This project aims to discuss the phenomenon of Eurosclerosis, politico-economic crisis experienced by the EU states during 70-80s of the former century. Considering that Eurpsclerosis is manifested through high level of unemployment, limited labor mobility, and considerable socio-cultural heterogeneity of the EU members, --these notions are the main objectives of the present research. The data is collected by exploring and analyzing the relevant official resources. The purpose of this paper is to answer the question whether the symptoms of Eurosclerosis remain topical in the today’s European states. In these regard, it also identifies the steps that were taken to resolve the crisis and assesses the effectiveness of those approaches. The findings reveal that to mitigate the negative consequences of the discussed phenomenon the EU states chose the course towards reducing social benefits in a labor setting, increasing taxation, and conducting other reforms aimed to enhance employee motivation and productivity of workflow. In overall, collected data suggests that that these strategies were partially successful and resulted in the increased labor mobility and reduced unemployment. Hence, the signs of Eurosclerosis remain present in the contemporary EU, in particular, the diversity of strategies of the member-states implies high national egoism that inhibits integration.
The phenomenon known as Eurosclerosis took place in the 70-80s of the former century. This period was characterized by the general confusion and, as a result, dysfunction of the politico-economic mechanism of the EU. Scholars explain that “states were losing their ability to control their political economies, but they could not figure out any collective solutions to these problems” (Fligstein & Mara-Drita, 1996, p. 10). In defining the main characteristics of this troubled period, researchers point to the high level of unemployment and the low labor mobility (Ribound, Sanchez-Paramo, & Silva-Jauregui, 2002). As a rule, these two determinants are closely associated with Eurosclerosis; thus, the same issues became the main targets of every country of the EU. In such a manner, while striving to resolve the aforementioned problems, each member state offered a unique view regarding effective measures for preventing the deterioration of the socio-economic situation (Frangakis, Hermann, & Lorant, 2009).
In this regard, one may rightfully deduce that the lack of the universal approach was the third significant determinant of the discussed crisis. Despite the diversity of approaches, the common strategy of the EU states was to decrease the expenditure on social benefits, in particular, those that considered the regulation of the worker-employee relations (Ribound et al., 2002). This strategy had certain positive results such as the reduction of unemployment and enhanced mobility in the labor setting (Boeri &Garibaldi, n. d.). At the same time, this approach caused negative reaction of the EU citizens. Specifically, the level of employee satisfaction considerably decreased (Ribound et al., 2002). At the present time, the lack of unified course remains a topical challenge. Under these conditions, some scholars presume that Eurosclerosis has not been eradicated; thus, it continues to deteriorate the life and well-being of the EU nations. In contrast, other scientists argue that the decrease in the unemployment and improved labor mobility are clear indicators that the crisis was successfully overcome (Pollack, 2005). The purpose of this paper is to detect and discuss the causes and implications of Eurosclerosis with the aim to identify what steps were taken in order to manage this adverse phenomenon and scrutinize its consequences for the modern EU.
The Factors that Stipulated the Development of Eurosclerosis
Approximately in the 70s of the 20th century, member states of the EU understood the importance of the consolidation and setting common goals; however, the governments were not ready to demonstrate the needed level of devotion to the achievement of unified goals. Instead, member-states “retreated to national egoism” (Waechter, 2009, p. 8). Specifically, consolidation was hindered by the fact that “each European country had continued to cherish its own social model” (Waechter, 2009, p. 9). As a result, the EU comprised states, each of which continued to follow own social models of development. In this regard, Ribound et al. (2002) argue, “Adopting the set of policies and institutions common to European countries, do not constitute a monolithic group” (2). Under such circumstances, it was not surprising that the EU experienced stagnation. It is necessary to clarify that the decadence of the political system of this union was not clearly visible because of the moderate but consistent economic growth (Ribound et al., 2002). Probably, this mitigating factor veiled the urgent need for changes.
One of the most important issues that contributed to the dissonance in strategic courses was the diversified view on the merits of neo-liberalism. Most states of the EU agree with the idea that markets should have been liberated (Jamet, Mussler & De Corte, 2011). This premise was in line with the global mainstream tendency in constructing business relations. In particular, other considerable players on the world stage acknowledged the need to provide businesses with the greater freedom as a means of boosting the domestic economic growth. Moreover, at this time, one could notice the tendency towards the consolidation of businesses and frequent cases of multinationals expanding into the world. Under these conditions, it was predictable that the states of the EU would adopt the neo-liberal approach (Jamet et al., 2011).
