism, which refers to a relationship “of personal dependence, unrelated to kinship, which links two persons who control unequal resources, the patron and the client, for a reciprocal exchange of favours.” Central in this typology are hierarchy, service, favors-in-kind and personal dependence relations. All democracies show features of these typologies (Becker, U.: ibid., pp. 138–140).
Regarding movement along the continuum, the focus is particularly on the economic dimension. I do realize, however, that this dimension is greatly influenced by cultural and political conditions. One may even argue that the present economic situation of what we call “the developed world” has its origins in a threefold cultural premise from around four centuries ago. The first premise is that democratic development conditions economic development. Consequently, a country will stay economically behind if it is organized in a top-down structure with citizens living in fear of their leaders. China has been a long-standing example of this until recently. As it shows, however, the country is very well capable of realizing a strong economic growth without a democratic form of government. The second premise is that a country will develop economically only if it has both a middle class, which is characterized by an entrepreneurial spirit, and if society is characterized by gender equality. The third premise is that, through personal observation and experience, individuals can succeed in wresting themselves from dictated dogmas, which is the basis for scientific development. In combination, these premises condition democratic economic development. Consequently, there is every reason to be critical of linking development aid to political democracy. (For the influence of cultural aspects on economic development, see Landes, D. S.: The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor (Dutch Translation), Het Spectrum, 1998).
Becker, U.: ibid., p. 11. More specifically, democracy in the countries of the developed world means “liberal democracy,” i.e., a political system which is not only characterized by universal suffrage, but also by the existence of a constitutional state, the separation of powers, and the protection of constitutional rights like freedom of speech, religion, and property. This type of democracy dates to around 1950 (Zakaria, F.: ibid., pp. 13, 45).
For an extensive discussion in this respect, see: Hartog, F.: Overheid en Economisch Leven, Alphen a/d Rijn, 1965, chapters 5–8.
Hoffman, L.: Sector-Structuurbeleid, in: Economisch Statistische Berichten, 23-5-1973, p. 441.
Pen, J.: Harmonie en Conflict, Amsterdam, 1962, p. 5.
Kalma, P.: De Illusie van de “Democratische Staat,” Kluwer, 1982.
Kalma, P.: ibid., p. 20.
Regarding this, the Dutch seem to be envied for their so-called “polder model,” which is characterized by time-consuming negotiations between employers, the unions, and the government (The Economist: Model Makers: A Survey of the Netherlands, 4 May 2002, p. 3). Nonetheless, this model is immediately renamed the “Dutch Disease” whenever the economy slows down. This “polder model” is assumed to have contributed to improving the Dutch competitive position in the international economy, thanks to social-economic stability and an agreed-upon wage restraint. However, there is reason to modify the benefits of the Dutch model to a certain extent. First of all, wage restraint in the Netherlands in the 1980s did not result in increased employment in industry. Furthermore, although exports in the Netherlands increased during that time, this was not the effect of wage restraint, but of investments in quality and increased productivity, both of which were facilitated by the strong Dutch guilder (Delsen, L.: Exit Poldermodel? Sociaal-Economische Ontwikkelingen in Nederland, Second edition, 2001).
These countries (still) consider social security to be an investment in society that contributes to political stability, the latter being an indispensable factor for economic growth, according to Dornbusch (Dornbusch, R.: Agenda voor Economische Groei, Economisch-Statistische Berichten, 22-2-1992. pp. 708–711).
Dyson, K.: The Politics of the Euro-Zone: Stability or Breakdown? Oxford University Press, 2000, p. 4.
Sennett, R.: The Corrosion of Character: The Personal Consequences of Work in the New Capitalism, W.W. Norton and Company, 1998, p. 53.
Vos, P. J.: Overleeft het Rijnlandse Model? in: Toren, J. P. van den and Vos, P. J., (eds.): Overleeft het Rijnlandse Model? Perspectief op Arbeidsverhoudingen, Nationaal Vakbondsmuseum, 1997, p. 10.
Braybrooke, D. and Lindblom, C. E.: A Strategy of Decision, New York, 1970.
Kirschen, E. S., et al.: Economic Policy in Our Time, Vol. I, II and III, Second edition, Amsterdam, 1968.
In this respect, Urwin adds greater productivity and better social security to the policy objectives of governments (Urwin, D.W.: Economic Policy in Our Time, Vol. I, II and III, Second edition, Amsterdam, 1968 ibid., p. 126).
Meadows, D. L.: The Limits to Growth: A Report for the Club of Rome Project (Dutch Translation), Utrecht/Antwerpen, 1972.
Beek, W. J.: Het Eco-Circus is serieus te nemen, in: De Ingenieur, Volume 88, no. 8, February 1976.
Urwin, D.W.: ibid., p. 126.
Becker, U.: ibid., pp. 93–94.
Pierre, J. and Guy Peters, B.: Governance, Politics and the State, MacMillan Press Ltd., 2000, p. 81.
Pierre, J. and Guy Peters, B.: ibid., p. 1.
Pierre, J. and Guy Peters, B.: ibid., pp. 4–5.
Pierre, J. and Guy Peters, B.: ibid., p. 9.
Pierre, J. and Guy Peters, B.: ibid., p. 194.
Marks, G., et al.: European Integration from the 1980s: State-Centric v. Multi-Level Governance, in: Nelsen, B. F. and Stubb, A., (eds.): The European Union: Readings on the Theory and Practice of European Integration, Second edition, Palgrave, 1998, p. 292.
Marks, G., et al.: Stubb, A., (eds.): The European Union: Readings on the Theory and Practice of European Integration, Second edition, Palgrave, 1998 ibid., pp. 273–293.
The World Economic Forum’s 1999 competitiveness ranking, for instance, shows that they remain far behind the United States. The United States ranks second (after Singapore); and the United Kingdom, France, Germany and Italy only hold the 18th, 23rd, 25th, and 35th positions, respectively. In addition, the World Competitiveness Yearbook 2000 ranks the United States first for five consecutive years, with Germany in the 18th place and Italy in the 30th. Reports of the European Commission present a comparable picture. They show that the European Union lags 20% behind the United States in terms of productivity levels and employment rates. Moreover, the European Union has created only ten million new jobs since 1960, which is less than 20% of the jobs created in the United States. Finally, when it comes to investments, in the European Union there was a sharp decline from 2.5% in the 1980s to 0.8% during the 1990s, compared with an average annual increase of 5.4% in the United States during the 1990s, up from 2.4% in the 1980s (Lee, S.: Discovering the Frontiers of Regionalism: Fostering Entrepreneurship, Innovation and Competitiveness in the European Union, in: Breslin, S., Hughes, Ch.W., Phillips, N., Rosamond, B., (eds.): New Regionalism in the Global Political Economy: Theories and Cases, Routledge, 2002, pp. 163–164). In a globalizing economy, these are alarming differences.
In this respect, it is sufficient to note that, from 1850 onward, national European governments, mainly in the industrializing world, started to assume a growing responsibility for the management of social affairs within their territory through the development of “complex surveillance systems to monitor social conditions, including those that might lead to instability, and to confront problems” (Dunkerley, D., Hodgson, L., Konopacki, S., Spybey, T., and Thompson, A.: Changing Europe: Identities, Nations and Citizens, Routledge, 2002, p. 27). In those days, the permanent foundations were also laid, on a national scale, for compulsory and collective social security systems in capitalistic democracies in Europe, to the advantage of the great majority of wage laborers. Since then, systems of social security in Europe have been extended, refined, professionalized, and bureaucratized, creating the “equanimity of the welfare state” (Swaan, A. de: ibid., p. 158; author’s translation). Although there are differences in the timing and scope of the development of these systems, they all contributed to social stability. Nonetheless, these developments imply that the relational tensions between the privileged and the poor continued to exist. In this respect, De Swaan argues that, on the one hand, laborers had to develop a sense of collective solidarity. After all, what had happened to others today might happen to them tomorrow. On the other hand, the privileged would have to start to realize that mass poverty among industrial labourers could also threaten their own existence. What was required, therefore, was an understanding of the “general interdependence of people in an industrial society, a social consciousness” (Swaan, A. de, ibid., p. 160; author’s translation).
As for the origins of social security, there is an acknowledged distinction between Bismarck and Beveridge. Bismarck introduced employee insurance against industrial and other diseases, accidents, invalidity, and old age in Germany around 1880. The objective was, on the one hand, to promote the political and social integration of the working class into society, and on the other hand, to prevent social unrest and class struggle. In the period between the two World Wars, the circle of insured parties was extended to include higher incomes, family members, and senior citizens. At the dawn of the Second World War, all the countries of Western Europe had social insurance against these four risks. In addition to social integration and the prevention of social unrest, stabilization of the economy also became an objective, inspired by Keynes, who regarded social insurances useful because of their anti-cyclical effect on the economy. The Beveridge model was introduced in the United Kingdom in 1942. This involved a universal insurance system, which gave all citizens the right to health care and protection. In contrast to Bismarck, the Beveridge model is not related to income (Einerhand, M., et al.: Sociale Zekerheid: Stelsels en Regelingen in Enkele Europese Landen, Den Haag, 1995, pp. 27–29). For other approaches to models of social security see, for example, Jallade, J-P., (ed.): The Crisis of Redistribution in European Welfare States, Stoke-on-Trent, 1988; Geleijnse, et al.: Tussen Ministelsel en Participatiemodel: Een verkennende Studie naar Stelselvarianten in de Sociale Zekerheid, Sociaal en Cultureel Planbureau, Rijswijk, 1993; Alber, J.: Some Causes of Social Security Expenditure Developments in Western Europe 1949–1977, in: Loney, M., Boswell, D., Clarke, J., (eds.): Social Policy and Social Welfare, Open University Press, Philadelphia, 1993, pp. 156–170; Lee and Raban, in: Jones, L.: The Social Context of Health and Health Work, London, 1994, pp. 59–60; Einerhand, M., et al.: ibid., pp. 29–35; Goudswaard, K. P.: Sociale Convergentie, Leiden, 1996; Esping Andersen, in: Schuyt, K. and Veen, R. van der, (eds.): De verdeelde Samenleving: Een Inleiding in de Ontwikkeling van de Nederlandse Verzorgingsstaat, Houten, 1995, pp. 6–7; Dent, M.: Remodelling Hospitals and Health Professions in Europe: Medicine, Nursing and the State, Palgrave, 2003, chapter 2.
Sandmo, A.: Introduction: The Welfare Economics of the Welfare State, in: Andersen, T. M., Moene, K. O., Sandmo, A., (eds.): The Future of the Welfare State, Blackwell Publishers, 1995, p. 1.
Thinking about welfare, however, had already started a few hundreds years earlier, as can be seen from Thomas Paine’s writings (Pierson, Chr. and Castles, F., (eds.): The Welfare State Reader, Polity, 2003, pp. 1–2).
In his Citizenship and Social Class (1950), T. H. Marshall gave a well-known syntheses of the development of modern citizenship. According to him, the concept of citizenship is linked to the development of three sets of rights over the past few centuries. The 18th century saw the development of civil rights. They concerned individual freedom and justice, with a judicial system for their enforcement. In the 19th century, political rights were added, which meant that citizens became entitled to political participation and decision-making procedures. Finally, the 20th century saw the emergence of social rights, providing entitlements to an appropriate quality of life linked to education and welfare services. Marshall argued that “the modern drive towards social equality is the latest phase of an evolution of citizenship which has been in continuous progress for some 250 years” (in: Dunkerley, D., Hodgson, L., Konopacki, S., Spybey, T., Thompson, A.: ibid., p. 11). From this perspective, the welfare state is a logical and irreversible next step in a process of civilization. A comparable approach can be found in Vasak, who distinguishes between three types of revolution: (1) the French revolution of 1789, which brought classical rights; (2) the socialistic revolutions of around 1848, resulting in social rights; and (3) the revolutions as a consequence of the process of decolonization after the Second World War, which brought collective rights (in: Cliteur, P.: Tegen de Decadentie: De Democratische Rechtstaat in Verval, De Arbeiderpers, Amsterdam/Antwerpen, 2004, p. 169).
Urwin, D.W.: ibid., p. 130.
Calleo, D. P.: ibid., p. 166.
De Volkskrant, 5 September 2003.
Geleijnse, L., et al.: ibid., pp. 7–8.
Urwin, D.W.: ibid., p. 123.
Here, we have an important difference with the United States. Citizens’ expectations about what the government should or should not do are essentially lower in the United States than in Europe. Research from the 1990s, for instance, shows that twice as many Europeans as Americans expected their governments to decrease income inequality. In addition to this, almost three times as many Europeans as Americans expected their government to provide a guaranteed minimum income (Becker, U.: ibid., table 5.5, p. 125).
Dyson, K.: ibid., pp. 19 and 38.
Becker, U.: ibid., p. 157. For the United States, Friedman proposes an even more rigorous change. After concluding that most of the American welfare programmes should never have been enacted, because they make people dependent and de-motivated to work, he suggests a transitional programme that would have two essential components. Firstly, the many different specific programmes, including the huge accompanying bureaucracy, would be replaced by a single comprehensive programme of cash income supplements, paid through a negative income tax linked to the positive income tax. This single programme would also provide a safety net for every American, so that nobody would have to suffer from dire distress. Secondly, he suggests unwinding social security (although meeting existing commitments), and simultaneously (but gradually) requiring people to make their own retirement arrangements (Friedman, M. and Friedman, R.: ibid., p. 120).
The figures for 1960 and 1985 are from Mueller, D. C.: ibid., p. 322, table 17.2.
Figures from the OECD Economic Outlook, OECD website, December, 2002.
In this respect, Pakaslanti distinguishes between four groups of countries (see Theofilatou, M. A.: ibid.: pp. 151–152).The French and the Germans, with budget deficits in 2003 of 4% and 3.8%, respectively, are thus in trouble.
In the United Kingdom, an Anglo-American country, 20% of the working population worked at least 60 hours per week in 2002. Currently, 25% of Canadians work more than 50 hours per week, up from 10% in 1991 (Honoré, C.: In Praise of Slow: How a Worldwide Movement is Challenging the Cult of Speed (Dutch Translation), Lemniscaat, Rotterdam, 2004, p. 148).
In 1997, Americans worked 1,966 hours per year, compared to, for example, 1,399 for Norway, 1,552 for Sweden, 1,643 for Switzerland, 1,689 for Denmark, and 1,679 for the Netherlands (Phillips, K.: Wealth and Democracy: A Political History of the American Rich, New York, 2002, p. 165). In the United States, there has been a trend reversal. Back in the 1950s and 1960s, Americans worked fewer hours than their colleagues elsewhere. In 1999, however, “the typical American worked 350 hours more per year than the typical European, the equivalent of nine work weeks,” according to the American Bureau of Labor Statistics (Phillips, K.: ibid., p. 115).
