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Moving Along a Continuum

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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.

Keywords

Member State Health Care System Social Security Welfare State International Monetary Fund 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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References

Chapter 1

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    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.Google Scholar
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    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).Google Scholar
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    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.Google Scholar
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    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).Google Scholar
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    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).Google Scholar
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    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.Google Scholar
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    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).Google Scholar
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    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.Google Scholar
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    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).Google Scholar
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    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).Google Scholar
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    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).Google Scholar
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    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.Google Scholar
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    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).Google Scholar
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    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).Google Scholar
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    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.Google Scholar
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    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.Google Scholar
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    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.Google Scholar
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    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).Google Scholar
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    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).Google Scholar
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    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.Google Scholar
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    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).Google Scholar
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    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).Google Scholar
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    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). 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