Four models of Euro economics…

Economic Models - Finantial Times Interesting piece from Martin Wolf drawn from a paper by André Sapir on Globalisation and the Reform of European Social Models. It identifies four typological models: Rhineland (or continental); Mediterranean; Nordic; and Anglo Saxon. The UK, Ireland and Portugal all fit the relatively successful enterprise driven Anglo Saxon model. But the Nordic countries which feature strong government intervention also performs strongly in economic terms.

Wolf concludes:

First, there is no doubt about the success of the Nordic countries. But all these (relatively small) countries have highly educated populations with a shared commitment to exceptionally high levels of state-financed welfare. In Denmark, Finland and Sweden, the ratio of public spending in GDP is above 50 per cent. The model may be relevant for Germany or France. But its applicability to the Mediterranean countries is questionable.

Second, if the Nordic route is difficult, the Anglo-Saxon one is no easier. The (implicit) goal of Rhineland and Mediterranean welfare models is to protect the jobs and earnings of the male heads of household. The Anglo-Saxon model does not achieve this, because of far greater earnings inequality.

Third, the EU is largely irrelevant to these decisions because the structure of welfare states and labour market regulations remain overwhelmingly national.

The conclusion is that Europe has models of economic policy that seem to work tolerably well and offer something very different from “savage capitalism”. This is dramatically true of the Nordic model.

The question is how far other European countries can adopt either of the apparently superior alternatives. Italy, for example, could never turn itself into either Finland or the UK. But one thing seems clear: merely resisting change is economically and politically suicidal.

  • fair_deal

    A very interesting piece indeed. I thought this was the most interesting comment in UK policy terms.

    “Prof Sapir argues, intriguingly, that the main reason for the underperformance of the Anglo-Saxon model on poverty alleviation is not the lack of fiscal redistribution but poor educational standards at the bottom.”

  • Gerry O’Quigley

    Wolf makes the point that the structure of welfare states and labour market regulations remain in the domain of the national sphere. I would argue that there are elements of fiscal policy, especially taxation, that are also determined at the national level and will be influential in determining which path to follow. Social policy issues are likely to dominate the agenda in the lead up to the next election in the Republic and the “Boston or Berlin” divide is a well-worn theme at this stage. Tax and labour market policy will largely determine what kind of childcare policies are possible for example. Therefore positions adopted in respect of social partnership or a wealth tax could be significant. It would be good to have a real debate about those issues but so far the risk-averse strategy of the potential alternative government means that very little is said about the hard economic issues.

  • David

    “this is nudging towards what might be considered worthy of norn iron debate, but fails.”

    All the really good countries (ie the ones with the Nordic model) in Europe are Protestant…? (except Austria)..?

  • D’Oracle

    David,
    Ah ..i think you’ll find the thread about the Orange Order’s repeat of last weekends events is actually a few places further down the menu

  • David

    D’Oracle,

    We all know that the Orange Order were not responsible for the trouble last week. I can confidently reveal that secret sources in the Vatican have told me that the Whiterock Parade was not conducted by the Orange Order at all. Instead a special squad of Jesuits dressed up as Orangemen to go on the march. Several thousand Opus Dei secret agents were then bussed in from strongly Romanist Argentina, they flooded Loyalist areas and rioted. Of course the Roman controlled media blamed the Protestants, but we all know who is really to blame…

  • Elaib

    I would be interested to see those results weighted for poulation size.

  • Occasional Commentator

    Would Norway be Nordic and Switzerland Anglo-Saxon? I suppose they were left out because they’re not in the EU.