Szomburg, Jan

English

Policy Documentation Center

   
 
 
THE POLISH LISBON STRATEGY FORUM 
 
 
 
 
 
The Union 
Authority for Development* 
 
      
Jan Szomburg** 
 
  
 
 
  
  Gdańsk, December 8th, 2003  
 
* © GIME, Gdańsk Institute for Market Economics (http://www.ibngr.edu.pl/) 
PFSL, Polish Lisbon Strategy Forum  (http://www.strategializbonska.pl/) 
** President of the Gdańsk Institute for Market Economics 
Director of the Polish Forum for Lisbon Strategy 
 
 
 
 
 
 The most important issue to be solved as regards the EU constitution is the 
system of authority. It will decide on rules of the game in this group, further 
integration process, as well as the future of the European Union . Therefore, we cannot 
compare the importance of these decisions with the meaning of financial aid, even if it 
amounted to billions euro.  
The integration is a kind of European public good and it is in the interest of all nations 
of our continent. The EU system of authority, which will strengthen it, must meet two 
conditions. At first, it must guarantee the balance of development interests of all its 
members. Secondly, it must correspond to real strategic challenges faced by the Union 
as a whole and by its individual states. The system of authority not meeting these 
conditions will not be useful for anybody in a long run, and it will lead to the erosion 
of integration.  
 
Europe at a turning point 
 
The European Union has already got tens of years of prosperity and stability 
behind it. Now, however, it is at its turning point. Either, during the following 10  15 
years, it will adjust to globalisation requirements, the growth of competition resulting 
therefrom, and society ageing, or it will enter the inclined plane leading to the loss of 
competitiveness, outflow of financial and human resources, stagnating economic 
growth, and as a result, to gradual systematic deterioration of its position in the world. 
In the optimistic variant, although such a deep transformation of the Union, including 
mainly the restriction of the caring state, will result in a wide wave of tensions and 
social conflicts, it will not endanger its social and politic stability and integration 
processes. In the pessimistic variant, if the transformation is too shallow, at the 
Jan Szomburg  President of IBnGR, Director of PFSL 2 
beginning there will be less conflicts, but later, along with the cumulation of negative 
economic phenomena, the concentration of various types of extremisms and 
nationalisms will be that big that it will cause a real danger of destabilisation of the 
social and political stability in Europe and the dissolution of the Union.  
 Although, the challenge of adjusting to globalisation and ageing societies refers 
to all, without any exceptions, European states, the three big states of so called hard 
core of Europe: France, Germany and Italy will have the biggest problems. These 
countries, constituting the biggest part of the economic potential of the European 
Union, will be a bottle neck of the transformation of our continent since they are 
hostages of their own ineffective and very deeply rooted system. Small and peripheral 
states located in the north, east (new members) or south, as the existing experience 
shows, usually have got bigger adjustment skills. Objectively speaking, these three big 
states of the European centre, which - according to the draft constitution - hold a 
control stake of the authority in the EU, have got two ways to solve their development 
problems. They may take the intervention, in fact defensive, path, consisting in 
imposing rules of the game and policy convenient for themselves on small and 
peripheral states, and as a result improving the situation at their cost. Or the 
deregulation, in fact offensive, path, consisting in allowing for some internal system 
competition and diversification of policies to use the whole potential of the continent. 
The exploitation approach, discounting the existing integration achievements and the 
power of political pressure, may bring about only temporary effects, and it will never 
solve the problem of long-term competitiveness. Politically, however, it is much easier 
and more likely if other partners of the integration process agree for it. The very fact of 
granting some financial aid to less developed states (structural funds) in the Union 
may lead to wrong conclusions regarding the essence of the situation. An example may 
be the relation between rich states of the north and poor states of the south. Even the 
aid amounting to billions will not be able to compensate for damages caused to the 
latter by rules of the game imposed by highly developed states of the north (mainly in 
the form of interventions in the agriculture). A better example of superior meaning of 
the institutional and regulation system over financial aid is eastern Germany. During 
one night the whole changed social and economic system of western Germany was 
Jan Szomburg  President of IBnGR, Director of PFSL 3 
introduced there. It efficiently affected the competitiveness of the economy of this 
area, and even transfers of hundreds of billions euro did not suffice to overcome 
economic stagnation and a very high unemployment rate resulting therefrom.  
 