In this respect, German statistics from 2000 reveal that a German four-person household living on social security received 73% of the wage earnings of a comparable working family. For the United Kingdom, France and Italy the figures were 68%, 56%, and 48% respectively (Miegel, M.: Die deformierte Gesellschaft: Wie die Deutschen Ihre Wirklichkeit verdrängen, Propyläen, 2002, p. 105).
Rifkin, J.: The End of Work: The Decline of the Global Labor Force and the Dawn of the Post-Market Era, New York, 1995, pp. 202–203. See also Luttwak, E.: Turbo Capitalism: Winners and Losers in the Global Economy, London, 1998, p. 106. The importance of these differences is illustrated by empirical research from Alesina and Perotti. They found that if taxation on labor would increase by 1% of GDP, the costs of each labor unit in countries with average institutional labor relations would increase by 2.5% (in: Rodrik, D.: Has Globalization Gone too Far?, Washington, 1997, p. 45).
Fairlamb, D.: Too Few Cradles and too Few Graves, in: Business Week, European Edition, 29 March 2004, p. 56.
In: Komter, A. E., Burgers, J. and Engbersen, G.: Het Cement van de Samenleving. Een verkennende Studie naar Solidariteit en Cohesie, Amsterdam University Press, 2000, p. 20. In this respect, Habermas speaks of the “welfare state compromise,” which has characterized post-war capitalist societies. This compromise emerged to fill up the “functional gaps” of the capitalist economy caused by the economic disequilibria of “crisis-ridden growth” (business cycles and poor infrastructural investments) (Scambler, G.: Health and Social Change: A Critical Theory, Open University Press, 2002, p. 47).
Offe, C.: Some Contradictions of the Modern Welfare State, in: Pierson, Chr. and Castles, F., (eds.): ibid., p. 70.
Komter, A. E., Burgers, J. en, and Engbersen, G.: ibid., chapter 1.
Klein, N.: Fences and Windows: Dispatches from the Front Lines of the Globalization Debate, Picador, USA, 2002, p. 182.
Komter, A. E., Burgers, J. and Engbersen, G.: ibid., p. 21
Schnapper, D.: The French View of the ‘Dutch Miracle, in: Gier, E. de, Swaan, A. de, Ooijens, M., (eds.): Dutch Welfare Reform in an Expanding Europe: The Neighbours’ View, Het Spinhuis, 2004, p. 52.
Castells, M.: End of Millennium, ibid., p. 129.
Luttwak, E.: ibid., p. 203.
In support of this view, for example, is the way the United Kingdom’s government handled the privatization of UK prisons, with the American Wackenhut company becoming the British prison privateer, despite its higher-cost bid and its negative public image (murder, sexual abuse of prisoners, illegal use of gas in prisons) (Palast, G.: The Best Democracy Money Can Buy, London, 2003, pp. 310–314).
Regarding this, the Dutch economist Teulings correctly argues that a monopolist in public hands also behaves like a monopolist, with political control and responsibility remaining publically symbolic. With this experience, the search for more efficient control mechanisms has a rational basis. Regarding this, Teulings refers respectfully to the initiatives of Prime Minister Thatcher, who was responsible for the privatization of British public utilities like water, electricity and telecommunications. They resulted in such productivity increases that a 40% increase was not exceptional (Teulings, C.: Hoe de Beursgang van een Staatsmonopolist de Welvaart dient, in: Dalen, H. van and Kalshoven, F. (eds.): Meesters van de Welvaart: Topeconomen over Nederland, uitgeverij Balans, 2002, p. 118). In line with this, Mueller produces a list of 50 studies showing that privatization of public services resulted in efficiency gains in all examples but two (Mueller, C.: ibid., pp. 262–265). Though the United Kingdom was the forerunner of privatizations, corporate businesses in the United States were quick to smell the potential profits. As an example, the Californian lobby for the deregulation of electricity was very successful, not the least because of the promise that deregulation would cut consumer prices by 20%. However, after deregulation, normal households experienced a price increase of 379% in 1999, compared to the 1998 level. In addition to this, Californian plant owners started to behave like “power pirates” by manipulating the available capacities. This was exposed on the first hot Californian summer day after deregulation, when the electricity price per unit of power increased by no less than 30,000% (!) above the old regulated price of about $30. The electricity producers chose not to use all available generators, thus creating shortages through “physical withholding” and “economic withholding.” Between May and November 2000, this is reported to have occurred no less than 98% of the time. It is not difficult to guess who suffered most from this outrageous behavior of “revaluating capitalists” (Palast,G.: ibid., pp. 125–129). As for the role of Enron in this matter, see Stiglitz, J. E.: The Roaring Nineties: Seeds of Destruction, ibid., chapter 10.
Feigenbaum, H., et al.: Shrinking the State: The Political Underpinnings of Privatisation, Cambridge University Press, 1999.
In this respect, Palast shows that, due to privatization, water bills in the United Kingdom shot up to 250% of the USA price, whereas company stock prices quintupled. In some parts of England, you could even be arrested for watering your lawn (Palast, G.: ibid., p. 130).
Yergin, D. and Stanislaw, J.: The Commanding Heights: The Battle between Government and the Marketplace that is Remaking the Modern World, New York, 1998, p. 121. An illustration of the necessity for government regulation has been provided, sadly enough, by the railway accident in London some years ago, which led to the decision to make quality control of the railroad network a task for the government again.
Yergin, D. and Stanislaw, J.: ibid., p. 380.
Barber, B.: Fear’s Empire: War, Terrorism and Democracy (Dutch Translation), Ambo/Manteau, 2003, p. 170.
For instance, a strike in late 1995, intended to prevent intervention in the social security system and originally supported by two-thirds of the population, crippled public life in France (NRC/Handelsblad, 6 December 1995). Next, the Juppé social security renovation plan of 1995, submitted to the French national assembly as a bill of only one page long, elicited no less than 5,277 amendments from the opposition (NRC/Handelsblad, 11 December 1995). It is, for that matter, no exception that legislative proposals are substantially amended. In 1995, an Education Bill in the United Kingdom was amended 981 times (Alexander, R.: The Voice of the People: A Constitution for Tomorrow, London, 1997, p. 60). Furthermore, in Germany in 1996, the unions fought for continued full sickness payments, even though the German parliament had proposed only very limited adjustments to the existing regulation. In Spain, 100,000 people went on strike in Cadiz, refusing to accept that the government subsidy for the local shipbuilding wharf was to be cut. Finally, at about the same time, many Italians went on strike because they saw their pension rights under threat.
Hooghe, L.: A House with Differing Views: The European Commission and Cohesion Policy, in: Nugent, N., (ed.): At the Heart of the Union: Studies of the European Commission, 2nd edition, MacMillan Press Ltd, 2000, p. 99.
Zonneveld, M.: Kermis in de Politiek: Waarom de Nederlandse Kiezer op Drift raakte, Van Gennep, 2002, p. 98. Recently, a former leader of the Dutch federation of labor unions also criticized the model by stating that it is too dull; the 2006 minister of finance claimed that it is too slow and lacks dynamics, and comparable developments can be observed in the other countries of the European Union.
Becker, U.: ibid., pp. 160–161.
Rodrik, D.: ibid., p. 6. In this respect, it should not be forgotten that the welfare state has not been the result of the natural course of things, but has, instead, been achieved through a long-lasting struggle for a fair society. Though this welfare state may, indeed, promote “a sense of dependence”: “it is either naïve or cynical to lead the public to think that dismantling the welfare state is enough to ensure a revival of informal cooperation,” because “market mechanisms will not repair the fabric of public trust. On the contrary, the market’s effect on the cultural infrastructure is just as corrosive as that of the state” (Lasch, C.: The Revolt of the Elites and the Betrayal of Democracy, W. W. Norton & Company, 1995, pp. 82 and 100–101). In this respect, also see Myrdal, G.: ibid., p. 219.
In this respect, the World Economic Forum, a private not-for-profit foundation, headquartered in Geneva and supported by more than 1,000 member companies, uses a weighted composite index, including open markets, lean government spending, low tax rates, flexible labor markets, a stable political system, and an effective judiciary (Mittelman J. H.: The Globalization Syndrome: Transformation and Resistance, Princeton University Press, 2000, p. 39).
Scholte, J. A.: Globalization: A Critical Introduction, Palgrave, 2002, p. 265.
In 1958, 73% of interviewed Americans answered that the government “mostly” or “almost always” made the right decisions. In 1994, this figure had decreased to no more than 15%. Also in 1958, 23% of Americans “never” or “sometimes” trusted the government. In 1995, this figure was around 80% (Fukuyama, F.: The Great Disruption: Human Nature and the Reconstruction of Social Order (Dutch Translation), Amsterdam/Antwerpen, 1999, pp. 62–63). In 2003, over a hundred million Americans, almost 40% of the population, did not participate in the elections (Moore, M.: Downsize This: Random Threats from an Unarmed American, Pan Books, 2003, p. 23). Research in Great Britain has shown that the number of people having “much or reasonable confidence” in parliament decreased from 54% in 1983 to 10% in 1996. Research in Britain in 1998 among youngsters between the ages of 16 and 21 showed that 71% held the opinion that voting (or not voting) would not make a difference to their lives. In France, research in 1990 revealed that 60% of those interviewed did not trust the political parties, whereas the presidential elections of April 2002 showed that almost 30% of the population abstained from voting in the elections, a figure that was 22.5% five years earlier. This decreasing interest of the public in politics has become increasingly manifest over the past 20 years. This also applies to the countries of Middle and Eastern Europe. In Poland, voter participation dropped from 64% in 1989 to 49% in 1997. In Czechia, voter participation was 93% in 1990 and 77% in 1998. In Hungary, the figure dropped from 76% in 1990 to 60% in 1998 (Hertz, N.: The Silent Takeover—Global Capitalism and the Death of Democracy (Dutch Translation), Amsterdam/Antwerpen, 2002, pp. 122–123). Finally, a recent Eurobarometer reveals that confidence in public institutions, i.e., the civil service, the national government, the national parliament, and political parties, is low in both the “old” and the “new” member states. In particular, political parties do not enjoy high esteem. They appear to be trusted by only 13% of a region’s population (European Commission: Applicant Countries Eurobarometer 2001, ibid., p. 23).
To Levine, democracy is a plutocracy “in which moneyed elites, not undifferentiated citizens, endeavour to control the political process” (Levine, A.: The American Ideology: A Critique, Routledge, 2004, p. 121).
Beck, U.: ibid., p. 3. Corporate business would make decisions that completely disregard nation states, while “displaying contempt for the political system” (Bové, J. and Dufour, F.: The World is not for Sale: Farmers against Junk Food, Verso, 2001, p. 187). In the words of Palast, “investing in politicians has a consistently higher rate of return than investing in plants or products” (Palast, G.: ibid., p. 129). In this respect, Beck speaks of the “jubilant mass suicide” of politicians who sing the praises of the market and thereby undermine their own position (in: Fox, J.: Chomsky and Globalization, Icon Books, p. 21).
Barber, B. R.: Jihad versus McWorld: How Globalism and Tribalism are Reshaping the World, Ballantine Books, 1995, p. 117.
In this respect, it is rather convincing to quote Richard Goodwin, the speech-writer for former United States President John F. Kennedy, who said, “The principal power in Washington is no longer the government or the people it represents. It is the Money Power. Under the deceptive cloak of campaign contributions, access, and influence, votes and amendments are bought and sold. Money establishes priorities of action, holds down federal revenues, revises federal legislation, shifts income from the middle class to the very rich. Money restrains the enforcement of laws written to protect the country from abuses of wealth—laws that mandate environmental protection, antitrust laws, laws to protect the consumer against fraud, laws that safeguard the security markets, and many more” (Phillips, K.: ibid., p. 320).
Phillips, K.: ibid., p. 324. Regarding this, there is hardly any difference between Republicans and Democrats. Both political parties, though in different measures, share “a contempt for the electorate’s will” (Palast, G.: ibid., p. 80). During the 2000 presidential election campaign, Bush managed to raise no less than $191 million, the highest amount in American history, whereas Gore had to settle for $133 million. These campaign moneys are almost completely contributed by the richest 4% of the population (Hertsgaard, M.: The Eagle’s Shadow, (Dutch Translation), Cossee, 2002, p. 164). No wonder that a Republican candidate for the presidency denounced the campaign finance system as “an elaborate influence-peddling scheme with both parties conspire to stay in office by selling the country to the highest bidder” (Phillips, K.: ibid., p. 325). In this respect, Hutton reveals that, for the last 20 years, every presidential election has been won by the candidate who raised the most money (Hutton, W.: The World We’re In, Little Brown, 2002, p. 172). Furthermore, Kelly argues that “it’s obvious to almost everyone that wealthy individuals and corporations have purchased the government of the United States” (Kelly, C. M.: ibid., p. 181). “The corporations don’t have to lobby the government anymore. They are the government,” said a former American politician in this respect (Palast, G.: ibid., p. 86). All in all, American “money-responsive” politics has become “a commercial parody of itself [...] along with mediocre political candidates” (Gates, J.: ibid., pp. xxiii and 14). It is sufficient to note further that Palast estimates that candidates for the American federal election cycles invested a total amount in G.W. Bush’s election campaign of $447 million (Palast, G.: ibid., p. 83).
Beck, U.: ibid., p. 4. A more moderate position is taken by Legrain. He agrees that money and politics should be kept as separate as possible and that government should be conducted far more openly, but he also believes it not to be true that governments simply do companies’ bidding (Legrain, Ph.: Open World: The Truth about Globalisation, Abacus, 2002, pp. 147–150). To him, it is untrue that global competition prevents governments from taxing, spending and regulating. He also believes it to be untrue that globalization harms the poor and is a danger to democracy. To Legrain, ideas like these are dangerous, because they encourage frustration, apathy, and anger. They invite people to take the street, instead of thinking creatively about what kind of globalization we want (Legrain, Ph.: ibid., pp. 21–22). Companies, Legrain argues, are constrained by competition law (Microsoft versus the United States government, General Electric versus the European Commission), and companies have to abide by extensive legislation from workers’ rights to health-and-safety procedures and environmental protection. As examples he refers, among other things, to former United States President Clinton’s decision to raise the minimum wage and to Prime Minister Blair’s decision to introduce such a wage (Legrain, Ph.: ibid., pp. 19–20). This, however, is the weak point of his reasoning, because he apparently does not know that British and American employers do not live up to the minimum wage law without this having consequences regarding the majority of violations discovered.
Deakin, N.: The Politics of Welfare: Continuities and Change, London, 1994. For the American situation in this respect, Moore uses the term “Republicrats” (Moore, M.: Downsize This, ibid., p. 26). Gates observes a de facto merger of the principal political parties (Gates, J.: ibid., p. xi).
