sábado, 17 de marzo de 2012

Europe in a globalized world. Economic politics

After the fall of the Berlin Wall, no one can doubt the superiority of the market economy as the best alternative known today to produce and distribute economic goods. However, the free market does not resolve the problem of those who have nothing to contribute to the market. The sociologists complain that their science does not have the possibility of carrying out experiments, and must limit itself to observing the social reality. Nevertheless, the largest of the scientific experiments made during the history o humanity have been sociological. We have divided the world into two, establishing in a continent, North America (United States-Canada), the free market system, while in the other, (China-Russia), there were planned economies, with a socialist island in America, Cuba, and another free trade island in Asia: Formosa, which serve as examples of contrast. The European continent was also divided into two with the same purpose and some countries were divided into two: Germany, Vietnam, Yemen and Korea; and even the City of Berlin were divided into two. Austria was allowed to choose, and a number of countries in the third world, such as Chile, Guatemala, Cambodia, etc. alternated the two systems. For half a century, the consequences have been awaited and, after two generations of guinea pigs, there is not the slightest doubt that the theoreticians of the School of Vienna were right when they assured that a planned economy could not function efficiently. As the Austrians were the only Europeans who could choose between the two systems, they seriously considered the two alternatives and found that:

• It is impossible for a central planner to have and process all the information required to efficiently direct the economy of a country.
• Planning requires renouncing personal freedom.
• Planning de-motivates initiative and lowers productivity.
• With economic centralisation, the very important information that prices provide on what the market needs and on what is being produced in excess is lost.
• There are no incentives to innovation.
• The lack of discrimination of the demand through prices lead to queues.

The first vertical casting steelworks which produced high resistance light steel was established in Sweden with a Russian patent, since the Russian planners fixed production quotas by tonnage and no Russian steelworks wanted to produce steel which weighed less.

The impossibility of knowing the wishes of everyone on one point makes the option of a single central planner unfeasible, as was demonstrated in practice with the soviet experience, bureaucracy and inefficiency expand as demonstrated by the School of Vienna (von Mieses, Hayek, Kirzner...). Moreover, the concentration of economic power propitiates the development of situations of domination and corruption. Planning is a valid option in small communities with a strong sense of solidarity, such as families and religious communities although, even in these cases, there are two distorted extremes of the central planning system: when the planner sacrifices his needs in favour of the rest, “the mother” or the inverted centre-periphery system of Lasuen, and when the planner sacrifices the members in favour of his interests, “il padre padrone” or the imperial type structure.

Accepting the superiority of the free market, we find four problems which the free market does not resolve by itself:

What happens to those who do not have access to the market? The underprivileged due to incapacities or those incapable of being incorporated into the production systems: the sick, the old, the invalids, the incompetent, and the useless.

How should we act when some groups, seeking Nash balances for the benefit of the group at the cost of the majority have recourse to alliances and implement cartels and monopolies in order to control a determined market?

What is to be done when capital is withdrawn massively from a country, leaving unexploited resources and a high number of unemployed workers?

How to prevent the desire for profit from impairing security?

The European Union must endeavour to find solutions to these problems, by assuming a social policy which seeks, in the first place, to properly train and employ all the underprivileged people and cover the legitimate needs of everyone, preventing fraud and the abuse of the system. The fact that other countries do not take the underprivileged into account must not be used as an argument for not doing what is right, even though this involves the loss of some competitiveness in the international market, which will have to be offset by being more competitive, innovative and entrepreneurial. The European Union must defend the welfare state within the free market. Aid for unemployment must be oriented towards the attempt to find new employment, not becoming permanently unemployed. The right to work must not be confused with the right to unemployment. The prevention of the second problem will have to be achieved by applying anti-trust laws and prosecuting the manipulation of prices and the distortion of competition.

If there is a lack of capital, the state must facilitate the creation of cooperatives which provide dynamism for the local resources and generate self-employment, capitalising labour within a competitive market system.

