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Reorganization of the Spatial Division of Labor in Europe and its Impacts on the Lisbon Goals

Explore the challenges hindering the Lisbon Agenda 2010 in light of protests, strikes, and economic issues, alongside an analysis of the credibility, constraints, and institutional barriers. Investigate the implications on economic and social aspects and proposed solutions.

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Reorganization of the Spatial Division of Labor in Europe and its Impacts on the Lisbon Goals

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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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