Instead, a new world is emerging. In this world, pragmatism will replace ideals and consumption will be more important than convictions. This transformation makes “leaders who lead” an antique phenomenon. Instead, markets and corporate CEOs lead, with prime ministers and presidents listening (Palast, G.: ibid., pp. 297–299).
Lasch, C.: ibid., p. 80. Regarding this, former Prime-Minister Kok of the Netherlands, a social-democrat, declared in 1995 that the Labor party had definitively said goodbye to the ideology of socialism and to “the ideological ties with other descendents of the traditional socialist movement” (Vroonhoven, L. van: De Al-Ene Mens: Op zoek naar het Individu, Damon, 1999, p. 11; author’s translation). According to Lasch, both left-and right-wing ideologies “are now so rigid that new ideas make little impression on their adherents” (Lasch, C.: ibid., p. 80).
Bové, J. and Dufour, F.: ibid., p. 173.
Zonneveld, M.: ibid., p. 62.
Schoo, H. J.: De Jaren Zestig in de Herkansing, in: De Volkskrant, 11 May 2002.
Gunsteren, H. van: Fortuyn gaf de Democratie Leven, in: De Volkskrant, 11 May 2002. If one looks at daily political practice, the correctness of these observations is hard to deny. In France, it was the social-democrat Mitterand (the term socialist is hardly used anymore) who started to reform the French social security system. After winning the elections in 1981, Mitterand promised to end with capitalism. This was a promise he had to break after a right-wing victory in the national assembly a few years later. In the Netherlands, former Prime Minister Lubbers, a Christian-Democrat, invented the term “nononsense” policy; Mike Harris from Canada introduced the “Common Sense Revolution” (Klein, N.: Fences and Windows, ibid., p. 113); German Chancellor Kohl is responsible for limiting social security and health care arrangements, for reducing corporate taxation, for privatizing public utilities, and for amending the trade unions and trade disputes legislation to the advantage of employers (Hertz, N.: ibid., p. 36). In addition, there is a large difference between Tony Blair’s writings before he was elected and what he is actually doing in Downing Street. It was his initiative to delete Article IV from the Labor statutes (Hertz, N.: ibid., p. 39). According to Pilger, Britain has become “a single-ideology state with two principal, almost identical factions, so that the result of any election has a minimal effect on the economy and social policy. People have no choice but to vote for political choreographers, not politicians” (Pilger, J.: Hidden Agendas, Vintage, 1999, p. 98).
In this respect, Peter Mandelson, one of Blair’s confidants, publicly said that “the era of representative democracy might come to an end” (Cameron, S.: The Cheating Classes: How Britain’s Elite Abuse their Power, Simon and Schuster, 2002, p. 8).
Cameron, S.: ibid., p. 8.
People would exist for the rulers of the system instead of the other way around. If one reads Cameron’s The Cheating Classes, one can wonder if this is not the case already (Cameron, S.: ibid.). Governments do not seem to realize that political colorlessness may endanger democracy, since democracy without pluralism cannot exist (Forrester, V.: Une étrange Dictature (Dutch Translation), Amsterdam, 2001, p. 19), and democracy without critical opposition loses its resilience (Gunsteren, H. van: ibid.). True democracy should embrace diversity. “True democracy is messy and fractious, if not outright rebellious,” says Klein in this respect (Klein, N.: Fences and Windows, ibid., p. 189).
Regarding this, research done by the Dutch employers’ organization VNO/NCW in 1999 showed that two-thirds of the members of the Dutch parliament did not understand anything of economics, and only 20% of those members could make a fair estimation of the amount of public spending. Therefore, it is appropriate to conclude that the most important safety mechanism for a democracy, being parliament, should be improved. One way to do this could be to increase the support of members of parliament, in order to decrease the leeway they have in their relation with the government (Dalen, H. van and Kalshoven, F., (eds.): ibid., pp. 11 and 22). In this respect, Kalma proposes to increase the countervailing power of members of parliament against the executive power of the government by, among other things, extending parliament’s administrative apparatus (Kalma, P.: ibid., p. 102).
Urwin, D.W.: ibid., pp. 263–264.
Phillips, K.: ibid., p. 318.
In this respect, British participation in the war on Iraq (whether it is deemed correct or incorrect) is an example. Long before President George W. Bush, with support of Prime Minister Blair, started the war on Iraq, the argument to do so (that is, the presence in Iraq of weapons of mass destruction) was refuted from several sides, including Scott Ritter, a former UN weapons inspector (Ritter, S. and Rivers Pitt, W.: War on Iraq: What Team Bush Doesn’t Want You to Know, Profile Books, 2002). For the Netherlands, information regarding noise pollution as a consequence of the enlargement of Schiphol airport is an example.
Kelly goes even further and suggests that [American] politicians deliberately neglect the interests of uneducated ordinary people, because capitalism has become plutocratic. Plutocratic capitalism, he argues, is designed “to benefit the educated and powerful, at the expense of the uneducated, poor and powerless.” Democratic capitalism, as it existed from the 1930s to the beginning of the 1980s, was designed by politicians who believed in realistic equal opportunities for all citizens to live healthy, productive, and rewarding lives. That kind of capitalism does not exist anymore (Kelly, C. M.: ibid., pp. 712–173). Only 7% of Americans believe that their government most often responds to the public’s wishes in this respect (Gates, J.: ibid., p. 87).
Regarding this, Klein refers to young Czechs who have come to conclude that communism and capitalism have something in common: “they both centralize power in the hands of a few and they both treat people as if they are less than fully human. Where communism saw them only as potential producers, capitalism sees them only as potential consumers” (Klein, N.: ibid., p. 35). Regarding this, voting for extreme right-wing parties (not left-wing parties, since communism has proven not to be an attractive alternative), may partly be considered to be more a declaration of dissatisfaction with the political elite, than an expression of a genuinely increasing resistance against ethnical minorities or a generally increasing xenophobia.
Widening income gaps, however, “could turn out to be globalisation’s Achilles’ heels, ” says Thomas Friedman in this respect (Friedman, Th. L.: The Lexus and the Olive Tree: Understanding Globalization, Anchor Books, 2000, pp. 318–319).
Regarding this, Judt expresses his unrest by observing that European populist political parties like that of Haider from Austria, Jean-Marie Le Pen from France, Bossi from Italy, or De Winter from Flanders “attract more votes from unemployed young people and insecure elderly than from employed people in the prime of their lives” (Judt, T.: A Grand Illusion: An Essay on Europe (Dutch Translation), Erven Bijleveld, 1997, p. 105; author’s translation). Meanwhile, we are not speaking solely of a European phenomenon. The electorate of Pauline Hanson, the leader of a provocative anti-Aboriginal/anti-immigration platform in Australia, had one of the highest unemployment rates. More than half of all Australian young people cannot find a job (Pilger, J.: Hidden Agendas, ibid., p. 233). Altogether, the increasing split in society is one of the most serious dangers to democracy. According to Handy, to prevent this from causing society to fall apart, we have to close the “hole in the heart of capitalism” (Handy, C.: People and Change, in: Radice, G. (ed.): What Needs to Change: New Visions for Britain, Harper Collins Publishers, 1996, p. 27). This hole exists because, contrary to communism, which had a cause without an effective mechanism, capitalism has an effective mechanism but no cause. The cause should be that through democratic political decision-making, capitalism shows a proper concern for others in the sense of Smith’s “sympathy.” If politics is not capable of achieving this cause, the end of democracy may not, contrary to Hertz, be caused by corporate business, but by politics itself.
Commission on Global Governance: Our Global Neighborhood, Report, Oxford University Press, 1996, p. 11.
Hertz, N.: ibid., p. 232.
Zonneveld, M.: Kermis in de Politiek: Waarom de Nederlandse Kiezer op Drift raakte, Van Gennep, ibid., p. 75.
Kuttner, R.: Everything for Sale, ibid., p. 29.
Scholte, J. A.: Globalization: A Critical Introduction, ibid., p. 136. To Scholte, sovereignty has been replaced by supraterritoriality. This being so, one can distinguish between five general changes in the position of the state. First of all, states have to face the fact that supraterritoriality has changed the meaning of the concept of state sovereignty, since many current worldwide problems (for example, global warming, ozone depletion, and pollution) have to be solved by joint action between states. Consequently, as a second change, states have to reorient themselves to serve supraterritorial interests in order to serve territorial interests. Thirdly, due to worldwide changing labor terms, states have to cope with the problem of downward pressures on public-sector welfare state provisions. Fourthly, states have to take part in the process of redefining warfare, and, finally, territorial interests have to be balanced with an increased reliance on multilateral arrangements. These demonstrations of the spread of supraterritoriality have “tended to create a different kind of state” (Scholte, J. A.: Globalization: A Critical Introduction, ibid., p. 135), but that does not mean that globalisation and the state are inherently contradictory. The difference with the pre-supraterritorial sovereign state is a relative decline in relative primacy, which has mainly transpired in two ways. First of all, supraterritoriality has promoted downward shifts (local and provincial) as well as upward shifts (suprastate governance at regional or transworld level) of regulatory competences. Secondly, globalization has promoted increasing regulatory activities through non-official bodies (Scholte, J. A.: Globalization: A Critical Introduction, ibid., chapter 6), i.e., an outward shift of state power.
The term is from Scholte, J. A.: Globalization: A Critical Introduction, Van Gennep, 2002 ibid..
Hitiris, Th.: European Union Economics, Prentice Hall, 4th edition, 1998, p. 54.
Dunkerley, D., et al.: ibid., p. 121.
Dunkerley, D., et al.: ibid., p. 132.
First of all, this was based on the belief that economic integration and cooperation would contribute to ending the history of regular warfare on the European continent. Creating a European Union was perceived to be “a road constructed out of consent and consensus rather than upon military conquest” (Urwin, D.W.: ibid., p. 4). It was assumed that such a union would create “a more civilized political framework” (Dyson, K.: ibid., p. 205). In addition to this overall political objective, “the idea of free trade has always been the key to integration” (Jørgensen, J. G., Lüthje, T., and Schröder, Ph. J. H.: Trade: The Workhouse of Integration, in: Hansen, J. D., (ed.): European Integration: An Economic Perspective, Oxford University Press, 2001, p. 138). Furthermore, the European Union was meant to establish a place of dignity for Europe in a post-war world that was dominated by the two superpowers, the United States and the Soviet Union. Finally, two further motives for integration were raising the standard of living for the member states and encouraging political unification by economic coordination and harmonisation of national policies (Hitiris, Th.: ibid., pp. 345–346).
It should be noted that this process shows that, despite all its “messy diversity” (Calleo, D.: ibid., p. 8), economic integration and cooperation are moving forward. The dynamics of this process were further underlined in the early 1990s when the European Commission included a “functioning and competitive market economy...[and] an adequate legal and administrative system in the public and private sector” as a further objective (Croft, S., et al.: The Enlargement of Europe, Manchester University Press, 1999, p. 61).
Eyden, T. van der: Betrouwbare Grenzen van de Europese Rechtsunie, in: Kaars Sijpesteijn, E. J., (ed.): Het Volk en Europa—Grenzen aan Europa, Vereniging Democratisch Europa, Amsterdam, 2004, p. 68.
Croft, S., et al.: ibid., pp. 67–68.
