1. dia - Social Economy Europe by dffhrtcv3


									      THE SOCIAL ECONOMY
         European Parliament

            Tibor Palánkai
            Emeritus Professor
    Corvinus University of Budapest
       Brussels. 15th of May, 2008

Prof. Palánkai Tibor
        Main Points of Presentation

Global challenges and Lisbon Strategy,
Globalisation aggravates social problems – global
Knowledge based society and reform of education,
About „equal opportunities”,
Social Economy –Social Regulation – Social
Lessons of reforms.
     Lisbon as European Strategic Answer

 Complex but contradictory answer to global challenges:
• Creation of a globally competitive economy,
• ICT - creation of E-infrastructures,
• Knowledge based society,
• Dynamic economic growth and employment (better
• Sustainable development (environment),
• Social inclusion (full employment, social policies).
European Model of Eco-social Market Economy.
Certain order, but mutually conditioned.
       Model - relevant and consistent

Scandinavian countries are examples that objectives can
   be compromised.
Finland is better performing than US, which is about 20%
   behind the Lisbon program. Europe is behind in
   averages. Position of New Members.
“Europe” should catch up to “Europe”.
        Europe – „structural problems”

 Weaknesses in competitiveness:

• Countries compete not only with their techno-economic
  structures (technologies, products, innovations, company
  managements etc.), but also with their socio-economic
  and institutional systems.
• “Structural problems” : flexibility of factor markets, over-
  regulation of the economies by the state, inefficiencies of
  the state sectors, crisis of European welfare state etc.
    Major deficiencies of Lisbon Program

•   Governments not consider it enough important,
•   Lack of political determination.
•   Minimal interest among the researchers.
•   Good objectives, but insufficient action programs.
•   Missing interests of the private sector.
•   Lack of proper financing.
•   The communication towards the society was insufficient.
•   The democratic acceptance of the program is
    Global Challenges – Reforms Needed

•   Modernisation of structures and technologies,
•   Creation of knowledge based society,
•   Reforms of governance,
•   Reforms of “state households”,
•   Reforms of public services,
•   Broad social implication, reforms of social
    Inequities created by Globalisation

Globalisation aggravates social problems - creates
  dramatic social inequities:
• Inequities between “classes”, social groups,
• Among countries,
• Among regions,
• New power centres (BRICs)
    Inequities created by Globalisation

• High profits based on strong increase of
  entrepreneurial incomes,
• Interest rates (basic capital incomes) are stable
  around 2-4% in the last 100 years,
• The prices of capital services are a different
• The entrepreneurial profits: innovation rents,
  exploitation of comparative advantages, global
  optimalization of production and business.
    Inequities created by Globalisation

• In US, the manager incomes increased 40 times
  in last 20 years, and 110 times in last 40 years.
• The present rich „earn” their incomes. The
  richest 1% of US earned only 20% of its incomes
  in 1916, that was 60% in 2004. The incomes of
  an average worker increased only by 10% in the
  last 25 years.
• The knowledge worker is highly rewarded.
• In OECD, TNCs pay more for their workers than
  local companies.
     Inequities created by Globalisation

According World Banks 2002 data: The per capita
  income of the richest country was:
• In 1820 4,5 times,
• In 1913 15 times,
• In 1950 26 times,
• IN 1973 42 times,
• In 2002 71 times
higher than that of the poorest country.
           Hungary - Transformation

Transformation –modernisation – global adjustment:
By the end of 1990s H is a functioning market economy,
Entry into post-industrial society: in GDP in 1989 and 2005-
  Agriculture 16% - 4%, Manufacturing 34% - 28%, and
  Services 42% - 67%
Catching up: in 1960s H is on about 60% of European
  average of per capita GDP, in 1990 40-45% , in 2005
  62% EU 25.
Creation of information society, big development of
  communication infrastructures (use of mobils)
             Hungary - Globalisation

From 1980s economic policy opening – trade liberalisation,
   convertibility, attraction of FDI, early 1990s H. – „open
EU –European Agreements – 2004 full EU membership,
Structural openness: foreign trade and FDI about 70% of
TNCs- 70% of industrial production, 90% of export and
   50% of employment.
Competitiveness ranking – lower class of developed
   countries – one of the most globalised economies.
            Hungary and Inequities

In CEE, and Hungary great differentiation of
  incomes after 1990:
• In Hungary, according some estimates, the 5-
  10% elit controls the 30-35% of resources,
• on the other side the 20-35% of the society owns
  only 5-8% of resources,
• there is a middle society in between, one part of
  which pursue great struggle for catching up,
  while the other struggles for avoiding falling into
              Hungary and Reforms

