European Union *
"New
Economy"
and
Single
Market
Mark 2
THE Lisbon summit adopted
"a new strategic objective for the coming decade - to become the most competitive and dynamic knowledge-based economy in the world".
FRANCOIS VERCAMMEN
European power created in the
aftermath of the Balkans war has added a new string to its bow - a merciless competitive battle through (or for?) the establishment of the "new economy". The EU will use the method that succeeded in establishing monetary union, and that has been applied since June 1999 for its "autonomous defense": a mobilisatory discourse (which seeks to be "popular") and a precise calendar with objectives and schedules, regular verifications and mechanisms of "self-constraint"
The PR hullabaloo about the "new economy" should not be allowed to hide three other measures adopted at the Lisbon Summit. They are still more important, amounting more or less to a "Single Market Mk 2", or a new stage of the project embarked on in 1992. First, the completion of a "totally integrated and liberalized telecommunications market" [on an EU scale] by the end of 2001. It is a colossal market in terms both of size (the number of consumers) and capital invested. It links the telephone network with the Internet and will propel a new stage in the "cyber-economy". Until now Internet exchanges had mainly created a market for International Viewpoint #322 June 2000 15
magical virtues are attributed to it. be taken between now and 2003. They
*European Union consumers — essentially travel, music, videos and books. But now there will be "inter-company" trade (without intermediaries): a cascade of upheavals will affect the structures of the economy (branches born out of others which collapse; changes between and inside branches; distribution, the banking sector, the merger between telephone and Internet sectors).
### Date fixed
Also, a date has been fixed for the completion of a unified financial market (2005), which will lift all barriers so as to "encourage investment". This applies particularly to the government bonds market. Making access to capital easier and cheaper is a major objective: besides state loans, there will be "the modernization of the rules concerning the public markets" and, on another level (in another chapter of the text) there is mention of favoring the opening of pension funds through a European juridical and institutional framework.
These masses of capital will be needed to support the centralization of capital ("mergers and acquisition" but also because the Lisbon Summit decided to eliminate remaining restrictions on services before the end of 2000, notably by speeding up liberalization in sectors like gas, electricity, postal services and transport (Jospin having given way on the very eve of the summit). The management of airspace will also now be included in this area. The EU's real thinking in relation to economic development is summed up as follows: «efficient and transparent financial markets favor growth and jobs allowing a better allocation of capital at less cost". Hence, the EU "will pursue its efforts seeking to encourage competition and reduce the general level of state aid".
In this context big capital's pressure for a minimal fiscal harmonization could succeed, which would be the cherry on the cake. In reality, we are witnessing a kind of
"Single Market Mk 2": 15 years after the
Cockburn report (1985) which began the road towards the "Single Market" (January
1993), a whole series of reports will, over the coming ten years, organize the submission of our societies to a new wave of
"commodification". The "new economy"
is the key to everything; it is supported by a demagogic ideological discourse and
16 International Viewpoint #322 June 2000
According to its ideologues, the economy is not only new in the "temporal" sense, but will overcome conjunctural cycles, supplant the "old" material economy, propel an unprecedented take-off of productivity and create "full employment"!
This is the discourse which dominates the documents of the Summit. Recent events on the stock exchange have brought things down to earth. As to the predicted "disappearance" of the traditional economy (notably manufacturing), Kumar Bhattachary, one of the most influential English economists, said recently: "We are not Gods. We cannot live off fresh air and spend our days operating our mobile telephones".!
### Warning issued
As to the progress of productivity in the United States, and the possible benefits on the social level which could flow from it, a US establishment economist (Robert J. Gordon) issues this warning (before the respectable Federal Reserve Bank of Chicago): *there has been no acceleration of productivity in 99% of the [US] economy outside of the sector producing "hardware" for computers. On the contrary... the deceleration in the manufacturing sector is getting worse; if you take computers out of the durable goods production sector, the recession sharpened if you compare the period 1995-99 to 1972-95, and there is no progress at all in the sector of the production of non-durable goods.". 2
The conclusion is drawn by another expert, Steve Hancke, a former adviser to
Reagan: "You Europeans, you must pay attention... The US economic "boom"
owes very much more to deregulation than to the technological revolution" 3
Despite this good advice from those who know something of the subject, the
European Council, held in Lisbon, nurtured the "fantasy" of the new economy, promising that "the passage to a digital economy based on knowledge, encouraged by the existence of new goods and services, will be a powerful factor of growth of competitively and job-creation".
So much for the ideology. Then there are the practical decisions which the bosses will welcome: "At last concrete objectives... which at least have a chance of being positive for entrepreneurs and consumers" .4
A series of measures are supposed to amount essentially to three things:
1. A radical enlargement of the market for the consumption of computers: each school (each class, each pupil?) in the EU will be connected to the Internet. With its collateral multiplier effects in every family and, certainly, among all teachers. Internet access to all basic public services, which, in their turn, must be equipped to handle this. This would be accompanied by a radical cut in the cost of access. All crowned by a European plan of action which will put in place an information superhighway" to interconnect the different networks on a continental scale;
2. A multiform support for capital "which flows directly from a regulatory environment favorable to investment, innovation and the spirit of enterprise" (European Council). This means a series of juridical-institutional, fiscal, (anti-) social measures favorable to "risk capital" and to small and medium companies: amount of start-up capital, banking guarantees and conditions of indebtedness, lowering of costs of company management.