I refer, instead, to Dyson, who ably describes several legitimacy problems that the European Union has to solve in order to prevent it from falling apart (Dyson, K.: ibid., chapter 7). It should be noted that these legitimacy problems may increase as a consequence of enlargement. Moreover, the fact that the European Union has admitted political “dissidents” (the United Kingdom, Denmark) may have critical implications for its future development, particularly if the number of obstructionists increases through enlargement. In other words, enlargement may generate centrifugal forces (Croft, S., et al.: ibid., p. 81). In this regard, since the beginning of European integration, the United Kingdom has been a regular “dissident.” In this respect, Winston Churchill is known to have said long before the Second World War that “We see nothing but good and hope in a richer, freer, more contented European commonality. But we have our own dream and our own task. We are with Europe, but not of it. We are linked, but not compromised. We are interested and associated, but not absorbed.” (Urwin, D. W.: ibid., p. 74). This quotation illustrates the relation between the United Kingdom and the other member states throughout the history of the European Union. For that matter, this quotation is completely in line with his famous speech at the University of Zurich in 1946, where he promoted a United States of Europe under the leadership of France and Germany, with the United Kingdom as a friend and sponsor (italics mine), together with the United States and, possibly, the Soviet Union (Nelsen, B. F. and Stubb, A., (eds.): ibid., p. 11). He advocated being with Europe, but not being part of it, because the United Kingdom had its own dream and its own task. It is intriguing to know what is behind this attitude. Two historical arguments seem to be important. The first argument has to do with a shared history between the United Kingdom and the United States. Both nations speak the same language, inherited the same cultural history, stem from the same liberal tradition, and share the same political beliefs, all of which led to the Anglo-American approach regarding social arrangements and comparable dealings with unionized labor (Carew, A.: Democracy and Government in European Trade Unions, Allen & Unwin Ltd., London, 1976, p. 16). Similarly, Huntington quotes Vaughan who, referring to the original English settlers in the United States, argues that “almost everything was fundamentally English: the forms of landownership and cultivation, the system of government and the basic format of laws and legal procedures, the choices of entertainment and leisure-time pursuits, and innumerable other aspects of colonial life” (Huntington, S. P.: Who are We? America’s Great Debate, Free Press, 2005, p. 60). The second argument has to do with the United Kingdom’s history as a colonial world power. In the years after the Second World War, these colonies were converted into the Commonwealth. The United Kingdom’s own dream and its own task probably have to do with both historical arguments. They turn up regularly in the history of the establishment of the European Union. This can be illustrated with several examples. First, they led to different answers to the question of whether people desired a European community or a broader Atlantic community, including the United States. During the Cold War, choosing for the latter had delivered an effective bulwark against the communist superpower. Because of this, supporters of the Atlantic option were not only British. However, when as a result of a certain balance of power between the United States and the Soviet Union, the threat of communist rule in Western Europe was softened, countries like France and Germany, instead of being dominated by outsiders, favored the union of the European countries in order to flourish in a new global environment. In contrast, the British “continued to rely on importing an external hegemon,” that is, the United States (Calleo, D. P.: ibid., p. 27). In this respect, Prime Minister Thatcher, in her speech to the College of Europe in Bruges in 1988, called on Europe to preserve the Atlantic Community in the sense of “that Europe on both sides of the Atlantic” (Nelsen, B. F. and Stubb, A., (eds.): ibid., p. 54). “This disjuncture of historical imagination and sympathy between the British and the French runs throughout post-war European politics and continues to bedevil the future of the whole European Project” (Calleo, D. P.: ibid., p. 27). In fact, there are two aspects that continue to be a problem in respect of further European integration (including Britain). The first aspect is the sympathy the British have for the United States. In this respect, it is worth mentioning that, as recently as March 2000, an American congressional delegation visited the United Kingdom in order to discuss with British Euroskeptics the option for the United Kingdom to leave the European Union and to join NAFTA instead (Wallace, H.: Europeanisation and Globalisation, in: Breslin, S., Hughes, Ch.W., Ohillips, N., and Rosamond, B., (eds.): ibid., p. 139). These Euroskeptics were strongly supported by Thatcher, who insisted, that “British values and essential interests do not lie with Europe” (Hutton,W.: The World We’re In, ibid., p. 15). One should not be mistaken about the influence the Euroskeptics have in Great Britain; for example, in the mid-1990s, almost half of the British people opted for complete withdrawal from the European Union (Norris, P.: Global Governance and Cosmopolitan Citizens, in: Nye, J. S. and Donahue, J. D., (eds.): ibid., p. 157). The second aspect has to do with the country’s readiness to accept the transfer of sovereignty to a supranational level. Here, throughout the process of European integration, the United Kingdom has shown relatively more reluctance than any of the other member states. Instead, the country favors a loose intergovernmental structure for the European Union. This was already the case in the early days of European integration when, for instance, the European Coal and Steel Community was established. Though the country was invited to take part in this undertaking, “Britain refused an invitation to join the new organization, being unwilling to accept beforehand the principle of a new and binding supranational authority” (Urwin, D.W.: ibid., p. 83). The same applies to examples from more recent times, like the country’s choice to stay outside the fixed exchange rate cooperation within the European Community, its refusal to sign the Social Protocol of the Maastricht Treaty, its non-participation in the European currency, and its rejection of the establishment of the European Central Bank. As early as the 1950s, Charles de Gaulle, who favored keeping the United States at a comfortable distance and vetoed an earlier British attempt to join the European Community, labeled Great Britain as a “European maverick” because of its sympathy for the United States (Urwin, D. W.: ibid., pp. 274–275). For reasons of balance, it should be mentioned that in the late 1950s, the United Kingdom declared itself to be against a Union of the Six with agreement to an external tariff wall. The British opposition can even be said to have been threatening to the Six, if one believes Charles de Gaulle in this respect. Referring to a meeting de Gaulle had with the then British Prime Minister, Harold MacMillan, on 29 June 1958, the latter is quoted to have said, “The Common Market is the Continental System all over again. Britain cannot accept it. I beg you to give it up. Otherwise, we shall embark on a war which will doubtless be economic at first but which runs the risk of gradually spreading into other fields” (italics mine) (Nelsen, B. F. and Stubb, A., (eds.): ibid., p. 41). Britain has also been described as “the problem child of the EC” (Urwin, D. W.: ibid., pp. 274–275) and “a reluctant European” (Dunkerley, D., et al.: ibid., p. 143). For reasons of sympathy and sovereignty, “in view of the past it is not surprising, and in view of the future it is significant, that Britain still preferred to remain aloof from Europe and to consider itself the link par excellence between the continent and the United States” (Urwin, D.W.: ibid., p. 78). This preferred link between the United Kingdom and the United States is important for the theme of this book, because it implies a preference for the confrontational “winner-takes-all” style of the “majoritarian” liberal democratic social-economic infrastructure, known as the Anglo-American model. This contrasts to the consensual form of “ non-majoritarian” negotiated democracy, known as the continental European Rhine model. The difference between the two models is about more than differences in power sharing between employers, unions and the government. The fact that the Anglo-American model is characterized by less government interference in the economic process and a smaller state-provided safety net, is also an expression of cultural and historical differences between the United Kingdom/United States and the countries of the European continent. These differences become manifest in matters like choosing shareholder or stakeholder capitalism, deciding whether to conclude social pacts with the unions, preferring “ external” or “internal” flexibility, appreciating the Charter of Fundamental Social Rights, and so on. In a globalizing economy, choosing between these alternatives makes a difference. The Anglo-American approach clearly is the neo-liberal view of subordinating social policy objectives to economic objectives, for the simple reason that, thanks to a globalizing economy, “there is no alternative way,” according to Thatcher (Phillips, K.: ibid., p. 339). The Rhine model is struggling to maintain social cohesion while at the same time playing the game of global competition. Nevertheless, the latter model is slowly caving in. Figures regarding the non-wage costs per employee in the United Kingdom illustrate the differences between the models: in 1996, non-wage costs were cut to £18 per £100 spent by employers on wages. At the same time, these figures were £32, £34, £41, and £44 for Germany, Spain, France, and Italy, respectively. Though this gives the United Kingdom a competitive advantage in a global economy, it is at the expense of social cohesion in the British society. This latter point is illustrated by the increasing proportion of the population living on less than half of the average national income, after allowing for the costs of housing, being 9% at the start of the first Thatcher government in 1979, growing to 25% or 14.1 million people in 1992 (Lee, S.: Discovering the Frontiers of Regionalism: Fostering Entrepreneurship, Innovation and Competitiveness in the European Union, in: Breslin, S., Hughes, Ch. W., Phillips, N., Rosamond, B., (eds.): ibid., p. 176). Also, when it comes to measurable working hours, Britain is top of the European league. In 1999, the average male working week in the United Kingdom was 45 hours, 7 hours more than in Belgium and 5.5 more than in Germany. The application in 1999 of the EU directive on Working Time to Britain, stipulating a maximum of 48 hours a week for certain occupations, demonstrated that an estimated number of 4.5 million Britons exceeded that number, 600,000 more than in 1992 (Frank, S.: Having None of It:Women, Men and the Future of Work, Granta Books, 1999, p. 69). Finally, in Britain, only a third of people capable of gainful employment were fully employed, in the classical sense of the term, around the beginning of the new millennium, compared to 60% in Germany. Twenty years ago, the figure was over 80% in both countries (Beck, U.: ibid., pp. 58–59). This is typical of the development of the Anglo-American model since Thatcher came to Downing Street and Reagan moved to the White House. The differing preferences between the two models explain why the United Kingdom was conspicuous by its absence when the Social Protocol of the Maastricht Treaty, eventually annexed to the treaty as an addendum, was signed (Council of the European Communities, Committee of the European Communities, Treaty of the Union, Brussels/Luxembourg, 1992, p. 197. Also see: Corbett, R.: The Treaty of Maastricht, Longman Group, United Kingdom, 1993, p. 464). Springer points to the fact that the integration of the United Kingdom into the European Community in 1972 made European policy-making especially difficult for two reasons. Firstly, the economy of the United Kingdom, based on ties with former colonies, “was not easily aligned with the more rapidly growing economies of the original members. In addition, the legal system differed significantly from that of continental countries.” As a consequence, “the writing of EC laws became more complex. The entire decision-making process became tedious” (Springer, B.: The Social Dimension of 1992: Europe Faces a New EC, New York, 1992, p. 4). According to Hay, this opting-out of the Social Protocol should be seen as “an attempt to construct a niche for Britain on the periphery of the European market as a low-wage, low-skill, flexi-time, sweatshop economy—an assembly plant for non-European products that wish to penetrate the European market” (Hay, C.: Re-Stating Social and Political Change, Open University Press, Buckingham, 1996, p. 173). Hay argues that, in fact, the United Kingdom was forced not to sign the Social Protocol in order to stay competitive in a globalizing economy. A reasonable question behind all this is whether the United Kingdom feels more American than European. In the words of Hutton, the British themselves will not only have to answer how European they are, but also what they have in common with an America that is “increasingly in thrall to a very particular conservatism” (Hutton, W.: The State We’re In, ibid., pp. 1–2). In a compelling discourse, Hutton strongly argues that it is not just geography that defines Britain as a European country. It is “a value system born of sharing the same essential history.” British history mirrors that of the rest of Europe. Catholic feudal Europe, for instance, of which Britain was part, demanded that wealth and property were associated with reciprocal social obligations. This ethical view partly inspired socialism when advocating, among other things, respect for the rights of workers. Despite the fact that Christianity and socialism have lost much of their meaning for society, the ethical basis has survived. As an example, Hutton argues that no single European country shares the American majority view that governments should not redistribute income. In Britain, 63% of the population are in favor of income redistribution. In the United States, this figure is only 28%.To Hutton, this difference is part of a complex system of values that are deeply entrenched (Hutton,W.: The State We’re In, ibid., p. 43). All in all, it seems as if history can be manipulated to serve particular interests. Those in favor of the Anglo-American model use it to detach the United Kingdom from the European Union; those against this model focus on the negative sides. Meanwhile, there remains a difference in the continental European approach and the Anglo-American approach, which is an important obstacle for further integration.
Furthermore, I will not go into the patchwork of different cultures, religions, languages, and views, because many others have ably dealt with one or more of these aspects. Accepting that the concept of “Europe” means different things to different people, because “there is no identikit” (Croft, S., et al.: ibid., p. 9), I also will not deal with the advantages and disadvantages of the pluralist, the functionalist, the neo-functionalist, or the federalist approach to integration (Hitiris,Th.: ibid., pp. 39–41; for further information on theories on community policy-making, see: Theofilatou, M. A.: The Emerging Health Agenda: The Health Policy of the European Community, dissertation, Maastricht University, 2000, chapter 4). I will also not address schools of thought regarding institutionalized forms of cooperation within the European Union, like neo-realism, neo-liberal institutionalism, or social constructivism (Croft, S., et al.: ibid., chapter 1). After all, this book is not about the question of what the most preferable type of European integration would be and how this preferred situation could or should be achieved. It is about decision-making at the level of the European Union regarding policies which effect the direction in which it and its member states move along the continuum. I take the patchwork of different cultures for a fact, accepting that this has always been the case and always will be. Given the existence of the European Union and the large political and economic differences between the member states, it is no surprise that the developments intended to achieve the aforementioned objectives progressed slowly. The large cultural differences made the establishment of the European Union itself no less than a miracle (Hofstede, G.: Culture and Organizations: Software of the Mind (Dutch Translation), Amsterdam, 2002). Patience, therefore, is a necessary precondition for further integration (Cini, M. and McGowan, L.: Competition Policy in the European Union, London, 1998, p. 23). It has taken some 25 years to formulate a more or less crystallized European competition policy. The genesis of a European currency took approximately the same time (for the difficulties regarding the introduction of the Euro, see: Haas, B. de and Lotringen, C. van: Mister Euro: Een Biografie van Wim Duisenberg, Business Contact/Het Finaciële Dagblad, 2005). But now, more than 50 years since the Coal and Steel Community of 1952, followed by the Common Market of 1956, and with subsequent enlargements of the Single European Act of 1985 and the Single Market of 1992, the framework exists for an integrated Europe, being “ the most extensive economic cooperation project among sovereign nation states” (Jørgensen, J. G., Lüthje, T., and Schröder, Ph. J. H.: ibid., p. 115).
Dyson, K.: ibid., p. 215. To the author, “power and policy gravitate around the Council—that is, governments—and the ECB, not the European Parliament.”
Beck qualifies the European Union as a “negotiation state” (in: Rifkin, J.: The European Dream, ibid., p. 229).
Christiansen, Th.: European and Regional Integration, in: Baylis, J. and Smith, S.: ibid., p. 517. Transferring national decision-making powers to the higher level of the European Union “leaves the nation-state both as the main focus of expectations, and as the initiator, pace-setter, supervisor, and often destroyer of the larger entity” (Hoffmann, S.: Obstinate or Obsolete? The Fate of the Nation-State and the Case of Western Europe, in: Nelsen, B. F. and Stubb, A., (eds.): ibid., pp. 168–169).
