Blog Post 2: The European Union Strikes Back

29/8/14

In my ideal world, the invisible hand of the market would be the sole actor in the global economy. No tariffs, no trade blocs, no government intervention. However, it's more than clear that we are not living in a perfect world (until my album reaches #1 on the charts I refuse to believe otherwise) and some real obstacles are in place for the purchase power of the people to change economic trends. The buddying up of governments and multi-national corporations acts as a sort of Bizarro Robin Hood if you will.

Bizarro Robin Hood doesn't actually exist, but Bizarro Superman does

So if free market economics is not an option, what other style of economics (yes I'm talking about economics not employment relations, but I'll try and link it back to our unit at the end) has the capacity to fairly distribute income? As much as I like to think the neo-liberal practices of the United States is a system that comes relatively close to free market capitalism and therefore MUST create relatively equal income distribution... it doesn't at all. As the article below outlines, the American system could learn a lot from the social market system of economics (AND employment relations) that is in place in the European Union.

What America can learn from Europe about income inequality 

http://www.salon.com/2014/03/18/what_america_can_learn_from_europe_about_income_inequality_partner/ 

In the article the philosophies of both parties towards their respective workforce are compared. Whilst the United States have kept their Laissez-Fair style of economic and employment relations policy which (in the short term at least) has resulted in stronger economic growth than the EU, in the long term (if they can sort out the Euro Crisis business) the European workforce is sitting pretty. 

The EU has a very strict coordinated economy which has particular emphasis on increasing the human capital of its people. In 1998, the average European worker over took their American counterparts in terms of skillfulness in  the workplace. Such an undertaking of training is a long-term move which benefits both employee and employer: wage rates tend to go up the more skillful the worker and the more skillful the worker  the more productive the business is for the boss. That may seem too simple, heck too even a too-good-to-be-true theory, but in the last decade it really has come off. Wage rates for Europeans are $10 an hour more than in the US and productivity in Europe is... much slower than America's. Errr woops!

Why Europe lags the US in productivity

http://www.forbes.com/2010/10/25/europe-european-union-eu-productivity-lag-leadership-managing-mckinsey.html 

This article, whilst four years old, does give a good outline as to why the United States still out-steps European productivity. The crux of the piece is that the economic barriers the EU has set up restricts Europe's ability to increase it's productivity through the horrors of international compeition. However, these are the very same barriers that help create a worker's paradise of sorts in the Euro Zone (unless you're Greek, Italian or Irish, then getting a job is very hard). High tarriffs result in overseas goods becoming more expensive, meaninig local businesses can afford to pay their employees more. This is the conundrum of policy makers: how can we create a system that benefits employees AND employers?

If  5 time NBA Champion Kobe Bryant doesn't know the answer, no one does!

To sum up my post (which at this point resembles the sloppiest of a dog's breakfast) there are many things the EU gets right in terms of creating an economic system where people can earn a good wage and enjoy a good life. However, especially in these tough economic times,they must also look to increase their productivity if they want to reach their optimum economic potential.