Towards Full Employment and Growth in the European Union

Abstract

After a decade of full employment in OECD countries in the 1960s, the 1970s brought severe problems in labor markets and lasting negative shifts in European markets. From the trough of one business cycle to the next unemployment increased. In the period 1987–90 the EC’s unemployment rate increased by 6 percentage points. The EC Commission noted in its White Paper on Growth, Competitiveness and Employment that in the two decades after 1973 the European economy’s potential rate of growth shrunk from around 4 % to roughly 2.5 % p.a.; the investment-output ratio declined by five percentage points. The unemployment rate has steadily increased from cycle to cycle, while the EU’s competitive position in relation to the US and Japan has worsened with regard to export markets shares, product innovation and R&D intensive products. At the same time it was noted that the single market program was rather successful: nine million jobs were created between 1986 and 1990, EC trade doubled in sectors previously regarded as sheltered from competition and growth increased by a half of a percentage point each year (EC COMMISSION, 1993, pp. 9–10). The EC Commission considers cyclical, structural and technological unemployment as major problems and finally concludes that the creation and expansion of trans-European networks is the key to restored growth, full employment and international competitiveness. Telecommuniations is considered to be a crucial network industry whose modernization over the next decade alone would cost some ECU 150 bill.; some 67 bill. will be needed between 1994 and 1999 for priority projects. Trans-European transport and energy networks plus large environmental projects are another major topic addressed by the White Paper. Finally, the EC Commission argues that “the Community will be able to improve its global competitiveness considerably, provided it achieves a substantial recovery in its investment ratio” (p. 57).