Dyson, K.: ibid., p. 279. As a consequence, member states will continue to cause economic integration and cooperation to be “a series of pragmatic bargains among national governments based on concrete national interests, relative power, and carefully calculated transfers of sovereignty” (Moravscik, in: Dyson, K.: ibid., p. 110) This occurs in accordance with the intergovernmental approach of integration, based on the pillars of the sovereignty of member states, focusing on grand bargains, while using international institutions as instruments (Pierson, P.:The Path to European Integration: A Historical Institutionalist Analysis, in: Nelsen, B. F. and Stubb, A., (eds.): ibid., p. 320). Sovereignty once transferred, however, implies that the power to decide has been shifted to the supranational level of “pooled sovereignty” (Held, D., McGrew, A., Goldblatt,D., Perraton, J.: Global Transformations: Politics, Economics and Culture, Polity Press, 1999, p. 76), including the extensive bureaucratic competencies, unified judicial control, and capacities to modify policy that go with it (Pierson, P.: ibid., p. 321). This transfer of sovereignty may include decision-making regarding the what, the how, and the for whom of the production and consumption of goods and services. Depending on the subject of decision-making and their economic and political situation, member states may be willing or reluctant to transfer sovereignty. In this respect, Dyson developed an “interest-based” model, using two distinctive criteria for member states: on the one hand, the wish to avoid economic vulnerability for their citizenry, and, on the other hand, minimizing the domestic costs of economic convergence (Dyson, K.: ibid., pp. 110–114). Brought together in a diagram, his approach results in four types of member states: pushers, draggers, intermediates, and bystanders. Pushers are member states that strive for deepening integration. In contrast, draggers oppose this development. Intermediates have incentives to integrate, but have to face the fact of high convergence costs. Finally, because of low convergence costs, bystanders can take a more ambitious position, but they have little to gain directly. The problem with classifications like these, however, is their general applicability. Dyson notes that the model is static and partial. France, for example, generally termed as a pusher, demonstrates behavior of a dragger when it comes to centralizing monetary policy with the European Central Bank. France and Germany are pushers on the subject of harmonization of corporate taxation. In contrast, countries like Belgium, Ireland, and the Netherlands are disposed to be draggers or intermediates on this subject, because they would face higher costs. Nevertheless, the model is instrumental to illustrating the differing interests of the member states. Their position in the diagram may change in accordance with the subject that has to be dealt with. Behind all this is the everlasting question of what type of integrated Europe we want. Do we want a kind of European “governance,” thus accommodating a more active and independent role for supranational European institutions? Or do we want a “state-centric” principal-agent model, with supranational European institutions having limited power? (Dyson, K.: ibid., chapter 3). In this respect, Calleo distinguishes between four basic models, i.e., (a) America’s Atlantic Europe; (b) Jean Monnet’s federal Europe; (c) De Gaulle’s confederation of European states, and (d) an anarchic Europe of states (Calleo, D. P.: ibid., p. 135). Here, opinions differ, which in turn explains why economic integration proceeds slowly and why the outcome of decision-making at the level of the European Union is not always clear. Differing opinions imply that one will face dilemmas in collective decision-making, taking into account that, at the level of the European Union, decision-making is “extremely complex, with a multiplicity of governmental and non-governmental actors at national and European Union levels interacting with one another through a multiplicity of channels” (Nugent, N., (ed.): ibid., p. 11) Apart from the distinction in unanimity, qualified majority and simple majority voting, this complexity also appears in the outcomes of the decision-making processes. In this respect, one can distinguish between three kinds of decisions (Leibfried, S. and Pierson, P., (eds.): European Social Policy: Between Fragmentation and Integration, Washington, DC, 1995, pp. 25–26). Firstly, there are the “lowest common denominator” and “ packaged” policies. Here, one compromises either the proposals of the least ambitious participant in the decision-making process, or one handles “side payments” to buy off potential opponents. Secondly, the decision-making process can result in the “incorporation of institutional protections,” where one indulges the wishes of member states to remain their own masters. This kind of decision-making is a breeding ground for “ rigid policy designs.” The third type of decision-making is “the search for escape routes,” which means that member states are looking for alternatives because they are not satisfied. The picture that results from this distinction is one of a fragmented and poorly co-ordinated decision-making process, which is “well suited to finding compromises that avoid sharp conflicts and long-standing grievances among the member states” (Calleo, D. P.: ibid., p. 281). However, if compromises cannot be found, this decision-making process will probably cause disputes about competencies, which, in turn, is likely to limit the possibilities to reach generally accepted conclusions. Consequently, decision-making at the level of the European Union is very complicated, a fact that will probably impede the design of further integration. Furthermore, the dilemmas in decision-making become clear if one studies the political balance within the European Commission. In this respect, MacMullen developed a seven-point political left-right scale, with one representing state intervention/collective provision and seven representing laissez-faire/individualism. Over the period 1952–1995, the mean score for Commissioners appears to be 3.9, almost in the centre (MacMullen, A.: European Commissioners National Routes to a European Elite, in: Nugent, N., (ed.): ibid., p. 41). So it seems that, in terms of the continuum, the European Union showed a rather balanced situation until 1995. This undoubtedly influenced decision-making on moving to the left or to the right side of the continuum, combined with compromising and negotiating regarding the dilemmas. The problem with Mac-Mullen’s approach, however, is the length of the time span. For approximately 30 of the 42 years considered, global competitive forces were hardly perceived to be a problem. This potentially made it easier to come to some agreement on the middle of intervention/collective provision and laissez-faire/individualism. Given the more recent policies of the European Union, further outlined in this chapter, I would not be surprised if comparable research over the period 1980–2000 would result in a mean score that is considerably more in the direction of laissez-faire/individualism. This disregards the fact, however, that McDonald rightfully observes that the European Commission “is required to face and to negotiate daily the structural contradictions and the complex moral and political baggage, the tensions and the compromises, of Europe and nation and of unity and difference that stand prominently at the heart of the European Union, and which pervade any discussion of its history and its future, its shape and its ‘added value’, and its very raison d’ê tre” (McDonald, M.: ibid., p. 72). Nevertheless, though things proceed slowly and incrementally, there is progress, because meanwhile, aspects of decision-making regarding specific items, like competition and environmental policy or defence, may be and are transferred to the European Union level. And it is not unlikely that the European Union’s sphere of influence will be broadened to policy items that are not yet an item of a common approach. In other words, sovereignty has already been transferred, and will continue to be so. Consequently, Brussels produces a lot of legislation and directives. The officials of DGXI alone, which is responsible for environmental policy, had produced 12,000 pages of legislation by 1993 (Cini, M.: Administrative Culture in the European Commission: The Cases of Competition and Environment, in: Nugent, N., (ed.): ibid., 81).
Theofilatou, M. A.: ibid., p. 40.
Yergin, D. and Stanislaw, J.: ibid., p. 306 ff.
Cini, M. and McGowan, L.: ibid., pp. 32–33.
Lawton, Th. C.: “Uniting European Industrial Policy: A Commission Agenda for Integration,” in: Nugent, N., (ed.): ibid., p. 133.
Castells, M.: End of Millennium, ibid., p. 355. In this view, the European Union is part of an open world with three main players in the game of global competition. Each of these players will be forced to monitor continuously what is going on in the other two regions. Also, each region will try to achieve comparative advantages on the global playing field. In this environment, it will be very difficult for the European Union to differ much from the other two regions with respect to their institutional and macro-economic frameworks (Castells, M.: End of Millennium ibid., p. 129). In this respect, Castells anticipates “a relative equalization of working arrangements” between the three regions (Castells, M.: End of Millennium ibid., p. 324). One may argue that looking at the European Union as a defensive construction is a rather negative approach, because it makes the Union dependent on what is going on within the other two regions. However, the other side of the coin is that this kind of dependence may create realism, alertness, and innovative capacity. In other words, a European Union that, due to the process of globalization, is forced to be alert, may also discover new opportunities. To Axford, for instance, the defensive strategy that has led to the establishment of the European market is based on the recognition that the European economies have lagged behind, compared to the more dynamic, expansionary, and technologically more efficient economy of Japan and the large economies of scale in the United States (Axford, B.: The Global System: Economics, Politics and Culture, Cambridge, 1995, p. 121). Once this lagging behind has been recognized, one can initiate actions directed at creating a level playing field in relations with the other two regions. According to the World Economic Forum, for this ambition to become reality, the European Union has to overcome the present situation of being outperformed by the United States and other OECD countries regarding all but one of the strategic objectives that are relevant in a globalizing economy. These objectives are (1) the creation of an information society, (2) a European area for research and innovation, (3) completion of the Single Market, (4) increasing efficiency and integration of financial markets, (5) strengthening of entrepreneurship through a reduction of regulations, (6) sustainable development, and (7) social inclusion through bringing people back to work, upgrading skills, and modernizing social protection (World Economic Forum: The Lisbon Review, 2002). The final strategic objective is the only one where the European Union has the lead.
World Economic Forum: The Lisbon Review, 2002.
Cowles, M. G.: The Transatlantic Business Dialogue and Domestic Business-Government Relations, in: Cowles, M. G., et al.: ibid., pp. 159–179. The author speaks of a Europeanization of business-government relations in the common commercial policy area to which national industrial organizations would do better to adjust. During the 1980s, the coordination of research and technological development, for instance, became “the central pillar of EC industrial policy, with knowledge creation and dissemination coming to be seen as central to innovation” (Lawton, Th. C.: ibid., p. 135). Consequently, European Union support for research funding increased from 500 MECU in 1982 to 12,300 MECU in 1998, with priorities for information and communication technologies, industrial and material technologies, and life sciences and technologies, together rising from 22% of the total available amount in 1982 to 57% in 1998 (Theofilatou, M. A.: ibid., table 2, pp. 177–178).
Lawton, Th.C.: ibid., p. 136. This spirit of unity was something new, since during the first 20 years of the European Union’s existence, business was kept largely outside policy decisions at the European level (Lawton, Th. C.: ibid., p. 145). Regarding this, it could be that the change of attitude of the political scene was enforced by European industrial leaders who played a strong political card by intimating that the very existence of the European Union would be questioned by the business community, if the European Commission did not try to assist industry in times of stiff international competition. Supportive of this view is Dyson’s observation that, around the turn of the millennium, “the field was opened for a breed of internationally oriented corporate entrepreneurs to effect major changes in national economic structures and policies within the Euro-zone.” These corporate actors “displayed a new willingness to seize the initiative,” where traditional political and banking elites were reluctant to do so (Dyson, K.: ibid., p. 192). Consequently, states experience “an increasingly assertive policy-pushing corporate sector” (Dyson, K.: ibid., p. 278). As an example, the development of a liberalized pan-European telecommunications infrastructure was the result of a strong alliance between the European Commission and large European industrial firms like Siemens, Philips, Alcatel, and Olivetti (Schneider,V.: ibid., pp. 60–78). Close cooperation between European industrial leaders and politicians at the level of the European Union, whether or not enforced by corporate business, might raise the suggestion that, as a consequence of this particular type of bilateralism, individual member states are at the mercy of “ Brussels”; whereas, in turn, the European Union would be in the hands of the United States and Japan. In other words, there would be “state denial” (Weiss, L.: The Myth of the Powerless State: Governing the Economy in a Global Era, Cambridge, 1998, p. 2). According to Weiss, there is no reason to fear such a development, because governments have “transformational capacities,” which allow them to develop domestic strategies for industrial change (Weiss, L.: ibid., p. 15). According to Weiss, central to the capacities is the idea of “ governed interdependence,” which is based on cooperation with business life, in the course of which governments have a coordinating role. Such cooperation is a “negotiated relationship,” which, though giving autonomy to public and private participants, is ruled by broader objectives and which, therefore, is monitored by the governments (Weiss, L.: ibid., p. 38). Though Weiss does not speak of Europe, her approach can be considered the Dutch “polder model” on a European Union level. Its weakness is implied in the term “negotiated relationship.” What scope is there for corporate business to negotiate, when it has to survive in an environment of fierce global competitive forces? A European “polder model” will also have to face these facts. Therefore, less government interference in the economic process, a reduction in time-consuming corporatist procedures of consultation, and the demand for flexibility, “Europe’s big headache in the last quarter of the twentieth century, ” would simply be lifted to the level of the European Union. Moreover, in a relation of “governed interdependence,” the only interest of corporate business is survival (Olsen, F. and Skak, M.: Labour Markets: “Europe’s Big Headache,” in: Hansen, J. D., (ed.): ibid., p. 34). However, it is not just employer organizations that try to influence the European political scene. On the contrary, the internal market program has caused an explosive growth of lobbying in Brussels by a large number of interest groups. Even in 1985/1986, a total of 659 federations, ranging from consumers, environmentalists, labor representatives, public health promoters, and many others, had a representation in Brussels, together with 6,000 lobbyists. This leads Theofilatou to conclude that in “each specific area of Community activity, policy-making is controlled, to a large extent, by special interest coalitions.” Not each and every one of them is taken equally seriously, however. On the contrary, “the concept of equal access of interest groups to the policy-making machinery in Brussels is a myth.” Priorities lie with agricultural and economic policy (Theofilatou, M. A.: ibid., p. 88).
Frankel, J.: Globalization and the Economy, in: Nye, J. S. and Donahue, J. D., (eds.), ibid. The author refers to research by Rose, who found that adopting a common currency multiplied trade between the respective countries by an additional 3.5 times. This may somewhat compensate for the fact that a multitude of languages is one of the reasons that economic integration within the European Union is far from complete. In this respect, Frankel reveals that trade between countries that speak the same language is 50% more than between two otherwise similar countries (Frankel, J.: ibid., p. 54).
Hansen, J.D. and Olesen, F.: Monetary Integration: Old Issues—New Solutions, in: Hansen, J. D., (ed.): ibid., p. 167.
In order for the Euro to be an “anchor of stability,” the new currency, according to the then president of the German Bundesbank, had to be “depoliticized,” i.e., monetary policy should “be kept as much as possible away from daily political influences, short-term calculations and fashion as well as from political compromises” (Tietmeyer, in: Dyson, K.: ibid., p. 129). Therefore, after much political debate, the European Central Bank “was deliberately created by governments so that it would evade such [political] control and be able to set and pursue its own preferences” (Dyson, K.: ibid., p. 110). Setting its own preferences does not mean, however, that the European Central Bank is completely out of political control forever, because “ultimately, governments have the final power to dispose of central banking rules as they feel fit” (Dyson, K.: ibid., p. 181). Central to these preferences, and most welcomed by the International Monetary Fund, the G7, the OECD, the Bank for International Settlements, the United States government, and multinational corporations, appears to be the pursuit of a “sound money” policy, i.e., commitment to price stability. All in all, the introduction of the Euro and the establishment of the European Central Bank caused the “denationalization of money,” together with the relevant monetary policy instruments.
Dyson, K.: ibid., p. 157.
Axford, B.: ibid., p. 102.
Yergin, D. and Stanislaw, J.: ibid., p. 321.
Soros, G.: The Crisis of Global Capitalism: Open Society Endangered, London, 1998, p. 185. Castells also stipulates the necessity of homogenizing the macro-economic conditions of the different European economies, in particular fiscal and budgetary policy (Castells, M.: End of Millennium, ibid., p. 319._Also: Castells, M.: The Power of Identity. The Information Age: Economy, Society and Culture, Volume 2, Oxford, 1997, p. 245).
Lamy, P. and Pisani-Ferry, J.: The Europe We Want, in: Jospin, L.: ibid., p. 118.
Hansen, J. D. and Olesen, F., in: Hansen, J. D., (ed.): ibid., p. 188.
Hansen, J. D. and Jørgensen, J. G.: Industrial Structures: Specialization, Efficiency, and Growth, in: Hansen, J. D., (ed.): ibid., p. 105. This type of harmonization will also take considerable time, because the member states have largely differing systems regarding the tax base, the tax type, and the tax rate, as well as tax compliance and tax enforcement (Hitiris, Th.: ibid., p. 116). The rate of value-added tax, for instance, ranged from 15% in Germany to 25% in Sweden in 1995. In 1996, company profits tax was 39.6% in Portugal and 28% in Finland, whereas in the same year personal income tax was 60.6% in Belgium and 40% in the United Kingdom (Hitiris, Th.: ibid., pp. 126 and 135).
The French and German governments, for instance, favor harmonization of corporate taxation and of taxation on income from savings, whereas the Dutch and the Irish have reservations in this respect because of the effects that tax harmonization may have on employment and competitiveness (Dyson, K.: ibid., p. 18). Furthermore, Ireland would oppose tax harmonization since it would harm its competitive position in attracting multinationals. The United Kingdom blocked a directive from Brussels regarding taxation of the savings balance because the City of London would suffer from it. Moreover, corporate business appears to be capable of blackmailing governments that want to increase corporate taxation.
Dyson, K.: ibid., p. 245.
In this respect, we have to realize, however, that the further shaping of the European Union will be the result of a politically dynamic process during which “integration often creates a need for further integration” (Hansen, J. D. and Olesen, F.: From European Economics towards a European Economy? in: Hansen, J. D., (ed.): ibid., p. 239) The creation of the European Union’s customs union, for instance, led to measures directed at removing visible trade barriers, such as tariffs and quotas. In turn, this increased invisible trade barriers like discriminatory public procurement, national technical standards, and abuse of tax systems for national protectionism, which, in turn, led to the creation of the Single Market (Hansen, J. D. and Olesen, F.: ibid., p. 239). Consequently, “interdependence rises with integration,” according to Hitiris. To him, the final profundity of the dynamic integration process knows only two stable forms, being (a) a free trade area or (b) complete economic integration. All other forms are simply intermediate and temporary stages (Hitiris, Th.: ibid., p. 3). Politics at the level of the European Union is directed at the second form. It includes fiscal harmonization. The importance of this aspect of economic integration has been continuously realized since the early days of the formation of the European Union. For example, the Werner Report of 1970 argued for a simultaneous harmonization of economic, fiscal, and budgetary policy (Urwin, D. W.: ibid., p. 279). In 1963, the European Economic Community installed the Neumark Committee, followed by the Van den Tempel Committee in 1970 and the Ruding Committee in 1992 (Hitiris, Th.: ibid., p. 136). In one way or another, all these committees delivered proposals regarding the harmonization of fiscal policy.
