The EU 2020 strategy – the bitter taste of central planning

Just recently, the European Commission set out its proposal for a new economic strategy for Europe, a successor to the failed Lisbon Strategy for Growth and Jobs. Again, the European Commission is going to try and plan the EU’s economic future.

The new strategy is called EU 2020 – A European strategy for smart, sustainable and inclusive growth and is portrayed as the answer to the current economic crisis, which has “exposed fundamental weaknesses and unsustainable trends” (according to the Commission’s President, Jose Manuel Barroso). The crisis is said to highlight the need for stronger economic co-ordination in Europe.

The strategy’s key aims are tackling a rising employment rate, encouraging higher investment in R&D, reducing greenhouse gas emissions, lowering poverty, improving energy efficiency and raising higher education standards. Annual reports submitted by member countries are part of the governance process, as it was for the Lisbon Strategy. This time, however, the European Commission will have the power to give a warning to a national government if it fails to fulfil the targets (this tool is provided by the Lisbon Treaty). That, it is believed by the Commission, will make the EU 2020 strategy more successful than the Lisbon Strategy.

I do not think so. Firstly, the EU 2020 strategy is likely to conflict with the Stability and Growth Pact. Countries may face the choice of whether to fulfil the EU 2020 strategy by increasing public spending or to fulfil the Stability and Growth Pact by reducing public spending. In my opinion, the Stability and Growth Pact should and will have priority after the Greek disaster.   

Secondly, it is generally questionable whether planned targets enhance growth. For example, the R&D expenditure target can be reached just by increasing public spending. However, growth-enhancing innovations do not come from inefficient policy-driven research, but from competitive markets!

Thirdly and most importantly, the EU 2020 strategy is a further attempt by the European Commission to plan economies and increase its centralised power. However, economic theory and historical experience show that central planning will not succeed but the market economy will. Hence, economic competition between EU countries is the key to more growth. Innovative countries will be imitated by other countries, leading to greater economic dynamism and improved welfare for the whole of Europe.  

So let’s hope that the heads of government will dump EU 2020.

The irony is that opposition to that kind of centralisation of economic policy is sometimes branded as “anti-European”. Historically, the reason for Europe’s spectacular economic success is precisely that there never was an Empire of Europe or a Kingdom of Europe. There were smaller, competing entities that kept each other’s powers in check and allowed for policy experimentation. In that sense, a European super-government is an anti-European idea.

[...] it and so they’re turning it into a recommendation for EU audits of national accounts, the IEA reports that this spanner is resulting in a conflict between the EU attempt to centralize planning over [...]

[...] it and so they’re turning it into a recommendation for EU audits of national accounts, the IEA reports that this spanner is resulting in a conflict between the EU attempt to centralize planning over [...]

Post new comment

The content of this field is kept private and will not be shown publicly.
Type the characters you see in this picture. (verify using audio)
Type the characters you see in the picture above; if you can't read them, submit the form and a new image will be generated. Not case sensitive.