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Alexis de Toqueville:

How does the Reorganization of the Spatial Division of Labor in Europe Impede the Lisbon Goals Ulrich Blum. Alexis de Toqueville:. “… if you want to prevent a revolution, you must implement a revolution …” What does this mean against the background of Protests in France against nee labor laws

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Alexis de Toqueville:

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  1. How does the Reorganization of the Spatial Division of Labor in Europe Impede the Lisbon GoalsUlrich Blum UdM-CERIUM-Lisbon

  2. Alexis de Toqueville: “… if you want to prevent a revolution, you must implement a revolution …” What does this mean against the background of • Protests in France against nee labor laws • A two months strike in Germany at AEG/Electrolux Washing machine and dishwasher factory in Nuremberg where production is due to move to Poland to a new (EU-subsidized) plant in 2007 UdM-CERIUM-Lisbon

  3. Inquiry into the Lisbon Agenda 2010 • What are the goals? Are they credible? • Where are the constraints • Is there a problem (Lisbon Agenda 2100)? • Which theory helps to explain the situation? • What does this imply economically / socially? • What must be done – and by which institutions / agents? UdM-CERIUM-Lisbon

  4. What are the Lisbon Goals (1)? • In March 2000 EU heads of state met in Lisbon • They agreed on the ambitious goal of making the EU “the most competitive and dynamic knowledge-based economy of the world, capable of sustainable economic growth with more and better jobs and greater social cohesion” UdM-CERIUM-Lisbon

  5. What are the Lisbon Goals (2)? • A preparation for the transition to a knowledge economy through R&D (3% of GDP), structural reform, market integration and increased competitiveness • A modernization of Europe’s social model (entrepreneurship, increased labor participation) • Supportive macro-economic policy mix UdM-CERIUM-Lisbon

  6. Are the Lisbon Goals credible (1)? CIA: • Do US kids have to study abroad after 2010? • All successful nations had a surplus of human-capital rich young workforce. • This dynamic workforce is the result of own births and education effort, or integelligent immigration policies. • Europe is unable to deliver either of them. • US kids might have to study in Shanghai! UdM-CERIUM-Lisbon

  7. Are the Lisbon Goals credible (2)? Does Europe get the right immigrants? Germany: fiscal loss of 2.000 €/immigrant UdM-CERIUM-Lisbon

  8. Are the Lisbon Goals credible (3)? • European Growth rates are entirely unsatisfactory! • This is partly a German problem! • Unsatisfactory growth undermines growth policies! UdM-CERIUM-Lisbon

  9. Where are the constraints (1)? Institutional Arrangements as barriers: • Labor market inflexibilities • Adverse financing of social security • “Cohort-problem” of knowledge • “Industry-structure” problem of knowledge • Fiscal barriers A fundamental institutional problem! UdM-CERIUM-Lisbon

  10. Where are the constraints (2)? The (mis-) perception of globalization: • The firm (19th century) • The nation (20th century) • The individual (21st century) The world is flat – but individuals believe ostrich policies will be successful!!! UdM-CERIUM-Lisbon

  11. The Evidence (1) Change in the spatial division of labor: • Migration of capital • Migration of workers / people • Migration of firms within the EU and between the EU and rest of the world! UdM-CERIUM-Lisbon

  12. The Evidence (2) European core countries invest most in other European countries! Ireland (and Luxemburg) are exceptions UdM-CERIUM-Lisbon

  13. The Evidence (3) The big gold rush seems to be over! The system falls into equilibrium. But there are winners and losers! UdM-CERIUM-Lisbon

  14. The Evidence (4) • Behind these general movements of capital, a considerable industrial reorganization takes place • As statistics mostly do not monitor the true development because they do no fully capture the functional division of labor • Many early industrialized countries of Europe do not only have a cost problem but to an increasing extent a skill problem • Until now the spatial migration of manufacturing to Eastern reform countries is not complemented by a build-up of R&D in these regions UdM-CERIUM-Lisbon

  15. Institutional Problem • Problems of Europe are deeper than just relating to the spatial shifts of employment and industries • It is not the result of the strike of an asteroid but of a false adaptation of society to the global system UdM-CERIUM-Lisbon

  16. Theoretical framework of Lisbon (1)? • Europe is moving from a chicken-game dilemma into a prisoner-dilemma • History tells us that only reputation can overcome this lock-in situation which can be enforced by the carrot (Ireland, demographic expansion) or the stick (UK, Thatcher) • Society splits into cooperators and defectors according to the respective reputation potential • Help by a patriarchal state cannot be expected and fiscal constraints limit turn-around management UdM-CERIUM-Lisbon

  17. Theoretical framework of Lisbon (2)? • The problem of Europe can be formalized in a game-theoretical approach • People can cooperate and defect • The ability to control uncooperative people is limited unless the necessary external economies, especially cost-saving hierarchies and economies of scale, help • Hierarchies and centralized networks have eroded an with them the traditional welfare state • As a consequence, Lisbon 2010 is more than an social and economic program UdM-CERIUM-Lisbon

  18. Theoretical framework of Lisbon (3)? Assurance game (Integrated network of equals) Efficiency of cooperation (network effects) * IRE Prisoner’s dilemma game (decentralized network) Reputation [Social optimum] * UK * G * F Chicken game (centralized network) Technology (scale economies) UdM-CERIUM-Lisbon

  19. Theoretical framework of Lisbon (4)? • The problems are not those of the changing spatial division of labor that threaten Europe but those of sclerotic institutions • Europe faces institutional competition of an unknown degree • The title of this presentation just touches the symptoms UdM-CERIUM-Lisbon

  20. What must be done (1)? • As long as individuals perceive governments as an institution that can absorb all global personal risk entirely, the political system must fail! • Global individuals, especially globalized workers, are a precondition for success in this big global game. • The limits of the nation-state become visible! UdM-CERIUM-Lisbon

  21. What must be done (2)? • The rationality of economic change managements must be dramatically increased. • Population must be advised on unpreventable developments such as • Increased competition with immigrants, • Increased own responsibilities for unemployment, health, retirement benefits, etc. UdM-CERIUM-Lisbon

  22. What must be done (3)? Proof of dilemma: • Labor market inflexibility generates further inflexibilities • “Angst” prevails in most social classes! UdM-CERIUM-Lisbon

  23. References • Statistical Yearbook of Europe, • FDI-Yearbook 2005 • Lisbon Agenda Eurobarometer 2005 UdM-CERIUM-Lisbon

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