Worded differently, the question is not whether member states of the European Union can remain their own master, but if they can continue to fund collectively social policy arrangements in a Europe where economic growth is the binding ideology of further integration (Judt, T.: ibid., p. 45), and in which decreasing the costs of labor in a globalizing economy is the dominating objective of the economy.
Dunkerley, D., et al.: ibid., p. 21.
One of the reasons for this reality is probably “that areas dealing with the ‘cultural’ or the “social,” whilst seen to give a ‘human face,’ have to battle for their credibility” (McDonald, M.: Identities in the European Commission, in: Nugent, N., (ed.): ibid., p. 54). To Caporaso and Jupille, therefore, social policy is “something of a poor cousin to the more fundamental economic aims of the European Community” (Caporaso, J. and Jupille, J.: The Europeanization of Gender Equality Policy and Domestic Change, in: Cowles, M. G., et al.: ibid., p. 21).
As an example: the policy of becoming “the most competitive and dynamic knowledge-based economy in the world by 2010, capable of sustainable growth,” as declared during the Lisbon Summit of 2000, was conditioned by the addition of “more and better jobs and greater social cohesion.” Another example of interrelatedness has been provided by the European Commission which, in trying to trace the causes of the European Union’s relatively poor economic performance, referred to suboptimal macro-economic management resulting from the levels of public expenditure, particularly in the social field. These had become “unsustainable and [had] used up resources which could have been channelled into productive investment” (Lee, S.: ibid., p. 170). This picture of ambiguities is broadened if we include differing political views regarding social policy. To Tony Blair, for instance, the Community Charter of Fundamental Social Rights is “simply a statement of policy...[not] something of a binding nature” (Dunkerley, D., et al.: ibid., p. 105). To Lionel Jospin, however, it “deserves to be considered the keystone of the European edifice” (Jospin, L.: ibid., p. 16). In this respect, Theofilatou correctly points to the fact that the Social Charter “reflects fairly accurately the disagreements characterizing the development of active Community intervention in social security, including the health (care) sector and also demonstrates the lack of willingness (and determination) of discontented interest groups to carry their appeal to a wider forum” (Theofilatou, M. A.: ibid., p. 131).
Leibfried, S. and Pierson, P., (eds.): ibid.
No wonder, therefore, that harmonization of fiscal policy has been an ongoing subject of analysis since (almost) the start of the integration process. In this respect, tables presented by Hitiris clearly demonstrate the difficulties that have to be overcome. If we assume that the government, through policies of redistribution, remains the most important player in the pursuit of social policy objectives, the necessary tax collection (indirect taxes, direct taxes, social security and other receipts) as a percentage of GDP ranged from 36.6% in Ireland to 61.5% in Sweden in 1996. Within the different tax components, the Danes contributed only 2.8% of GDP to social security, compared to 19.9% for the Germans. The latter, however, paid only 10.5% of GDP in direct taxes, whereas the Danes had to cough up 32.1%. Comparable differences are apparent in the contributions to social security by employers, employees, the government, and other sources in 1995. The ranges are remarkable. Employers appear to have contributed to social security between 6.9% in Denmark and 52.9% in Spain. For employees the range went from 5.1% for Denmark to 41.7% for the Netherlands, whereas government contributions were 21.6% for Belgium and 81.6% in Denmark (Hitiris, Th.: ibid., table 5.1, p. 123, and table 10.1, p. 263). If we add to this the differences in value-added tax and corporate tax rates, harmonization of fiscal policy, if feasible at all, will prove to be an enormous job.
Leibfried, S. and Pierson, P., (eds.): ibid., 434.
Lee, S.: ibid., p. 169. In this respect,Theofilatou points to the fact that it is apparently easier for member states to reach agreement on the economic aspects of integration than to deal with the budgetary consequences of tackling the distributional and redistributional repercussions they may have for social welfare. Here, a lack of solidarity as well as the absence of a sense of European citizenship are assumed to be the most important obstacles (Theofilatou, M. A.: ibid., pp. 133–134).
Dyson, K.: ibid., p. 213. In this respect, it is important to note that, recognizing the interrelatedness of economic and social policy objectives, the European Commission asserted a direct correlation between economic and social cohesion and industrial and economic performance which “could ‘add strength to each other’ on the basis of the externalities generated by cohesion for infrastructure, especially in health, education and research” (Lee, S.: ibid., p. 172). Apparently, the idea of economic returns from investing in human capital still appealed to the European Commission (Dyson, K.: ibid., p. 227). Thus, social policy could be seen as a matter which contributed to productivity (Jospin, L.: ibid., p. 37).
Leibfried, S. and Pierson, P., (eds.): ibid., p. 28.
Streeck, W.: From Market Making to State Building? Reflections on the Political Economy of European Social Policy, in: Leibfried, S. and Pierson, P., (eds.): ibid., p. 412.
One may think that this perspective is too pessimistic, because one might, like Touraine, assume that employers know their social responsibility (Castells, M.: End of Millennium, ibid., p. 325. Regarding this, Handy gives examples which support Touraine’s views). This remains to be seen, however. The appeals of Senator Kennedy and other Democrats in the United States about a decade ago, to act against the “ corporate killers,” responsible for massive redundancies, have not succeeded to date. Massive redundancies are still carried out regularly in the United States, as well as on the European continent.
Hansen, J. D. and Olesen, F.: in: Hansen, J. D., (ed.): ibid., p. 242. This is completely in line with Delors’ vision that “the creation of a vast economic area, based on the market and business cooperation, is inconceivable without some harmonization of social legislation.” To him, the ultimate aim should be “the creation of a European social area” (Hutton, W.: The World We’re In, ibid., p. 298).
Meij, A. W. H. and Zimmeren, E. van: Ontwerp-Verdrag tot Vaststelling van een Grondwet voor Europa, Europocket, supplement bij de dertiende druk, Kluwer, 2003, p. 76. It should be kept in mind that the numbering of the articles in this draft treaty differs from the one on a later website (http://www.grondweteuropa.nl/9326201/v/indexalt.htm).
This might happen after the 2004 enlargement. In this respect, see: Swaan, A. de: Dutch Welfare in Europe XL, ibid., p. 7.
Miegel, M.: ibid., p. 33.
Leibfried, S.: Towards a European Welfare State? in: Pierson, Chr. and Castles, F., (eds.): ibid., p. 194.
Dunkerley, D., et al.: ibid., p. 7.
Schröder, Ph. J. H.: Eastern Enlargement: The New Challenge, in: Hansen, J. D., (ed.): ibid., p. 193.
Judt, T.: ibid., pp. 95–96.
Dunkerley, D., et al.: ibid., p. 7.
Judt, T.: ibid., p. 95. Comparable fear existed when Greece, Spain, and Portugal became members, because their accession increased the European Union’s GDP by only 10%, but its population increased by 22% and its employment in agriculture increased by 57% (Hitiris, Th.: ibid., p. 247). However, the consequences of that fear did not materialize. Given the differences in figures, fear may be more realistic with respect to the 2004 enlargement. These figures show that, for instance, if GDP per capita of the initial 15 member states is rated at 100, the equivalent for the ten new members is a mere 30. If we limit the comparison to the four initial member states with the lowest GDP per capita, the outcome is still the double of that of the ten new entrees (Dunkerley, D., et al.: ibid., p. 146), whereas after the latest enlargement, 36% of the European population live in regions with a GDP per capita of less than three-quarters of the European Union’s average (Lamy, P. and Pisani-Ferry, J.: ibid., p. 78). To give some concrete illustrations of the differences, in 1999 GDP per capita was $25,372 in Germany, compared to $14,266 in Spain, $11,763 in Greece, $10,782 in Portugal, $4,802 in Hungary, $3,983 in Poland, and $3,536 in Estonia (Calleo, D. P.: ibid., p. 278).
Jospin, L.: ibid., p. 30.
An Impact Study of the European Commission is very clear about these expected future advantages: “Economic benefits from enlargement are expected to follow from the expansion of the Single Market, from the overall integration process, as well as from the strengthening of the Union’s position in global markets. The Union’s human potential will be considerably enriched, not least in qualified and highly qualified labor. Acceding countries have significant natural resources (agricultural land, some minerals, biodiversity, etc.). Their geographic position will be an asset with respect to transport, energy transit and communications. The integration of these countries into the Union will be a powerful stimulus to their economic development. Major investments related to the radical modernisation of the new countries’ economies and their catching up with European Union living standards will boost demand across the Union and strengthen competitiveness” (Dunkerley, D., et al.: ibid., p. 147).
Thurow, L.: Head to Head: The Coming Economic Battle among Japan, Europe and America, Warner Books, 1993, p. 110. In 1999, the European Union, having a population of approximately 290 million, produced a GDP of $6 trillion, $2 trillion smaller than the United States with 270 million people, but $2 trillion more than Japan with a population of 125 million people (Gilpin, R.: The Challenge of Global Capitalism: The World Economy in the 21st Century, Princeton University Press, 2000, p. 196).
Lamy, P. and Pisani-Ferry, J.: ibid., p. 92. The reason for this may simply be that they don’t know what enlargement of the European Union is all about. In this respect, a survey among members of the Dutch parliament, carried out only five months before ten new countries became full members, revealed that one-third of them had no idea about the number of new members, and two-thirds could not tell the size of the European Commission or the Union’s budget (De Volkskrant, 6/7 December 2003).
Although attempts to prevent this deficiency by declaring that the European Union will “continue the process of creating an ever closer union among the peoples of Europe, in which decisions are taken as closely as possible to the citizen,” have resulted in some improvements (such as more direct influence of the European Parliament and the appointment of a European ombudsman), the enlargement of the European Union has thus far been an elite movement of political leaders, businessmen and the bureaucracy in Brussels (Gilpin, R.: ibid., p. 215). Regarding this, a recent Eurobarometer revealed that in the 13 applicant countries prior to May 2004, 69% of the population felt “not very well” or “not at all” informed about the enlargement process. For the 15 member states, the figure was 78% (European Commission: Applicant Countries Eurobarometer 2001. Public Opinion in the Countries applying for European Union Membership, March 2002, p. 97). It will not be easy to change this: it is reported that 98% of the citizens do not feel a connection with the European Union as a supranational body (Dunkerley, D., et al.: ibid., p. 40). This supranational body has yet to emerge as a contender for the loyalties of European citizens (Dunkerley, D., et al.: ibid., p. 120). Consequently, much missionary work still has to be done to create some idea of a European “ nation.” Promoting the perspective suggested by Thurow could be instrumental. European governments apparently do not realize that promoting a strong economic future could also counterbalance the already-existing, small but growing fires of regional separatism within the European Union (Judt, T.: ibid., p. 115). An example is Catalonia, which in 1993 produced 19% of Spanish GDP and 32% of Spanish exports, and where income per capita was 20% above the Spanish average. Another example is Italy, where “the aversion of the people of the North to have to share the country with the parasitical South is as old as the country itself” (author’s translation) (Judt, T.: ibid., p. 117). Or consider Belgium, where the Flemish have benefitted in recent decades from the decline of Walloon industry. One can easily find more differences between rich and poor regions within the Union, where the rich regions, from a kind of “weare-Europe” attitude, bypass national governments in order to promote their particular interests in Brussels and evince no concern for the less privileged regions. Hettne and Söderbaum call this phenomenon “micro-regionalism,” which is related to macro-regionalism “in the way that the larger regionalization (and globalization) processes create possibilities for smaller economically dynamic sub-national or transnational regions to gain direct access to the larger regional economic system, often bypassing the nation-state and the national capital, and sometimes even as an alternative or in opposition to the challenged state and to formal state regionalisms” (Hettne, B. and Söderbaum, F.: Theorising the Rise of Regioness, in: Breslin, S., Hughes, Ch.W., Phillips, N., Rosamond, B., (eds.).: ibid., p. 42). Contrary to this view, however, Börzel paradoxically observes a tendency of regions that have the necessary resources to exploit direct channels of access to the European policy arenas, to increasingly “rely on cooperation with the central state government to project their interests in the European policy-making process” (Börzel, T. A.: Europeanization and Territorial Institutional Change: Toward Cooperative Regionalism? in: Cowles, M.D., et al.: ibid., p. 157). Regardless of which scholar is correct in this respect, these examples are based on economic motives. They have to be distinguished from separatism that is rooted in ethnicity, language, or religion, which results in demands for recognition of identity or even independence. To some scholars, the strengthening of regional identity is a logical consequence of “an erosion or reorganisation of nation-states” (Hettne, B. and Söderbaum, F.: ibid., p. 40). This type of pursued separatism seems to be on the increase (Hofstede,G.: ibid., p. 24).The European map of some 100 years ago is becoming realistic again. Furthermore, the widening gap between different income classes in Europe will demand government action directed at preventing an unsound nationalism. It should be noted, however, that it is very difficult to distinguish between economic motives and motives of identity in this respect. If there is a relation between the two, it seems to me that prosperous economic conditions will mitigate feelings of identity, whereas poor economic conditions will exacerbate them. This, however, should not be interpreted as a general conclusion. Therefore, added to the problems sketched above, in order to maintain social stability in Europe, governments will have to display political tours de force.
Myrdal, G.: ibid., pp. 160 and 238.
In this respect, Lasch refers to referenda on the unification that have revealed “a deep and widening gap between the political classes and the more humble members of society.” The latter fear that the Union will be dominated by bureaucrats and technicians “devoid of any feelings of national identity or allegiance.” In their view, a European government will be “less and less amenable to popular control,” whereas “the international language of money will speak more loudly than local dialects” (Lasch, C.: ibid., p. 46).
McGrew, A.: Power Shift: From National Government to Global Governance? in: Held, D., et al: A Globalizing World? Culture, Economics and Politics, Routledge/The Open Unversity, 2000, p. 141.
However, some, like Elias, believe that these modern times of globalization will automatically lead to a global unification into a world state with a world government. Such a world state would resemble the welfare states as we know them now. So far, however, there are no signs that such a development will take place. On the contrary, separatism and demands for greater autonomy are on the increase (Loo, H. van der and Reijen, W. van: ibid., pp. 285–288).
McGrew, A.: ibid., pp. 140–141.
Consequently, we see an explosive growth in the number of global platforms. For example, the number of intergovernmental organizations grew from 37 in 1909 to almost 300 in 1999. Next to this, global governance has resulted in a multiplicity of expert groups, summits, conferences, and congresses. Their coming together amounts to around 4,000 meetings annually (McGrew, A.: ibid., p. 138).
