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May 25, 2005

OECD Growth Report.

The OECD has released its report on the growth prospects of its membership. To no one’s great surprise, the eurozone comes in for criticism:

But he said his main concern was the eurozone, which has suffered from high oil prices and the rise of the euro against other currencies. "Some European countries also suffer from a chronic lack of resilience when it comes to economic shocks," said Mr Cotis.

This, to me, is at the heart of the entire debate over what sort of economy we want to have. I understand the desire of people to have stability, security, can see how various lefties/social democrats are reflecting that desire in the policies that are pushed. Job security, worker’s rights, a reigning in of free markets, a lessening of the economic buffeting that people can be subject to. All perfectly rational.

However (and there always is a however now isn’t there?) I would in response want those promoting such things to accept that they come at a cost, a loss of flexibility in the economy. If the economic environment was unchanging that would not matter very much, for little change means little requirement for flexibility. Unfortunately, the economic environment does change, so we have a need for at least the possibility of flexibility to respond to it. It might be relatively short term things like the bounce in the price of oil, medium term things like the US deficits, long term things like the rise of China or changes in underlying technology.

Of course, there needs to be a balance in such things, a trade off between people’s desire for security and the need for such flexibility, but what the OECD seems to be saying above is that the eurozone has gone too far in one direction, too much security in the short term, leading to a loss of the needed ability to cope with change, and thus a loss of security in the long term. As those 10% of Germans  unemployed, 20% of French youth so, could tell you.

May 25, 2005 in European Union | Permalink


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Tracked on May 25, 2005 2:06:33 PM


Euro employment policies are a classic case of insiders and outsiders (creating elites is almost always a result of socialist meddling)

Posted by: Mark T | May 25, 2005 10:47:08 AM

Yes, but the Elites they create aren't very elite...

Why does one unnacountable politburo consider it can out-think the entire population and get their interests right more often than the people concerened can?

Well, they can't, it's impossible.

Posted by: Rob Read | May 26, 2005 11:24:44 AM


This may be hard to swallow, but employment is really much more of a national issue than an EU one. The impact of the EU as such is pretty marginal, whatever the Daily Mail tells you.

Sure, there are EU level reporting procedures on what policies member states are following, and even "employment guidelines". But how labour markets are run is largely a national affair.

That's one reason why you see so much divergence in employment performance and practices across the EU.

There are some exceptions of course - the working time Directive springs to mind. But even here the "unaccountable elite" at the Commission has a limited role. Directives have to be agreed by the member states. Otherwise they ain't law.

Ever wondered why EU policy takes so long to happen? Precisely because the Member States in Council can take 5 years or more to decide whether to do anything, or how they wish to amend a proposal.

And guess what - sometimes they agree not to do anything at all.

Posted by: rjw | May 26, 2005 12:05:03 PM