Global Finance and Social Europe

Global Finance and Social Europe

New Directions in Modern Economics series

Edited by John Grahl

With global finance reshaping the world economy, this insightful new book provides a full account of the EU’s financial integration strategy, together with a critical assessment arguing the case for social control over global finance. Written by acknowledged experts in European finance, this book discusses key issues from finance to general social developments, encompassing social security systems, employment relations, household saving and borrowing, and the question of economic stability. Thus far, America has been pre-eminent both in global financial markets and international banking – so how should the European Union meet this challenge? Global Finance and Social Europe constructively argues that an active response is required and highlights the importance of an integrated European financial system.

Chapter 5: Lisbon, Finance and the European Social Model

John Grahl

Subjects: economics and finance, financial economics and regulation, post-keynesian economics, social policy and sociology, economics of social policy


John Grahl INTRODUCTION 5.1 The European Commission’s (2000a) contribution to the Lisbon Council opened with a self-congratulatory account of economic progress in the EU. The ‘best economic conditions for a generation’ were signalled in terms of disinflation, the stabilization of public finance and lower interest rates. However, weaknesses, ‘in spite of this positive outlook’, were acknowledged in growth and employment, especially in comparison with the US. The expression, ‘in spite of’ might be considered tendentious in that the severe monetary and fiscal stabilization measures of the 1990s are regarded by many as, at least, the proximate cause of slow growth and high unemployment. But the relative lack of employment and output dynamism in the EU was traced not to any macroeconomic circumstances but to inadequate technological progress. The ‘knowledge economy’, centred on information and communication technologies (ICT) and the Internet, was seen as the sphere in which Europe needed to catch up. Transformed financial relations were to be a key linkage in the catch-up strategy. Within a ‘sound macro-economic environment’, policies for social inclusion, investment in human capital, integrated research policies and so on were to promote a surge in innovation, while finance was essential to the successful introduction of innovation into the economic system. ‘An integrated capital market and a dynamic financial services industry’ would translate these more fertile and entrepreneurial conditions into success on EU and global markets by widening financial options for enterprises and driving down the cost of capital (Figure 5.1). Specific dimensions of this financial...

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