Two examples demonstrate these devastating effects. The first example regards the liberalized exchange of capital flows, one of the boosters of the globalization process. Financial disasters since the 1990s in Mexico, Indonesia, Russia, Malaysia, South Korea, Argentina, and also the demise of Long Term Capital Management in the United States, which forced the Federal Reserve Board, “the cockpit of world finance” (Phillips, K.: ibid., p. 138), to save a group of American Banks (Hertz, N.: ibid., p. 44) with a $3.6 billion rescue package (Scholte, J.A.: Globalization. A Critical Introduction, ibid., p. 119), have demonstrated how unstable financial markets can be. As a consequence of the financial crisis, Indonesia’s economy, which expanded by 8% and 5% in 1996 and 1997 respectively, contracted by no less than 13% in 1998. South Korea’s economic growth sank by 7% in 1998 after having grown by 7% in 1996 and 5% in 1997 (Legrain, Ph.: ibid., p. 281). Consequently, unemployment in the South Asian region soared, with the number of people living in poverty increasing by 90 million (Werner, K. and Weiss, H.: Schwarzbuch Markenfirmen (Dutch Translation), Rijswijk, 2002, p. 194). As for Mexico, the privatization of Mexican banks in the 1990s created 28 billionaires, leaving ordinary Mexicans paying the price of the economic damage (Phillips, K.: ibid., p. 229). Contrary to the proponents of neo-liberal market fundamentalism, financial markets do not tend to reach a natural market equilibrium (Soros,G.: Soros on Globalization, ibid., p. 160). Instead, Soros says, “they need supervision and regulation” (Soros, G.: The Crisis of Global Capitalism: Open Society Endangered, Little, Brown and Company, 1998, p. 194). There are a few indications that the G8 countries are starting to realize this. Meanwhile, global financial experts hope that financial markets will become less volatile when good quality relevant macro-and micro-economic information is available. In this respect, it is helpful that the IMF established a Special Data Dissemination Standard in 1996 and a General Dissemination System in 1997, which are freely available on the Internet. In addition to this, the IMF, together with the World Bank and the International Federation of Accountants, launched an International Forum on Accountancy that aims to build accounting and auditing capacity (Scholte, J. A.: Globalization: A Critical Introduction, ibid., p. 217). These and other initiatives (Scholte notes the International Organization of Securities Commissions, the International Association of Insurance Supervisors, the OECD Committee on Financial Markets, the BIS Committee on Payment and Settlement Systems, et cetera: Scholte, J. A.: Globalization: A Critical Introduction, ibid., p. 218) are meant to increase stability in global finance. To a large extent, worldwide capital flows have to do with speculation. According to Phillips, only 2–3% of the daily 1.5 trillion dollars (Mittelman J. H.: ibid., p. 21) of currency trade in the global market in the late 1990s, which was an eightfold increase since 1986 (Gilpin, R.: ibid., p. 140), had to do with actual trade in goods and services (Phillips, K.: ibid., p. 138). Others give speculation estimations of 90% (for example, according to Scholte, the proportion of foreign exchange dealings that relate to transactions in real goods fell from 90% in the early 1970s to less than 5% in the early 1990s: Scholte, J. A.: Globalization: A Critical Introduction, ibid., p. 218). Consequently, “total turnover in currency markets alone, is inflated far beyond the underlying economic realities,” says the Independent Commission on Population and Quality of Life in this respect (Report of the Independent Commission on Population and the Quality of Life: Caring for the Future, Oxford University Press, 1996, p. 281). Concurrently, new stock exchanges were opened in 70 countries in recent years, including the African continent, Eastern Europe and Russia (Scholte, J. A.: Globalization: A Critical Introduction, ibid., p. 117). Commercial banks take part in this speculation. In 2000, a group of just 24 commercial banks made a profit of around €5 billion in just three weeks on the Brazilian commodities and futures market. The major part of these earnings, €800 million, went to American Citibank, whereas Deutsche Bank was among the top ten winners with €200 million (Werner, K. and Weiss, H.: ibid., p. 195). In addition to this, the three types of democratization described by Friedman have made it possible for individuals to take part in the capital-market gambling game. In 1980, a total of 4.6 million American households owned shares in mutual funds. By 2000, “more than half the U.S. population was investing in the stock market, either through equities they purchased themselves or through mutual funds or through their pension-retirement plans” (Friedman, T. L.: ibid., p. 125). This represented, by and large, a tenfold increase in 20 years. Illustrative of this gambling game is the fact that many individual shareholders hold their shares no longer than four to five days (Gates, J.: ibid., p. 144). The Internet plays a facilitating role here. Cheap online trading caused 10 million Americans to opening online accounts between 1996 and 2000 (Levitt, A.: Take on the Street: What Wall Street and Corporate America Don’t Want You to Know; What You Can Do to Fight Back, Pantheon Books, 2002, p. 29). To many authors, this is the most destabilizing force in a globalizing world. Soros, for example, believes that the globalization of financial markets has superseded the welfare states that were created after the Second World War, since people who need a social safety net cannot leave their country, whereas the capital that governments used to tax, easily can (Soros, G.: Soros on Globalization, ibid., p. 19), because “money has no flag” (Buchanan, P. J.: ibid., p. 54). However, it is assumed that this is not the fault of corporate business. To Burton-Jones, liberalized exchange of capital flows is one of the forces that are beyond the control of firms. In his opinion, “firms have as much control over these forces as a farmer has over the weather” (Burton-Jones, A.: Knowledge Capitalism, Oxford University Press, 1999, p. 230). Nevertheless, there is a destabilizing factor here, as the examples given earlier demonstrate. World leaders are compelled to design a policy that limits monetary speculation. In this respect, it is worth mentioning that the G8 called for “a new financial architecture” during its meeting in 1998. One of those G8 leaders, Tony Blair, urged a new Bretton Woods conference, with the aim of rewriting international financial rules (Gates, J.: ibid., p. 198). Furthermore, the Commission on Global Governance formulated the view that “ systemic financial stability; a stable monetary system, a capacity to deal with major systemic slumps and shocks, and prudential regulation of international financial markets” would be among the basic international public goods that global governance should provide (Report of the Commission on Global Governance: Our Global Neighborhood, Oxford University Press, 1996, p. 150). This demands a revision of the Bretton Woods agreement (1944–1971). After all, “if markets are global, their regulators must also be global” (Kuttner, R.: The Role of Governments in the Global Economy, in: Hutton, W. and Giddens, A., (eds.): On the Edge: Living with Global Capitalism, Jonathan Cape, London, 2000, p. 153). Regarding this, the Commission on Global Governance suggests the establishment of an Economic Security Council which aims: “(a) to continuously assess the overall state of the world economy and the interaction between major policy areas; (b) to provide a long-term strategic policy frame work in order to promote stable, balanced and sustainable development; (c) to secure consistency between the policy goals of the major international organisations, particularly the main multilateral economic institutions, the Bretton Woods bodies and the [then] (proposed) WTO, while recognising their distinct roles; (d) to promote consensus-building dialogue between governments on the evolution of the international economic system, while providing a global forum of the new forces in the world economy—such as regional organisations” (Report of the Commission on Global Governance: ibid., p. 156). Indeed, a Bretton Woods-like regulatory system seems more appropriate than ad hoc interventions by the great powers in order to, for instance, prevent the yen from crashing in 1998, stabilise the dollar against the yen (the Louvre Accord of 1988), or produce a period of coordinated reduction in interest rates (the Plaza Accord of 1985) (Kuttner, R., in: Hutton, W., and Giddens, A., (eds.): ibid., pp. 162–163). Moreover, there is no certainty that currency rates will produce optimal outcomes under free flows of capital. Several mainstream economists have challenged this thesis (Kuttner, R., in: Hutton, W. and Giddens, A., (eds.): ibid., p. 161). A Bretton Woods-like regulatory system, for that matter, would be in line with the intentions that the architects of Bretton Woods, Harry Dexter White and John Maynard Keynes, had in 1944. They not only proposed gradually to liberate international trade, but also to control speculative capital tightly (Legrain, Ph.: ibid., p. 104). One could also consider levying taxes on capital flows. After all, one can wonder why governments raise value-added taxes on physical transactions but not on financial ones (Soros, G.: Soros on Globalization, ibid., p. 84). The magnitude of capital flows is beyond human imagination. On a single day in April 1998, the turnover in the currency markets was $1.5 trillion, which is around a hundred times more than the trade in goods and services. (Today’s net capital flows, however, are far smaller as a share of GDP than were pre-First World War net flows out of Britain to countries like Argentina, Australia, and Canada [Frankel, J.: ibid., p. 57]). If we calculated a year of 240 working days, with governments imposing a tax of 0.01%, which would hardly influence the financial markets, this would produce considerable revenues for governments (Report of the Independent Commission on Population and Quality of Life: ibid., p. 282). Related to this are the so-called “Tobin tax” proposals of 1994, named after the Nobel Prize winner James Tobin, which entailed a 0.05% taxation on all foreign exchange dealings. It is estimated that such a taxation would yield over €100 billion annually on a worldwide basis. This represents a considerable amount of money that could be used for combating poverty and unemployment, while those who pay these taxes would hardly notice it (Werner, K. and Weiss, H.: ibid., p. 199). In this respect, Soros would like to see such tax revenues channelled to international institutions in order to finance the provision of public goods like combating infectious diseases and education (Barrez, D.: De Antwoorden van het Antiglobalisme Van Seattle tot Porto Alegre, Mets & Schilt, 2001, p. 110). Further, one could devise an international tax treaty or impose stronger reserve requirements on bank lending to discourage rash loans (Self, P.: ibid., pp. 199–200). Regarding these ideas, The Independent Commission on Population and Quality of Life suggested that the United Nations and the Bretton-Woods institutions could install a small group of experts to study and report on the possibilities of a global transaction charge on financial activities (Report of the Independent Commission on Population and Quality of Life: ibid., p. 284). All these suggestions could be carried through rather quickly, if politicians such as the leaders of the G8 could agree on a common line and had the courage to implement them. The second example may cause a profound impact in the near future. It concerns the growing worldwide inequality. The relevant question is whether we can prevent present-day capitalism, since communism has been defeated, from becoming its own worst enemy by making it politically acceptable through social corrections. In this respect, it is worth mentioning that during the World Economic Forum and G7 summits of 1999 and 2000, “much was made of the apparent trade-off between international competitiveness and the social and political priorities of democratic systems. Privatization and deregulation in welfare provisions, especially, were recognized to have contributed to rising levels of domestic inequalities, and the “logic” of international restructuring to have fed into an increasingly painful differentiation between rich and poor countries. Social injustice came during this time to be associated with the absence of effective economic regulation, or at the very least with the process of deregulation which most countries were engaged in engineering for much of the 1990s” (Phillips, K.: ibid., p. 71). Consequently, in economic and political circles, the objectives of neo-liberal market economies are thought to be in need of re-evaluation. Part of this re-evaluation should deal with the fact that privatization and deregulation have nothing to do with globalization. American airlines, for instance, have been deregulated. Nevertheless, foreign airlines are not allowed to fly domestic American routes, nor has the United States airline industry been opened to international competition. The same applies to the privatization of British Airways, Air France, and Lufthansa, which do not face American competition on European routes. Conversely, globalization need not imply deregulation or privatization. The pharmaceutical industry is a good example. Although they compete in a global playing field, pharmaceutical companies are strictly subjected to regulation (Legrain, Ph.: ibid., p. 6).
Commission on Global Governance: ibid., pp. 61 and 137.
Kapstein, E. B.: Sharing the Wealth:Workers and the World Economy, Norton and Company, New York, 1999, p. 111.
In this respect, one can agree with Kaplan that “there are no universal truths on how to organise society or to improve it” (Kaplan, R. B.: The Coming Anarchy: Shattering the Dreams of the Post Cold War, Random House, New York, 2000, p. 176).
It is impossible to consider the World Bank, the IMF, and the WTO in a completely isolated way, because their activities are closely tied up with the foreign policy of the developed world, especially American foreign policy, as is illustrated by the fact that within the IMF, the ten most industrialized countries have over 50% of the votes, of which the United States has 18% (Hobden, S. and Jones, R. W.: Marxist Theories of International Relations, in: Baylis, J. and Smith, S., (eds.): ibid., p. 213). The IMF has 183 members; the WTO 145. The WTO was established in 1995. Its members have a right of veto. The organization employs 550 people and has a yearly budget of $80 million, half of which is spent on the translation of documents (Legrain, Ph.: ibid., p. 183). Since its inception, the International Trade Organisation (ITO) and the General Agreement on Tariffs and Trade (GATT, 1947) represent the “embryonic trade ministry of a world government” (Buchanan, P. J.: ibid., p. 313). To Legrain, however the WTO is a simple forum where governments hammer out trade rules and have an umpire in trade disputes (Legrain, Ph.: ibid., p. 178). It faces difficulties in administering a series of rules, and in governing international trade and its related areas, in order to achieve its objectives of (1) non-discriminatory treatment in international commerce, (2) the pursuit of a reduction and possible elimination of barriers to trade, and (3) the pacific settlement of disputes (Wilkinson, R.: Multilateralism and the World Trade Organisation: Architecture and Extension of International Trade Regulation, Routledge, 2000).
Stiglitz, J.: Globalization and its Discontents (Dutch Translation), Utrecht, 2002.
Klein, N.: Fences and Windows, ibid., p. 21.
Mestrum, F.: ibid., p. 21. In this perspective, combating poverty, for example, is not additional to but an alternative for social security. This kind of social security is not meant to protect people against market failures. Instead, it is an incentive and an obligation to participate in that market. This means that, in order to survive, poor people must participate in the market in accordance with neo-liberal views. Consequently, organizations like the IMF and the World Bank criticize systems of social security, because egalitarian access to the advantages of social security would not respond to the demands of a market economy.
Mestrum, F.: ibid., pp. 75, 77, 126, and 137.