Three types of interests 
 
 To make the system of authority in the EU representative, we have to take into 
consideration three most important types of interests: policy, system and development. 
The first of them is best recognisable and prevails in the debate. Its symbol is the 
division into large and small states and a postulate to secure interests of small states. 
The latest evidence of the significance of this type of interests is that large states 
(France and Germany) are infringing the Union rules of stabilisation and growth, 
whereas small states (the Netherlands, Ireland) are fully required to observe them.  
The system interest is not much noticeable in the debates, and it is the most 
important one. It refers to the rules of economic game, known as the institutional 
order, which, from the point of view of social and economic development, are the most 
important. In this context, we may generally divide the Union into two blocks of 
states. The pro-market block led by UK and the ethatistic and corporate block with 
France and German as its leaders.  
In this game, usually each state tries to export and enforce its institutional solutions 
since it feels best with them and has got some comparative advantage. For example, 
Germany tries to export its tradition of employee councils at companies to the Union 
law, whereas the British find them an obstacle for their effective operation.  
The globalisation and the growth of competition resulting therefrom, at present, 
restrictively verify the effectiveness of institutional order. The enforcement of other 
solutions convenient only relatively, i.e. from the point of view of own tradition, skills 
and development level, but inconvenient from the point of view of the global game, 
reduces the competitiveness of the whole group. The European Union has to redefine 
the European social and economic model, deregulate and increase the role of the 
market, and decrease the state and corporate systems. Marketing such areas, like 
labour market, research and development and network industries (power, 
Jan Szomburg  President of IBnGR, Director of PFSL 4 
telecommunication, transport, post) is a required to use the existing potential better and 
improve productivity and competitiveness.  
 On the other hand, the third development interest results from achieved 
development level and a real economic situation. This interest refers both to system 
solutions, including technical, social and environmental standards, as well as 
directions, criteria and instruments of current economic support based on public funds. 
For example, highly developed states may greatly prefer to protect their environment 
and promote high standards and public expenditure related thereto. Imposing such 
preferences on less developed states may be highly inconvenient to them and lead to 
the growth of unemployment and reduce their abilities to increase income and fight the 
poverty. The same refers to technologies. Rich states naturally prefer to support the 
development of advanced world technologies, whereas states making up with them 
would prefer to guarantee the import and creative absorption of the existing, usually 
average, technologies. Basic differences in preferences may also refer to technical 
infrastructure and many other areas.  
Generally speaking, in the broadened Union, there are three development areas: 
highly developed states, cohesion states, i.e. the states making up with the latter: 
Portugal, Spain, Greece, and new member states, which are not only at a lower 
development level, but additionally their development trends (in the case of eight of 
them) result from their communistic past.  
 The above types of interests are mostly grouped in blocks. It is very important 
from the point of view of their representation in the system of authority. Each of these 
block of interests has to be present in the group of leading states with the biggest 
power of their votes.  
 Given these three groups of interests, while considering Nice and constitutional 
solutions, we may clearly see that the latter guarantee smaller representation of small, 
cohesion and accession states. In the key decision-making body, the European 
Council, small and new states will have much smaller power of votes. The blocking 
power, which, as the whole experience of the Union shows, is the most important 
instrument of the authority, will be held by three large central states (with over 40% of 
population), i.e. the states mostly resistant against any changes. Status quo societies 
Jan Szomburg  President of IBnGR, Director of PFSL 5 
developed during the decades of the caring state. Whereas, the Nice treaty 
establishes a leading group in the form of six more diversified states: France, 
Germany, UK, Italy, Spain and Poland. System and development interests are much 
better represented in this group.  
 