Nevertheless, these countries defined different levels of freedom in their national markets. This insight implies that some governments intended to keep a greater control over their markets than the others did (Jamet et al., 2011). For instance, the French government studied the disappointment in the market; as a result, significant government interventions were justified. These interventions were implemented though “defining protective regulations, redistributing revenues and awarding special status to interest groups” (Jamet et al., 2011, p. 13). The government interventions in the local businesses are usually considered restrictions for the offshore businesses that come from states that were liberated to a greater extent. Undoubtedly, this situation inhibits fruitful international relations among the members of the EU. In addition, it prevents the advancement of the labor mobility.
At the same time, adopting neo-liberalism to the full is a risky approach. In terms of the rationale, the uncontrolled business performance may put under unfavorable conditions both the employees and communities. The market failure may take a form of inability to function due to ecological issues that were predefined by the lack of government interventions in the business sector. At the same time, the government may collapse if it is unable to anticipate the negative consequences of excessive neo-liberalism. On the other hand, the state’s restrictions create a negative political environment for both domestic and offshore businesses. Therefore, the states of the EU have been balancing between the two undesirable edges (Jamet et al., 2011) for a long time already. In particular, the approach of ensuring a strong social protection of public needs may be a too huge financial burden for a state; whereas, assigning a considerable part of this duty to businesses means that the economic sector may suffer. In turn, such a situation causes retard in the development.
Another consideration that refers to the states’ heterogeneity and limited labor mobility in the EU zone is the control over the competition. In order to comprehend the meaning of this notion, one should refer to the nature of market relations. Fligstein and Mara-Drita (1996) explain that a market can be viewed as “a social situation where trade in an item occurs and a price mechanism that determines the value of the item exists” (p. 14). All determinants that constitute social situations in terms of the market relations are known as the local knowledge (Fligstein & Mara-Drita, 1996, 14). This knowledge is vital for building productive relations. Therefore, the local knowledge is essential for the survival of businesses. In the light of this peculiarity, a government strives to support the development of native businesses by initiating interventions that strive to alter variables in the local knowledge to an extent when this information possesses favorable conditions for the natives.
The aforementioned national egoism of the EU member-states is partially reflected in supporting the situation when “a conception of control” over the local knowledge is maintained by domestic businesses” (Fligstein & Mara-Drita, 1996, 15). The government control over the competition (or in other words, state’s endeavor to ensure that domestic businesses survive this competition) is a way of boosting the domestic economy and consumption of own goods and services. On the other hand, restrictions that are imposed on foreign businesses, in this case, create additional challenges for multinationals. Moreover, the internal competition does not guarantee that the produced goods and services are competitive on the world stage. Furthermore, the national egoism of the EU states resulted in the poor labor mobility and high cultural diversity. These factors caused the economic stagnation that reduced employment opportunities.
The EU Reforms and Policies Enacted to Overcome Eurosclerosis
The EU states’ endeavor to be assembled under a similar political denominator as a workable approach to mitigating negative effects of Eurosclerosis resulted in enacting a range of reforms that aimed to reduce the financial burden of the markets and governments. According to the survey conducted by Boeri and Garibaldi (n. d.), “The most powerful driving factor behind the increase in labour market flows was the reduction of employment protection legislation“(p. 14). In spite of the fact that the EU states adopted different labor regulations, the similar denominator was an attempt to limit social benefits of employees. This section identified the main similarities of labor policies of the EU member-states.
First, one should note that businesses received greater freedom in dismissals and recruitment. In particular, the process of dismissals was simplified in most EU states. Overall, the time given for warning about oncoming dismissal was reduced. Moreover, the time of compensation for being fired from work was decreased, as well. Furthermore, the procedure was simplified and shortened. For example, the Netherlands’ labor policy of 1995 stated, “An employer can dismiss an employee at the same time or even before asking permission to the director of the Public Employment Office” (Boeri & Garibaldi, n. d., 24). In some EU states, for blue collar employees, whose work relations are regulated by short-term labor constructs (those that are shorter than one month), the notice time varies starting with one day. Besides, the application for the collective dismissal was simplified (Boeri & Garibaldi, n. d.). In conclusion, as a result of the labor regulations discussed above, it was allowed to dismiss more people in a shorter period of time under conditions of reduced notice time, unemployment insurance, and other social benefits.
In addition to such restrictions, the EU has adopted many legislative regulations that aimed at studying different patterns of the unemployment, employees’ behavior and preferences, launching the centers of training and support. The primary purpose of these actions was to increase the work productivity and employee satisfaction. These issues were parts of a significant and urgent approach under the contemporary circumstances. For instance, in 2004, France established 300 social institutions that functioned with the aim to “identify quantitative and qualitative job needs; provide a structure for training; ensure the monitoring of unemployed people in difficult circumstances; bring together in a single 'public interest partnership'” (Boeri & Garibaldi, n. d., 25). Without a doubt, this step was a sound, safe, and effective means of addressing the issue of unemployment.