Broad reforms already from 1980s:
Reform of taxation and banking – 1986-1988,
Pension Reform - Private pension funds,
Education reform – integration of universities, Bologna,
Public health care reform – several steps – recently faltered
  with social insurance reform (referendum, break up the
  coalition, minority government),
Reforms of public administration.
Hungary as a Reform Country?
           Knowledge-based Society
Technological revolution together with revolution of
   sciences (physics, genetics etc.)
In social sciences – Need for scientific management of
   companies and macro-economy.
Knowledge as major production factor – un limited,
   renewable and exchangeable (scarcity overwritten).
R&D in production costs and GDP.
The qualitatively new requirements towards education.
               Reform of Education
Education is a major link between competitiveness and
  solving social problems. Quality education up valued.
Universalisation of higher education.
Demographic processes – average age can increase to
  100 years.
Bologna – convergence and mobility, but due to mass
  education and „reforms” with resource withdrawal from
  the sector, deterioration of quality. This is contrary to
  requirements of knowledge based society.
               Reform of Education
Discussions about the content of education.
Students should be trained according to the needs of
  market. It is relevant in terms of practice oriented
  training, and the demand of skills.
But students should not be trained for jobs.
University means that all the theoretical and
  methodological questions of the field (economist, lawyer
  etc.) should be taught.
They have to be taught to think, to solve problems, and
  they have to be innovative, improvising, intelligent,
  communicative, imaginative, adaptive and enterprising.
             Reform of Education
Important dimension of education is its socializing
  function. Main aspects:
• Moral conscience,
• Democratic conscience,
• Community discipline and cohesion,
• Social sensitivity,
• Environmental conscience,
• Behavioural culture.
             Reform of Education
Education and Identities:
• Identity is a complex network of different factors.
• From sex, age, skill to national, European and
  global identities.
• Education of European and global identities are
  important for individuals for see their
  opportunities, the understand the circumstances,
  and be successful in adaptation and
           Equal Opportunities?

The question of equal opportunities.
It is important in political and legal terms,
   and Europe made a spectacular and
   tremendous progress in this sense in the
   last decades.
Achievements of European democracy
   should be guarded and preserved. Any
   form of discrimination is unacceptable.
            Equal Opportunities?
But we are not equal in our personal capabilities
  and talents.
According Jeffry Sachs: only 15% of the world
  population is able for innovations, about half to
  adapt, and about one third unable innovate and
  adapt, has no relation with new technologies.
One solution: leave them in a dependent status. In
  an age of high productivity it would cause any
  problems. This is unacceptable.
We have to find solutions in education. Everybody
  has talents, capabilities. That should be found
  and developed.
             Equal Opportunities?
The present educational systems are incapable to
  address these problems. Instead, of equal
  opportunities, we need creation of opportunities.
The individual talent development should be the
  focus of any educational system. Totally new
  systems should be created. And it is a little more
  expensive. The present „educational reforms”
  combined with budgetary cutting have nothing to
  do with these problems.
    Social Economy –Social Regulation

Elements of self-regulating mechanisms of market mixed
  with macro-regulations.
“Social” regulation implies that the state itself should be
  broadly defined (besides government, parliament, local
  authorities) and they are combined with active role of
  broad range of non-governmental and civil organisations
  (consumer protection, environmentalists, trade unions,
  lobbies etc), which all can exert decisive influences on
  the economic and social processes.
The eco-social market economy.
   Social Economy and Social Policies
In the centrally planned systems, the economy and
  the social structures, the economic and social
  policies were mixed up. That lead to low
• The transformation and reforms separated them,
  and put their relation on new bases.
• Hungary was among the most radical and
  successful, even if there were certain cases
  (price of gas), when the economic rational fell
  victim of social or electoral populisms and
    Social Economy and Social Policies
The reforms were uneven and halfway in some
  public services (for example public health
  service), and they just seem to be faltered and
  blocked by the present minority governance.
We have a social security and transfer system,
  which is inefficient, unsustainable, dysfunctional,
  counter-productive, wasteful and socially unjust.
    Social Economy and Social Policies
New relations should be found, where
  compromises are found between efficiency and
  social justice, the market principles and efficient
  social regulation, global competitiveness and
  social welfare of the whole society.
Global and market-conform policies are needed,
  which compromise with major social goals of the
  society. Education, employment, structural and
  regional policies should have their social
  functions and connections.
   Social Economy and Social Policies
New „policy mixes”.

Dilemma: the introduction of Euro is a basic
  interest of Hungary.
The advantages are overwhelming to the costs.
How to achieve it with minimum social sacrifices
  and costs?
   Social Policies and Competitiveness
Social policies, as factors of competitiveness:
• Efficiency of social policies and transfers,
• Investments into human resources (education
  and health), life-long learning,
• Social expenditures contribute to employment
  and growth,
• Effective fight against poverty,
• Built on solidarity (between generations,
  genders, social groups, etc,)
    Social Policies and Budgetary Reforms

Budget has four functions:

•   Financing development,
•   Buying and financing public services,
•   Regulation
•   Cohesion, redistribution from rich to poor.
 Social Policies and Budgetary Reforms

Priority of global competitiveness.

Breaking out of „vicious circle” of free riding.
Better redistribution.
New safety net.
Public services reform.

Results remain limited if reforms are only about saving
   budgetary expenditures. Reforms should lead:
In light of global competition, economy with resources
   should improve,
Improvements in level of consumption,
Majority of the society should gain, social implications
   carefully considered,
Service providers should get just payments,
Clear strategies and action plans are needed,
Reforms should be broadly communicated to the society,
Reforms should be based on broad social consensus.

Prof. Palánkai Tibor

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