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.