Models of Capitalism in Europe

Seminar of the Dynamo-Group hosted by transform! europe, Paris, 18-19 March 2011
Publication: A triumph of failed ideas. European models of capitalism in the crisis

Some twenty researchers from 10 different European countries (Germany, Austria, Spain, France, Greece, Hungary, Italy, Ireland, United Kingdom and Sweden), having already worked together three years ago as part of the Dynamo workshop on changes in the labor market in their country, met again on 18 and 19 March 2011 in Paris to examine and compare their analyses, from their national experience as to how different variants of capitalism observed previously in Europe have been coping with the crisis of 2008.
They discussed how Europe got into depression, how the different models of European capitalism fared during the crisis and what lessons have been drawn after the collapse of the financial markets and the freefall of the so-called real economy.
The first and the third questions are easy to answer. The deregulation of the financial markets, the continuous re-distribution of income and wealth from the bottom to the top and the global imbalances in the economy fuelled a bubble which burst after the Lehman-shock in autumn 2008. In this sense the Lisbon-process, established in 2000 to make Europe the leading competitive economy in the world, fuelled the crisis. The dominant lesson from this seems to be an even tighter austerity regime after saving the banks by increasing public debts – with deepening the contradictions and conflicts within the EU.
The second question is more difficult to answer. On the one hand the different models of capitalism carried on during the crisis: the Scandinavian states – e.g. Sweden – recovered, the corporate states in the centre – e.g. Germany, Austria, France – benefit from rising demand of the BRIC, whereas the Anglo-Saxon and the Mediterranean states suffer. But going deeper into detail it is not that easy. Let’s take the PIGS, for example: Greece is the case of a debt crisis caused by the private sector and the state, whereas Ireland was a model pupil in public austerity before the crisis until it took over the toxic assets from the leading banks. Italy, on the other hand, with the strongest industrial sector in the Mediterranean, is not deeper hurt by the financial markets but is confronted with an ongoing crisis in the real economy. And Portugal has been lacking competitiveness for a long time. Evidently, there are different ways to get into crisis and it is not even clear if the German competition-regime is a way-out – it is fuelled by increasing demand from Asia but is lacking demand from the traditional European markets. The varieties-of-capitalism-model gives no clear answer how states develop during great depressions.
What might be results of the crisis are shifts in the production regime and – most of all – basic shifts in the employment models: with fast growing sectors of temporary work in contrast to high-skill permanent employment and extraordinary high youth unemployment. This way of social decomposition and fragmentation is a burden for the future of Europe.

The upshot of these two days of debate is that each of the countries studied was not confronted with the crisis under the same conditions, nor did the countries suffer the same impact, given the differences in the structures of their productive systems (weight of industry in Germany, constructions and tourism in Spain, service activities in France …), which would have justified the same strategy adopted by their respective governments (export development in Germany, attracting foreign capital by the absence of taxes on businesses in Ireland, real estate speculation in Spain, restructuring small firms network in Italy …).
The crisis has therefore not developed the same characteristics everywhere. It is primarily a financial crisis in the United Kingdom or France, a crisis of household debt in Ireland and Hungary, one of public debt in Greece, the bursting of a speculative real estate bubble in Spain, an export crisis in Germany …
Yet, everywhere the same solutions have been adopted, not calling into question the neoliberal model, but rather profiting from the crisis to consolidate the power of the international financial capital over the states, productive capital and labor. For banks this meant few regulations and constraints, “business as usual”, but for everybody else this meant postponing the age of retirement and restructuring the “Welfare State” in the name of the reduction of deficits increased by the rescue of banks, labour market fragmentation and increased job insecurity, the distribution of value-added increasingly unfavourable to employees and decentralization of collective bargaining.
How to explain that it was possible to pursue the same neoliberal policies despite the different origins of the crisis? Several factors are cited: the strong and manifold networks that connect the world of finance with the one of business and politics, a patrimonial capitalism in which, faced with social insecurity, one develops a preference for investment in stone as a financial asset, the development of employee shareholding to offset the loss of purchasing power of wages, the disengagement of the state which protects only the “poor”, and leads to a rejection of taxation. All these factors tend to cast doubt on the effectiveness of a “crisis corporatism”, a strategy of alliance between national “social partners” against international financial investors, which is advocated by some German trade unionists.

Find attached the publication 

Steffen Lehndorff (ed.), A triumph of failed ideas: European models of capitalism in the crisis.

Print: European Trade Union Institute, ETUI, with support of transform!europe)  
Steffen Lehndorff is Senior Researcher of the Working Time and Work Organisation Department at IAQ, University of Duisburg-Essen.
The current crisis in Europe is being labelled, in mainstream media and politics, as a ‘public debt crisis’. The present book draws a markedly different picture. What is happening now is rooted, in a variety of different ways, in the destabilisation of national models of capitalism due to the predominance of neoliberalism since the demise of the post-war ‘golden age’. Ten country analyses provide insights into national ways of coping – or failing to cope – with the ongoing crisis. They reveal the extent to which the respective socio-economic development models are unsustainable, either for the country in question, or for other countries.
The bottom-line of the book is twofold. First, there will be no European reform agenda at all unless each country does its own homework. Second, and equally urgent, is a new European reform agenda without which alternative approaches in individual countries will inevitably be suffocated. This message, delivered by the country chapters, is underscored by more general chapters on the prospects of trade union policy in Europe and on current austerity policies and how they interact with the new approaches to economic governance at the EU level. These insights are aimed at providing a better understanding across borders at a time when European rhetoric is being used as a smokescreen for national egoism."

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