When you look at the chart which is with this post, you wonder how these EU Ministers can advocate a "Social Model" with a straight face. The five Social model economies, Germany, France, Spain, Denmark, and Belgium, averaged 2% growth last year. The Free Enterprise ones, Latvia, Lithuania, Slovakia, Poland, Estonia and Ireland, average 6% growth. The UK, which is a mix, averaged 3.3%
Third way in Europe?
adamsmith.org
By Madsen on Tax & Economy
The economic shape of Europe is much in the news following criticism of the proposed European Services Directive. The proposal put forward by José Manuel Barroso, President of the European Commission, seeks to open Europe's market in services to internal competition. It is strenuously opposed by France and Germany, with Jacques Chirac calling for it to be scrapped to protect the 'European social model.'
Now it is reported that supporters of competition have backed off, to prevent a 'no' vote in the French vote on the EU constitution. The 'social' model emphasizes collective responsibility, regulated labour and product markets, with high taxes to fund a generous social safety net. The competitive 'American' model stresses individual initiative, flexible labour markets, low taxes, and minimal regulation.
Gordon Brown wanted to combine the two, talking of a 'third way.' Irwin Stelzer assesses his achievement. In practice his contribution has been to raise taxes and regulation in the UK, taking it somewhat away from the American model and some way towards the social model. The government's share of the economy has hugely increased under his direction. It is not a third way but a mid-way, on the road from a flexible, competitive economy towards a protected and regulated one. There is still some way to go, but the UK economy is closer to the European model than it was.
The new EU members from Eastern Europe have arrived to stir the pot. Anxious to achieve growth, they have opted for the flexible, free-market model, with its low taxes. Many of them have embraced flat taxes. There thus remain two models, with Britain still in the 'market' group, but only just. The chart shows the two groups. |
