The Ripple Effect:The future evolution of the (techno-)economic crisis

in Europe

Manuel Godinho, UTLisboaSandro Mendonça, IULisboa

2nd Lundvall Symposium Challenges for Europe ina New Age, Aalborg, 14-15

March 2013

Evolutionary approach

The conjecture of this paper

• The ripples in the lake are moving in the opposite direction

• Countries closer to the center may start feeling the impact of the changing tide with a time gap

• Western world used to send the aftershocks of the technological revolutions to the developing world

• This time around the opposite seems to be happening

In 1900, 2/3 of the world’s Catholics lived in Europe. Today only 20% do.

Habemus shift !

old guard new world

In 1900, 2/3 of the world’s Catholics lived in Europe. Today only 20% do.

centre of gravity moving

Europe-centre world multi-polar world

The Context: 4+1 Trends

• Deregulation, liberalization, globalization• Digitally-connected world• Ageing in the developed countries• Growth of the emerging economies

• + global warming

T1 - Deregulation, liberalization, globalization (1)

1980s Neoliberal Policies “Big Plan”• Liberalize world trade• Delocalize low-tech and resource-intensive

industries• Protect IPR-intensive industries (film, music,

drugs, computer hardware…)• Strengthening advanced services

T1 - Deregulation, liberalization, globalization (2)

“Big Plan” partially successfulTrade tariffs went downDelocalization of LT and RI inds.Reinforcement of “advanced services”(specially banking)

T1 - Deregulation, liberalization, globalization (3)

• However problems with IPR sectors (despite TRIPS success)

• MNCs invested in R&D in emerging economies• Emerging economies started to enter high

tech (reverese engineering + innovation)• Further Internet jeopardised Copyright inds.

T2 - Digitally-connected world

• Computerization• Internet• Broadband• Smartphones• “flattening of the world”

T3 - Ageing in the developed countries

Old age depency ratio • World 11% • Japan 37% • China 12%• EU 27%• Italy 32%• Greece and Portugal 30%

T4 - Growth of the emerging economies (% of world output ppp)

WE US Japan China India Brazil Africa Other

1950 34 32 4 3 4 2 3 18*

1990 27 22 9 5 3 3 3 28

2012 19 18 6 17 6 3 3 28

The institutional organization of the EU

• Single Market: 27• MEU: 13• No banking union• No fiscal union (EC budget: 1% EU’s budget)• Strong currency : 1999: 1.1 / 2001: 0.8 / 2008: 1.6 / Now: 1.3

• Commission, Council, 2020• “Effective institutions”???

Conclusions and further questions (1)

• EURO: Insurance policy which went badly• Institutional arrangements: ineffective• Adaptation: only marginal• Pessimistic attitude: no reasons for hope?• Will the EU countries be able to go alone on

“their own way”?

Conclusions and further questions (2)

• Seems emerging economies have learnt “the rules of the game”

• How far can they go? • Green keynesianism would be a solution?• Might it be effective if taken unilaterally?