Another common tendency in labor regulations is the legalization of various forms of contracts. Boeri and Garibaldi (n. d.) inform, “The sequence of reforms dramatically expanded the scope of fixed-term contracts and introduced more types of flexible contract (ranging from temporary agency work to job-on-call)” (p. 14). This approach decreases the financial burden of businesses by limiting social benefits that are predefined in permanent or long-term working contracts. As it is known, short-terms contracts do not provide the same level of social benefits and guarantees that the permanent ones do. Therefore, it is natural to deduce that many employees were deprived a part of their benefits and rights because of the extensive use of diverse forms of short-terms contracts. This decision was present almost in all EU states (Boeri & Garibaldi, n. d.). This example is the evidence that the countries of the EU aimed to adopt and follow the approach of neo-liberalism. These common trends in labor reforms in the EU states significantly reduced the voluntary unemployment. Besides, lessened social benefits predefined a stronger need for money, which had to be positively related to the productivity of the workflow.
Furthermore, while discussing the diversity of labor reforms, it is necessary to stress that service vouchers (Boeri & Garibaldi, n. d.) that were implemented in Belgium in 2003 strived to reduce the hidden employment. To be more precise, an individual who needs various kinds of services (mostly related to domestic chores and assistance to people with disabilities) can buy service vouchers and obtain the needed help. Under these conditions, the state receives almost 50% of taxes received from the payment to service workers (Boeri & Garibaldi, n. d.). At the same time, this strategy decreases statistics of the unemployment because many unskilled or low-skilled individuals obtained a chance to be deployed in legal terms. Hence, despite being positive, such employment does not provide social benefits to workers. It particularity implies that the discussed kind of employment resonates with the aforementioned increased diversity of worker-employer contracts.
Specifically, all these types of being employed are similar due to low or the lack of social benefits and high turnover with the poor ability of employees to set own terms. In a way, these approaches are the valid evidence of the EU states’ endeavor to overcome Eurosclerosis. Firstly, the above-discussed reforms address the issue of unemployment, which was the main characteristic of the crisis. Moreover, these and other labor regulations served to prevent the deterioration of the economic stagnation. In this regard, it is clearly visible that the steps were directed at enriching the state by enhancing freedoms for businesses, encouraging the advancement of the labor force, and increasing taxation.
While discussing in detail the enhancement of workers’ skills and productivity, one should emphasize that this approach is implemented by means of creating motivating conditions (competition), studying the employee behavior, and providing required assistance, as well as proposing flexible ways of employment. The latter is probably the most ambiguous issue due to the negative consequences of the limited social protection that were described earlier in the paper. Hence, to many people, the range of contracts and new forms of employment also offer possibilities for the enrichment (combining works, work and study, work and housekeeping, work and staying with children, for example). In a word, these reforms altered the labor market to an extent when the new possibilities were associated with more challenges. Consequently, the today’s effects of those regulations are positive and debatable at the same time. In terms of the labor mobility, one may rightfully deduce that enhancing the diversity of the means of employment, such as long and short-term contracts, service vouchers, labor by the call, is a benevolent and effective strategy. The next section discusses the effects and signs of Eurosclerosis in the contemporary EU zone.
Consequences of Eurosclerosis for the Today’s EU
While defining the effect of Eurosclerosis, it is appropriate to emphasize that there are both negative and positive outcomes in the modern politico-economic realms of the EU. This idea implies that steps taken with the view to mitigating the discussed crisis are partially effective. Simultaneously, they do not manage all negative determinants of Eurosclerosis. Moreover, aforementioned strategies have given rise to new issues that are expected to be addressed by the today’s governance of the EU.
To be more precise, according to Boeri and Garibaldi (n. d.), the level of the employee satisfaction has grown over time even though the growth was insignificant. At least, there is no further deterioration in the workers’ disappointment with the government’s regulations. Undoubtedly, this indicator reveals that the citizens of the EU have managed to adapt to the new relativities of work regulations. Moreover, the increased labor mobility and reduction of expenditure for the social sector meant that businesses were provided with favorable opportunities for the further evolvement. Similarly, this approach preserves the public sector from being overloaded with the financial burden.