Integration strategy 
 
The other, next to the balance of interest, key element to define a desired system 
of authority in the Union is the very integration strategy. Would we want, already now, 
to harmonise policies further and faster, integrate deeper, and unify and federalise the 
Union, or it is better for us to leave some field for system competition within the 
Union and visible stages of further integration process? From this point of view, the 
discussion is not simple since the states that are theoretically considered as advocates 
of fast integration deepening, like Germany and France, in practice slow down the 
introduction of already agreed integration level, i.e. the single market, and they often 
do not observed agreed rules themselves. Whereas, the states considered as integration 
sceptics, like Scandinavian members, in practice, realise the joint agreements in the 
best way. The accession states, perceived as a serious threat to the Union stability, also 
are determined to implement the Union law, regardless of economic and social costs, 
although Poland, due to its administrative and structural weaknesses and the size is 
slightly behind them in this area.  
The fact is that the Union as a whole has already got some serious problems 
with practical implementation and consumption of the agreed integration level. It 
mainly results from difficulties related to its existing drives. These are not only 
national, but sometimes even group interests, for example connected with 
Volkswagenem or Electricite de France, that have been blocking the introduction of 
the single market of company acquisition, the power market, or the maintenance of 
uniform rules of public aid and competition. The history of the stabilisation and 
growth package of the Treaty shows that we are likely to approach the a la carte model 
of integration, but only for the biggest and most influential states. It is difficult to be 
satisfied with that. We would prefer that the leaders achieved some successes and gave 
Jan Szomburg  President of IBnGR, Director of PFSL 6 
a good, and not bad example. Especially that the leaders seem to have problems to 
identify the most important challenges.  
The future of Europe does not depend on that whether we will manage to agree 
on single foreign and military policy, but on that whether the European Union will 
manage to adapt to requirements of global competition and society ageing. If the 
Union does not solve its economic problems, it will not be able to invest in its security 
and be one of global players in the international policy. At present, it is clearly seen in 
the case of France, which is surprised to discover that it is much less attractive partner 
than the USA for north African states (Algeria, Morocco, Tunisia, Libya, Mauritania) 
believed to be its influence zone. Since it is the power of arms and money that 
counts, and the French are much weaker in these areas.  
Our continent faces a heroic effort to reduce the state of welfare, deregulate and 
market labour markets. The harmonisation of tax and social systems and policies 
carried out according to requirements of the largest states having the most ineffective 
solutions, following the Social Union message, would be unfortunate for the whole 
group. Instead of unifying ineffective systems reducing international competitiveness, 
the Union needs a deregulation drive, both at the Union level (the Mandelkerns report 
mentions the need to delete 40% of the Union law), as well as at the level of individual 
states. It has to be done now during the nearest 5  10 years since later the political 
power of older people will block required changes for ever. May it be done by political 
elites of member states that have been attracting their societies with advantages of the 
social state for decades? Rather no, although we have to keep fingers crossed for their 
success. May the very European Commission stimulate that efficiently? Rather no. We 
may see that it becomes weaker and weaker year by year, because the community 
element of the Union weakens and the national element strengthens. It is not a 
convenient trend, but it occurs, although to enforce the single market and maintain the 
whole European project stable, the Commission has to be strong.  
The only real hope to enforce difficult adjustments is to maintain a certain 
portion of internal system competition. Whereas, too fast harmonisation and 
unification of over-regulated systems and social and economic policies may only 
reduce competitiveness and investment attractiveness of the least developed states and 
Jan Szomburg  President of IBnGR, Director of PFSL 7 
the Union as a whole. We know examples of enforcing excessive regulations to raise 
costs of internal competitors from the history of federal states. In the USA, for 
instance, the northern states once enforced minimum salaries on the southern states 
under a federal regulation adopted by the majority of votes in the Congress. For the 
North it was not important, because the salaries were higher there. Whereas, it reduced 
the competitiveness of the South. During the times when German countries joined 
under Bismarck (1870), Prussia (and its aliens) also enforced its high regulations on 
more liberal western countries.  
The accession states are entitled to be afraid that new excessive standards will 
be enforced in future. It may refer, for example, to regulations concerning the Services 
of General Economic Interest, discussed more and more often, in the power, transport, 
telecommunications, water supply and other areas. Such standards, convenient for 
consumers, could deepen their budgetary problems and reduce the competitiveness of 
their domestic companies. The least developed states should also be able to select their 
working time. Rich societies may want to work less, even at the cost of smaller income 
growth. It is a matter of their cultural choice. Whereas, developing societies, where 
there are simply a lot of poor people, to make up for the gap, must work more. 
Western Europe did the same in the 50s and 60s when it was making up with the 
United States. The interventionistic and harmonised Festung Europa may let the 
largest states rest only for a short time, at the cost of peripheral areas, but already in 
the mid run, it is not a good solution even for them. We may observe benefits resulting 
from system competition in the post-communistic states. Isnt the example of Slovakia 
and Estonia a strong inspiration, and even pressure for the others? 
 The actual execution of the single market, including, but not limited to, 
eliminating barriers between national monopolists and foreign competition, will reduce 
business costs in the EU and allow to achieve some advantages of the scale. It will also 
improve the situation of consumers. Thus, it has to be supported. Whereas, further fast 
integration of systems and social and economic policies will make Europe weaker, and 
not stronger. Europe that will not be able to use the potential of all its areas. Against 
the opinion of intellectual elites of the hard core of Europe, small and peripheral states 
constitute a transformation opportunity for the whole Union, because they are 
Jan Szomburg  President of IBnGR, Director of PFSL 8 
institutionally more flexible and innovative, and observe common rules better. These 
are the real leaders of changes: Ireland and Finland. The accession states are younger 
and less hungry of success and do not have established groups of interest, therefore 
they are more ready to adjust and have pro-market elites. They are a chance and not a 
threat. Of course, they must learn the Union, i.e. among others develop a consensus, 
observe the rules of the game, but for sure they will not block the deregulation or 
liberalisation of markets. Europe needs bigger involvement and creativity of all its 
states, not pushing them to passive and claimative positions.  
The most convenient integration sequence for the whole continent should 
stipulate for, at first, deregulation, real implementation of the single market concept 
and convergence, i.e. making development level similar, and later further 
harmonisation and integration deepening. Europe needs a balanced decision-making 
process, without the tyranny of large, small or poor states. The large states have to 
reduce their influence to the benefit of responsible and co-operative partnership with 
smaller and small states. The partnership for better system and social and economic 
policy in the Union and individual states. It is a common challenge. The system of 
authority based on the draft constitution, providing the directoriate of the large with a 
decisive vote, is not functional either for transformation or social and economic 
development of the Union. It will weaken the European Commission, render 
deregulation more difficult, simplify the selection of the intervention path, disactivate 
and reduce the responsibility of small and medium-sized states. It will not let us create 
national citizenship of the Union or the Europe of People, and only such Europe may 
be successful in the contemporary world.  
 
Jan Szomburg is the President of the 
Gdańsk Institute for Market Economics 
(IBnGR) and the Director of the Polish 
Forum for Lisbon Strategy (PFSL) 
 


The union authority for development

Abstract

Similar works

Full text

Available Versions

Policy Documentation Center