Democracy, however, cannot be enforced by foreign institutions. Neither can it be valued as an export article of the developed world, for the simple reason that civil rights cannot be imported. Democracies grow inside-out and bottom-up in a long-term process. For such a process to succeed, it is more productive to take indigenous traditions and rules as the point of departure, than imitating exogenous constitutions and political instruments (Barber, B.: Fear’s Empire, ibid., chapter 8). Hofstede, therefore, rightfully observes that introducing democracy as a pre-condition for material help will not change the political traditions of developing countries. Besides, one cannot expect participation in democracy from people who are hardly fed and who do not have the chance to be educated (Hofstede, G.: ibid., p. 57; also, Myrdal, G.: ibid., p. 130). On the contrary, forcing underdeveloped nations to introduce political democracy may work “like a razor in the hands of a child” (author’s translation) (Lichtveld, in: Jansen van Galen, J.: Het Suriname-Syndroom. De PvdA tussen Den Haag en Paramaribo, Bert Bakker/Wiardi Beckman Stichting, 2001, p. 27). In 1959, Lipset proved that there is a strong correlation between, on the one hand, a country’s democratic stability and, on the other hand, its level of economic development (Fukuyama, F.: The End of History and the Last Man, ibid., p. 135). Research by Przeworski and Limongi over the period 1950–1990 indicated that democracies in countries with a per-capita income of less than $1,500 lasted on average eight years; with per-capita income between $1,500 and $3,000, democracy lasted on average 18 years; and at an income level of more than $6,000 per capita, democracy appeared to be stable (in: Zakaria, F.: ibid., p. 63). And if, on top of this, those same people are forced to accept harsh adjustment measures as a pre-condition for financial support from the IMF/World Bank, this may endanger the assumed coexistence of democratisation and structural adjustment (Fukuyama, F.: The End of History and the Last Man, ibid., p. 135). This co-existence was already made critical by the IMF/World Bank in stating that a minimum wage of less than $1 per day was “excessive” (Mittelman, J. H.: ibid., pp. 104 and 107). One wonders then, how these international institutions define poverty. To provide some balance, however, Sen’s observation that the generation and enforcement of a democratic system is an essential element in a process of development is worth mentioning, because, to him, democracy has three separate advantages. Firstly, it has an intrinsic value. Secondly, it plays a role in creating a sense of standards in society. Thirdly, and most importantly, democracy is a means in the process of decision-making regarding the objectives of society. If governments can be criticized by their citizens, it may be that those in power will listen to hear what people want (Sen, A.: ibid., p. 155). Though all of this may be true for developing countries, one can doubt if Sen’s advantages apply to the so-called mature democracies of the Western world. Here, the continuously decreasing participation in elections makes me hesitant about citizens’ perceptions of the intrinsic value of democracy. Furthermore, one can argue that increasing demands for personal safety in the countries of the Western world are the result of a decreasing general attachment to an accepted sense of standards on what is right or wrong. Finally, the fact that a growing number of people have come to believe that politics no longer matters implicitly means that they no longer have the idea that they can influence political decision-making. Therefore, I tend to agree with Hofstede and Lipset. After all, the well-being of people begins with a full stomach and good health. The wish to be taken seriously by those in power comes after that.
Chalmers Johnson: Blowback: The Costs and Consequences of American Empire, Little, Brown and Company, 2000, p. 80.
Since 1985, the IMF and the World Bank have controlled Tanzania’s economy. When taking over the country, with its diseases and debts, no time was lost in cutting trade barriers, reducing public spending and selling state industries. Fifteen years later, GDP per capita had dropped from $309 to $210, literacy had fallen, and the rate of abject poverty had jumped to 51% of the population (Palast, G.: ibid., p. 148). Meanwhile, settling the country’s debts demanded an amount of money that was six times as high as what the country spent on health care (Ellwood,W.: The No-Nonsense Guide to Globalization (Dutch Translation), Lemiscaat, 2003, p. 57). An Economic and Rehabilitation Programme for Mozambique in 1988, sponsored by the IMF and the World Bank, further squeezed the already-low social provisions in the country. The privatization of health care drove up the price of medical services. As a result, attendance at local clinics and hospitals, particularly by women, dropped immediately by 50% to 80%. In addition to this, the IMF/World Bank conditions accelerated the already-downward spiral of inadequate nutrition (Mittelman, J. H.: ibid., p. 83). This policy of squeezing social provisions resulted in a dramatic decrease in public spending on health care and education. Per-capita spending on health fell from $4.70 in 1982 to $0.90 in 1989, whereas spending on education in 1989 was only one-third of that in 1982 (Mittelman, J. H.: ibid., p. 97). In South Africa, “apartheid based on race has been replaced with apartheid based on class.” According to Trevor Ngwane, a former ANC municipal council member, this was caused by the restructuring programme that was imposed by the IMF and the World Bank and executed by the South African government. The results have been devastating. Since 1993, a total of 500,000 jobs have been lost, wages for the poorest 40% have dropped 21%, the price of water has gone up 55%, and the price of electricity has increased 400% (Klein, N.: Fences and Windows, ibid., pp. 108–109). In Indonesia in 1998, the IMF eliminated food and fuel subsidies for the poor in a framework of “market-based pricing” of food, water and domestic gas. The same happened in Bolivia in 2000, where the population suffered water price hikes (Palast, G.: ibid., p. 153). Here, the American-owned International Water Limited secured from the Bolivian government a guaranteed 16% return on investment, which accounted for a 35% price increase. Protest organizers knew that just over the border in Argentina, the privatization of water supplies had eliminated the jobs of 7,500 people. Brazil provides a good example of how the IMF and the World Bank serve the interests of the developed world. As Palast reveals, Cardoso’s re-election to the presidency in 1998 was dependent on his ability to maintain the high value of the real, the Brazilian currency. The IMF and the World Bank offered a loan of $41 billion that would not be handed over before the elections. Thirteen days after Cardoso had been re-elected, publicly supported by Peter Mandelsohn, Blair’s favorite, “the U.S. Treasury gave the nod, a trap door opened and Brazil’s currency plunged through, dropping 40%.” This appeared to be very convenient, because in order to be able to pay its new multi-billion dollar debts, Brazil held a fire sale. The Texan companies Enron and Houston Industries purchased the electricity companies of Rio de Janeiro and São Paolo, and a pipeline, for peanuts, and British Gas received São Paolo Gas Company for a song (Palast, G.: ibid., pp. 303–304). For most underdeveloped and developing countries that have received loans from the IMF/World Bank, annual interest payments are higher than combined spending on health and education. Interest payments leaving many African countries are three times as high as aid money coming in. Situations on other continents deliver a comparable picture. Pakistan, for instance, spent just 0.05% of its budget in 2000 on health, 2.2% on education, and 60% on repaying debt (Neale, J.: ibid., p. 39). As a condition for an IMF loan, the government of Ecuador was ordered to raise the price of cooking gas by 80% from November 2000. Furthermore, 26,000 government jobs had to be eliminated, and for the remaining staff, real wages had to be cut by 50% in four steps in accordance with a timetable delivered by the IMF. Finally, by July 2000, and in order to serve the interests of the developed world, ownership of Ecuador’s biggest water system had to be transferred to foreign operators, while British Petroleum was granted the right to build and own an oil pipeline over the Andes (Palast, G.: ibid., p. 145). As for the recent crisis in Argentina, the World Bank ordered the government, in its secret “Country Assistance Strategy” report of June 2001, to increase labor flexibility by cutting works programs, smashing union rules, and slicing real wages. All of this satisfied the conditions for a $20 billion emergency loan package, together with “stand-by” credit from the IMF. At the time of the deal, Argentina already owed $128 billion in debt. For this debt, $27 billion in interest and premiums had to be paid annually. Consequently, the Argentinian population did not get one penny from the so-called bailout loan (Palast,G.: ibid., p. 160). Meanwhile, the population revolted over massive cuts in social spending, almost $8 billion in three years, as a condition to qualify for the IMF loan (Klein, N.: Fences and Windows, ibid., p. 49). Moreover, since cutting social spending was not enough to meet the financial obligations, a big hunk of the water system was sold to the French, who promptly raised the price of water in some cities by 400% (Palast, G.: ibid., p. 162). Finally and most revealingly, in 2001, two weeks before the G8 came to Genoa, in Papua New Guinea three students were killed while protesting a World Bank privatization scheme (Klein, N.: Fences and Windows, ibid., p. 151). It would be wrong, however, to assume that the IMF and the World Bank’s neo-liberal strategy is only applied to the underdeveloped and developing countries. On the contrary, the “one size fits all” strategy is implemented worldwide. In this respect, the following quotation from an IMF bulletin of 1994, regarding the developed world, is of interest. It reads: “It should not be that European governments, because of the anxieties that have arisen from the fact that they have lost control over income distribution, cease carrying out courageous and profound reforms with respect to the labor market. A flexible labor market results from a revision of the benefit system, the legal minimum income and the regulations concerning employment protection” (author’s translation) (Forrester, V.: L’horreur économique (Dutch Translation), Amsterdam, 1997, p. 109). This is the IMF which, like the World Bank, is part of the United Nations, but nevertheless operates like “self-righteous surgeons, skilfully removing the remnants of political control over market forces” (Castells, M.: The Power of Identity, ibid., p. 269). Meanwhile, these tax-free salaried surgeons saw their remuneration increase by 38% in 1992–1993, with a further budgeted increase of 22% for 1994 (Ormerod, P.: The Death of Economics, Faber and Faber, 1994, pp. 3 and 124).
Gray, J.: False Dawn: The Delusions of Global Capitalism, London, 1999, p. 272.
Hutton, W. and Giddens, A., (eds.): ibid., p. 93. Perhaps this explains why there seemed to be a change in policy during the Asia crisis of 1997–1999, when the IMF and the World Bank departed from their traditional fiscal conservatism, advocating public sector deficits in order to protect food security, primary health care, basic education, and employment. Similarly, since 1996, the World Bank, through its Structural Adjustment Policy Review Initiative, has joined with civic associations to explore possible connections between neo-liberal economic restructuring and poverty (Scholte, J. A.: Globalization: A Critical Introduction, ibid., p. 215). In this respect, the African country of Chad, by exploiting its extensive oilfields, delivers an example of the World Bank’s policy change. In Chad, the government had to accept a legal regulation guaranteeing that 80% of oil incomes will be spent on health, education, and rural infrastructure; 5% for the population living near the oil fields; and 10% as a reserve for coming generations. So, only 5% can be spent in accordance with what the government wants (Zakaria, F.: ibid., p. 147).
Recent American manipulations of temporary members of the Security Council of the United Nations (Angola), and conditioning financial help to support in a then possible war against Iraq (Turkey) show that, in fact, nothing has changed. Meanwhile, the United States continues to claim moral superiority in a way that no other country can (Hertsgaard, M.: ibid., p. 75).
According to Wheen, the IMF, the World Bank and the WTO have been created and are directed by “a small elite conclave of capitalist cardinals” (Wheen, F.: ibid., p. 239).
Scholte, J. A.: Globalization: A Critical Introduction, ibid., p. 272.
In this respect, the Meltzer committee proposes to reshape the World Bank into a World Development Agency, instead of just lending money on severe terms (Soros, G.: Soros on Globalisation, ibid., p. 115).
Bové, J. and Dufour, F.: ibid., p. 158.
As for the latter, it is possible to argue that the WTO is worse than its predecessor the ITO, since the Havana Charter of 1948 required members to “take fully into account the rights of workers under inter-governmental declarations, conventions and agreements” (Wilkinson, R.: ibid., p. 57). Now, however, the only thing the WTO asks from its members is to conduct their commercial relations “with a view to raising standards of living, ensuring full employment, and a large and steadily growing volume of real income and effective demand” (Wilkinson, R.: ibid., p. 58). This seems to be more rhetorical than substantial, given the fact that, contrary to the Havana Charter, the WTO has no formal relations with the International Labour Organisation (ILO), nor does it want to have such relations. Moreover, the WTO managed to resist pressures from a number of members in this respect. France, for example, did not succeed in establishing a permanent working party between the ILO and the WTO (Jospin, L.: ibid., p. 38).
Pilger, J.: Hidden Agendas, ibid., p. 73. In this respect, one can wonder if there is an essential difference between present times and the nineteenth century, when imperialism and globalization went hand in hand. Legrain would call this neo-Marxist claptrap, because nowadays countries are no longer forced to open their borders but, instead, can choose to do so (Legrain, Ph.: ibid., p. 100). However, one can criticize the meaning of free choice in a context where the terms of trade are determined by the developed world, be it directly or indirectly via international organizations like the WTO, the IMF, and the World Bank. Figures demonstrate that, through their policies, developing countries are becoming more dependent on an ever-increasing free trade world. It has always been like this. At the start of the nineteenth century, the richest country was three times richer than the poorest one. A century later this was ten times. Now the richest country is sixty times better off (Legrain, Ph.: ibid., p. 90). New to the current day, however, is the fact that, according to Bhagwati, the idea of free trade has been “hijacked by the proponents of capital mobility” (Chalmers Johnson: ibid., p. 205). O’Rourke and Williamson, however, warn that we should take a more balanced view regarding the effect of free trade on Third World countries’ increasing dependence (O’Rourke, K. H. and Williamson, J.G.: Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy, The MIT Press, 2000).
Jospin, L.: ibid., p. 7.
Gates, J.: ibid., p. 255.
He reveals an internal WTO memo, which he claims to have held in his hands, that in March 2001, the WTO would design a system to replace democracy with something that one day might be seen as the post-democratic Magna Carta. “At its heart was a bold plan to create an international agency with veto power over individual nation’s parliamentary and regulatory decisions. The memo begins by considering the difficult matter of how to punish nations that violate a balance between two potentially conflicting priorities: promoting trade expansion versus protecting the regulatory rights of governments.” Both seem to have been thought out in the preparations for a General Agreement on Trade in Services (GATS), and have found expression in Article VI.4. Once countries have signed this article, they will be subject to the so-called “Necessity Test.” This test demotes parliaments and regulatory agencies, in effect, to advisory bodies, because “final authority will rest with the GATS Disputes Panel to determine if a law or regulation is ‘more burdensome than necessary.’ And the GATS panel, not any parliament or congress, will tell us what is necessary” (Palast, G.: ibid., pp. 165–166). If one reads things like this, one does not believe one’s eyes. Admittedly, Palast refers to an internal WTO memo. Nevertheless, it is disturbing that WTO staff give expression to ideas like these. And it is likewise disturbing that trade ministers, “in the course of secretive multilateral negotiations, agreed that, before the GATS tribunal, a defence of’ safeguarding the public interest...was rejected.’ In place of a public interest standard, the secretariat proposes a deliciously Machiavellian ‘efficiency principle’“ (Palast, G.: ibid., p. 167). Finally, Palast wonders where the trade ministers got these ideas, and he answers: “ There are conspiracy cranks and paranoid antiglobalizers who imagine that the blueprints for WTO supranational control are designed in secret meetings between the planet’s corporate elite and government functionaries, with media leaders attending to adjust propaganda as ordered. They’re right. One of these quiet groups is the LOTIS committee, which stands for Liberalisation of Trade in Services” (Palast, G.: ibid., pp. 170–173).
Legrain, Ph.: ibid., pp. 200–202.
Bové, J. and Dufour, F.: ibid., p. 165.
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(2007). Moving Along a Continuum. In: Trends in EU Health Care Systems. Springer, New York, NY. https://doi.org/10.1007/978-0-387-32748-8_1
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