It must also be taken into account that, in all economic activity, security must take priority over profit, by ensuring systems which control the quality and guarantee the security of the products, especially as regards food and pharmaceuticals, as well as the security of the workers and the neighbourhood in the construction and manufacturing processes which involve dangerous or contaminating processes.

The European Union cannot neglect technological innovation. Maintaining the same technological level for a long time will reduce the opportunities of innovation while marginal profits are depleted due to the decreasing marginal yield, apart from the possible technical obsolescence as compared with the competitors and the effects of the saturation of the market which might occur. A society which did not improve its technological level would stagnate in its development with the consequent deterioration of its competitive position and the physical degradation of the productive infrastructures. While a stable technology system has decreasing marginal growth, in an environment with permanent innovation growth becomes continual development. The type of innovations developed and their quality depend on the level and quantity of the resources dedicated to research. The research budget and the technological and industrial application of the results are important for success in the long term. Collaboration between companies, research centres and education centres should be given priority. The number of innovations depends on the quality and the number of persons engaged in research. A policy must be achieved which retains a country’s own researchers and attracts foreign researchers. In order to maintain development when the population decreases, the percentage of researchers over the total population must increase. This means training them, attracting them from abroad and keeping them. In general, it would be advisable to have a clear selective policy on immigration and comply with this policy.

Profit is the reward for innovation. There will be no innovation without profits. Both chance and risk are involved in each innovative act. An innovative culture must develop a level of tolerance to risk and a certain propensity to change. There are two types of innovation: those within a determined technological level and those which provoke a leap to another level. Each technological level requires a type of leadership and each new level produces new leaders (Sloan, Pakard, Ted Turner, etc.). The development of leaders should be another clear objective. All innovation benefits customers and suppliers. Research plans should be integrated vertically throughout the industrial processes, from raw materials to the distribution of the finished products and their subsequent maintenance.

Training is accumulative. Its effect depends on the time invested and the quality of the teaching. The quality of education is a factor in international competitiveness. Europe should be at the centre of education and world research and, in Europe, Spain should make an effort to profit from its climate by attracting researchers and students, even giving priority to this over its attractiveness to tourists. Spain, which is the Florida of Europe, should endeavour to become the California of Europe.

One chapter to resolve in sustained development is preventing planned obsolescence. Products should be designed and manufactured to last and not to break down. Obsolescence should be technological, that is to say, because there are newer better products, but not due to planned deterioration . The Singer company discovered that its sales were falling because the new generation was inheriting the sewing machines of the grandmothers, and invented planned obsolescence so that a sewing machine would not last more than 30 years. Car manufacturers reduced this figure to 10 years and the manufacturers of electrical appliances to 6 years.The best recycling is that things last. The design of the products should take maintenance into account so as to facilitate this.

Another aspect of the economy would be the recognition of trade union freedom. In this regard, it would be recommendable to ensure not only the freedom of association, but also the independence of the trade unions. We know of three models of trade unions: the British, the continental and the American. The British Trade Unions were created free, but, in order to gain political force, they created their own party: the Labour Party. The continental Trade Unions were created by political parties in order to gain control over the workers. The American Trade Union started as free unions, but were infiltrated and controlled by the Mafia. Consequently, we find that there are Trade Union actions for political reasons or due to Mafia pressure which clearly damage the interests of the workers and the national economies.

Trade Union independence should be one of the principles of the economy of the European Union. In the new European context, the Trade Union platform must be a forum for agreement and dialogue in search of the common good and not a means of political intervention or of exploitation of labour by the Mafia under the disguise of labourism. Two areas in which the economic policy of the European Union should develop a common policy are energy and water. The agricultural policy will depend on what comes out of international agreements as in Doha. Solidarity with less developed countries is necessary, but the world must also understand that Europe was hungry for centuries and, besides ensuring peace, the EU wants to ensure its pantry.

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