### Synergy
An important aspect is synergy, orchestrated and paid for by the state, organizing "the key interfaces between enterprises and financial markets, between R & D and the training institutes, between advice services and the technological markets". It is not by chance that the Council has adopted the project of a "(European] area of research", with its inter-state coordination, its growing opening to the private sector, the adoption of community patent, the circulation of researchers in the EU, and so on.
3. The training of the workforce to familiarize it with computers and the
Internet is indispensable. This is not just about schools, but rather the creation of a general environment where permanent training throughout active life is carried out at least cost, outside school and the workplace. Education will be shaken up well beyond the presence of computers in the classroom: it adds up to a real "commodification" of all social relation (as illustrated by the Allègre reform of education in France - see article by Christian
Piquet, page 7 of this issue). *
1. Quoted in the Financial Times of April 17th 2000.
2. "Has the "new economy" rendered the productivity slowdown obsolete ?", June 1999.
3. Interview in Corriere della Sera April 18th 2000. 4. Financial Times, March 25th 2000.
New Economy *
DOSSIER: THE "NEW ECONOMY"
AFTER the odes to the glory of the "new economy", presented as a new form of regulation, the fall in stock market prices during the second week of April has reopened the debate on the economic conjuncture and, beyond that, on the eventuality of a reversal of the depressive phase of the long wave, generally dated from the beginning of the crisis of 1974.
Marxist economists, following Ernest Mandel, considered in general that if the beginning of a depressive phase of the long wave is due to the accumulation of contradictions which undermine the mode of regulation during an expansive phase, the reversal of the wave (and thus a new expansionary phase) involves factors exogenous to the economy: a modification of the relation of forces between the classes, the political will of a strengthened bourgeois leadership, a "technological revolution" allowing productivity gains, and so on. The revival of the rate of profit in the course of the two preceding decades, the (still uneven) opening up to trade of new markets
(Eastern Europe, the ex-USSR, China) and finally the length of the favorable con-
April 2000 was forgotten within a juncture in the United States (the ninth year of growth) are among the factors feeding few days. It remains nonetheless the debate on the eventuality of a new expansionary long wave. The history of capithe symptom of more fundamentalist economy shows us moreover that the factors allowing an expansionary long tal disequilibria which raise seriwave differ each time and that it would be wrong to imagine today a return to the ous doubts on the capacity of the mode of regulation of the capitalist economy which predominated in the thirty years following the end of World War 2.
'new economy" to form the basis
Without having the pretension of settling this debate, we publish here two articles of a new expansionary long wave.
which highlight different aspect of the contradictions of the current economy: the stock market mini-crash of Friday April 14th 2000 analyzed by Maxime Durand; the
MAXIME DURAND*
"new economy" and the possibility of a new expansionary long wave analyzed by
Marc Bonhomme. We intend to return to this subject with other articles in our coming issues. Capitalism being also a society in which the commodity marks social
WO elements were the detonators development in an overall fashion, we complete this dossier with an analysis of cultural flux in the history of capitalism by Francisco Louça. * dict delivered in the Microsoft affair
D. M.] which has been interpreted as the end of the super-profits linked to information technologies. On April 24th Microsoft shares lost 15.7% in one day and were down by 44% in relation to the end of
1999. The second factor was the announcement of the index of inflation which, at
0.7% for a single month, seemed to mark a sharp leap forward and confirm a light movement of resurgence of inflation.
As is very often the case, the factors which unleash a crisis are not the deep causes of it, and stock market instability is often the result of a tendency to exaggeration, to over-reaction. But these two elements have thrown a worrying doubt or two on the main underpinnings of the dominant mood of euphoria.
affair underlined that
The Microsoft the endless accumulation of considerable profits is not guaranteed. Recall that Bill
Gates is the one of three men whose combined fortunes exceed the GDP of the 48 poorest countries. That the giant of the
"net-economy"
can thus stumble has been perceived as a worrying message.
The inflationary resurgence, if it should be confirmed, puts an end to one of the most striking traits of the "new economy", namely the possibility of the US economy experiencing a relatively high cycle of growth, with a return to quasi-full-employment (for US averages) without inflation picking up and leading to the reversal of the cycle.
### Concern about inflation
Wall Street's great concern about inflation certainly cannot be analyzed as the fear of a loss of competitivity it relates rather to the division of incomes, which inflation affects in two ways. For the holders of financial assets, every price increase reduces the real value of the wealth as well as the income they possess. Inflation is moreover an indicator of tension on the labour market and reflects the resistance of employers to an improvement in the situation of wages.
From this point of view, the US economy has always been marked by this cyclical spiral: the upturn brings unemployment down and, thanks to this improved relationship of forces, employees gain more rapid increases in their purchasing power. The employers respond by increasing their prices to maintain their margins, then the Federal Reserve Bank (the Central Bank) increases interest rates, so as to rein in activity. All this confers on the US economy a fairly repetitive cyclical profile.
But, precisely, the last cycle has given the impression that these mechanisms were neutralized and this forms one of the components (with the new technologies) of the vaunted "new economy". This also explains why the current cycle is presented as especially vigorous and exceptionally long. It had indeed seemed that the lowering of the rate of unemployment no longer pushed wages or prices upwards.
Things are a little more complicated and it is worth going back a little to consider the last cycle in its entirety, distinguishing two phases. After the recession at the beginning of the 1990s the cycle restarted normally and growth was in the order of 2.7% between 1991 and 1995. Then, from 1996 onwards, growth found a International Viewpoint #322 June 2000 17
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