Hence, scholars emphasize that labor policies of the EU should be reviewed in order to increase the employee satisfaction (Boeri & Garibaldi, n. d.). For example, conducted reforms strived to limit national egoism of the EU member-states and increase the level of consolidation. The success of this goal is manifested through similar policies and standards. Assembling the countries under the same denominator reduced the government’s control over the competition. Apart from it, nowadays, labor standards are better aligned (Boeri & Garibaldi, n. d.). Under such circumstances, the increase in the labor mobility makes the working environment more challenging for employees. While discussing this situation, Boeri and Garibaldi (n. d.) emphasize that the new labor regulation “prevents workers being compensated for the higher turnover risk they face” (p. 17). Without a doubt, it is not the only negative outcome of the decreased social protection of workers.
In general, the scholars presume, “Europe is still stuck half way across the river of labour market reforms” (Boeri & Garibaldi, n. d., p. 17). To be more precise, it is clear that coming back to the excessive social guarantees to workers is not an option because it requires much money. In addition, it may cause the intensification of national egoism since the views of different states of this issue vary. For instance, in the case if certain EU country decides to take greater control over the local knowledge, it may possess some negative outcomes for the rest of European states. Nevertheless, it is clear that the employee dissatisfaction is positively related to the decreased productivity. On the other hand, reduced force of workers means that a state may avoid the voluntary unemployment. This ambivalence of outcomes brought by conducted reforms illustrates that the today’s EU experience both negative and positive implications of Eurosclerosis. Therefore, it is impossible to talk about the remarkable success of enacted regulations. At the same time, the effects of Eurosclerosis were successfully mitigated. In other words, the crisis has not intensified; this issue is a good achievement.
Besides, one should stress that the heterogeneity of the EU states results in the application of different strategies of interventions in the modern world. This diversity remains a significant stumbling block that inhibits the process of integration. The present situation is understandable because it is obvious that no player wants to lose its national identity by dissolving in the collective identity of the EU. Nonetheless, Frangakis, Hermann, and Lorant (2009) argue that the diversity of views and approaches towards constructing political institutes and governing markets should not be perceived as a weakness. Instead, it is more appropriate to consider the national heterogeneity as a valuable characteristic, which is a considerable determinant of the political, economic, social, and cultural course of the EU as single unit (Frangakis et al., 2009). Despite this premise, it is obvious that the diversity of views contributed to the development of Eurosclerosis.
What makes the things even more complicated is that this peculiarity decreases the sense of unity and challenges the achievement of similar ambitions. For instance, while addressing the problem of unemployment in the 21st century, the states of the EU allocated different amounts of GDP. In this regard, Ribound et al. (2002) explain, “Differences in benefit quantity and duration, and in coverage rates translate into differences spending in unemployment insurance” (p. 9). The study conducted by these researchers reveals that the approaches towards establishing social benefits in the labor settings vary considerably from state to state. Consider an example, Ribound et al. (2002) surveyed the period of the unemployment insurance in the history of the EU states. The study reported, “Maximum duration in the Czech Republic and Estonia is 6 months, compared to 12 months in Hungary and Slovak Republic, or even 24 months in Poland and Slovenia” (Ribound et al., 2002, p. 8). This example implies that the symptoms of Eurosclerosis remain prominent and tangible. Specifically, despite the fact that unemployment was reduced and labor mobility within the EU states was enhanced, the heterogeneity of these countries complicated the establishment of common standards in the political-economic setting.
On the other hand, some scholars believe that today, the depth of integration of the EU zone is much bigger than during the 70-80s of the former century. For instance, Pollack (2005) states, “EU institutions shape not only the behavior, but also the preferences and identities of individuals and member governments” (p. 23). This premise suggests that the phenomenon of Eurosclerosis has been successfully managed. Despite the fact that this supposition may be correct, the discussed political entity will need much time and efforts in order to address the adverse symptoms of Eurosclerosis. Moreover, it is necessary to ensure that other accompanying issues, such as the poor employee satisfaction and social protection, also receive due attention.
In conclusion, one should emphasize that Eurosclerosis is an international politico-economic crisis that emerged in 70-80s of the 20th century because of the national egoism of the EU member states, which manifested in the defective consolidation. This phenomenon is characterized by three main determinants: socio-cultural heterogeneity, the high level of unemployment, and limited mobility in labor settings. In order to resolve this crisis, the EU states joined their efforts and held the course for reducing social benefits in the labor realms. Despite adhering to similar goals, the states continued to demonstrate lessened but prominent level of nationalism, which was manifested in the diversity of steps towards reducing the outcomes of the unemployment and economic stagnation. The obtained results suggest that the symptoms of Eurosclerosis remain topical; in addition, the new issues, such as the low employee satisfaction may be witnessed. Nevertheless, labor reforms also stipulate positive consequences of decreased unemployment, enhanced mobility, and new possibilities for the professional growth.