The effects of globalisation more diverse than estimated - the European competitiveness policy requires a great deal of work
Globalisation creates much more subtle pressures for the worldwide re-allocation of production and employment than estimated before. Earlier, it was thought that competition from the developing low-wage countries only affected certain branches of industry and mainly low-paid workforce in the developed countries.
Recent research shows that competition may affect work regardless of education level. Moreover, changes in the competition may be very abrupt and hence hard to anticipate. This highlights the importance of economic adaptability and, in particular, the ability of labour markets and education systems to adjust. Provided that we have the ability to adjust and change, globalisation will be a good thing for Europe.
These are some of the conclusions made by Professor Richard Baldwin in his article, which is one of several papers constituting the first part of the study on the challenges of globalisation for Europe and Finland organised by the Secretariat of the Economic Council of Finland, published on Wednesday 20 September.
In addition to Baldwin’s article, the first part of the study includes eleven articles written by acknowledged European experts. Two of these articles are comments that complement Baldwin’s analysis. The remaining nine articles discuss the European competitiveness and structural policies, internal market issues, innovation policies in their broad sense, the European economic policy system and governance of globalisation.
The articles imply a strong need to develop the European competitiveness policy in various policy sectors. The new challenges posed by global competition combined with, for example, population ageing underline the need to improve innovation activity, the education systems and the functioning of labour markets, product markets and markets for risk financing.
Many of the policy recommendations are familiar from earlier studies. For example, further investments in education and, at least in certain countries, in R&D find support. But the analyses also warn about excessive simplicity in policy. Efforts to raise education level by simply increasing the number of people with university degrees are not necessarily wise. Nor are such “investments in the information society” that merely aim to train, for example, more ICT specialists.
In several articles, attention is paid to the greatly differing performance of the European countries in employment creation and productivity growth. In many respects, the Nordic countries seem to fare very well. On the basis of the aforementioned differences, the authors stress the importance of national policies and the need to learn form other countries’ experiences. The success of European economies depends, ultimately, on the countries’ ability to implement reforms that contribute to growth and employment.
However, the Union must also do its share. New bold openings are required in innovation policy. In this regard, new technology development projects based on cooperation between European companies and the public sector constitute an important field of action. Europe should also finally get its incoherent patent system in order. The development of a European-wide services market and network industries will provide new potential which only wait to be exploited.
Europe must also carry its responsibility for the development of global institutions such as the International Monetary Fund, World Bank and World Trade Organization. Europe, in principle, has considerable influence in these institutions but it has, so far, been unwilling to use it.
The published articles form the basis for the globalisation analysis carried out by the Secretariat of the Economic Council of Finland this autumn. Two related seminars will take place on 4 October in Finland. The analysis of the Finnish economy and conclusions regarding Finland’s policy strategy will be finalised in December. Translations into Finnish of the English articles will also be published at the same time.
The articles will also contribute to the general discussion on European competitiveness policies during Finland's EU Presidency and in particular prior to the informal meeting of Heads of State or Government on 20 October in Lahti. Innovation policy will be the main theme of the meeting.
Further information: Vesa Vihriälä, State Under-Secretary, tel. +358 9 1602 2171 or +358 40 550 6351 and Maarit Lindström, Project Manager, tel. + 358 9 1602 2134, Prime Minister’s Office