bradford university school of management stimulating employment and growth : do we need an anglo-...
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Bradford University School of Management
Stimulating Employment and Growth : Do we need an Anglo-
Saxon or a Nordic Model?
Frank McDonald
Bradford University School of Management
National Business Systems
Countries have different national business systems determined by their institutional systems and norms of behaviour
National business systems largely determine the rules of the game for business transactions
Bradford University School of Management
National Business Systems
These systems are path determined by history and normally they change slowly.
They however can experience rapid change in periods of crises eg the UK in the 1980s or with radical change in the views of elities eg China in the 1990s
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Types of national business systems in the EU
Anglo-Saxon
Nordic
Rhenish
Issue of the emerging national business systems in new member states
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Anglo-Saxon Model
National business systems geared towards open economies (active participation in globalisation process), emphasis on extension of internal market of the EU based on social protection at minimal level, and flexible labour markets - UK and to a lesser extent Ireland
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Anglo-Saxon Model
Strong market based reforms
Social model conditions
largely determined by
needs of competitiveness
Increased growth and employment
Business friendly policies
Open to globalisation process
Economic stability
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Anglo-Saxon Model - Benefits
High growth and low unemployment relative to Rhenish model countries
Conducive to high levels of inward foreign direct investment from outside of the EU
Fast adjustment to process of globalisation
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Anglo-Saxon Model - Benefits
High proportion of population economically active
Some internationally competitive sectors eg financial & business services in London, Pharmaceuticals
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Anglo-Saxon Model - Problems
Growth and unemployment not better than Nordic model countries
Low level of labour productivity compared to both Rhenish and Nordic model countries
Large income inequalities - regionally and across types of jobs
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Anglo-Saxon Model - Challenges
Improve labour productivity
Reduce problems of low income for labour with low or the wrong skills
Reduce regional inequality
Keeping up with fast pace of change caused by technological change and globalisation
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Nordic Model
National business systems geared towards globalisation process and development of high employment (with reformed social benefits systems) founded on knowledge-based industries, labour markets geared towards encouraging high productivity with high wages – the Scandinavian countries and the Netherlands
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Bradford University School of Management
Nordic Model
Market based reforms
Social model influenced by EU laws and
policies but with national
variations
Increased growth and employment
Policies geared to developing high technology firms
Open approach to globalisation process
Economic Stability
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Nordic Model - Benefits
High growth and low unemployment
High labour productivity
High social welfare benefits
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Nordic Model - Problems
High proportion of GDP is accounted for by the state
Low proportion of population are economically activity
Not as attractive as the UK and Ireland for non EU based inward foreign direct investment
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Nordic Model - Challenges
Maintaining high proportion of GDP accounted for by the state
Dealing with low proportion of population that are economically activity
Creating enough high wage/high productivity jobs in the face of increasing international competition
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Rhenish Model
National business systems concerned to protect social benefits system (or to have slow pace of reform of this system) and to protect and encourage national (European) champions in key industries, major concerns about the globalisation process, and strong emphasis on protecting employment conditions – France and to a lesser extent Germany, Italy and Spain
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Rhenish Model
Slow market based reforms
Social model conditions
determined by strong EU laws and policies to enhance social
cohesion
Increased growth and employment
Business policies geared towards European champions
Cautious approach to globalisation process
Economic Stability
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Rhenish Model - Benefits
High labour productivity – especially France and Germany
High social welfare benefits
Some leading international companies – VW, EADS, Siemens, Thales
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Rhenish Model - Problems
Low growth and high unemployment compared to Nordic and Anglo-Saxon models
High proportion of GDP is accounted for by the state
Low proportion of population are economically active
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Rhenish Model - Problems
Not as attractive as the UK and Ireland for non-EU based inward foreign direct investment Many of the large internationally competitive companies in France are strongly connected to the StateFor advanced economies have a relatively large share of GDP in basic manufacturing
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Rhenish Model - Challenges
Boosting growth and reducing unemployment
Adjusting to the decline in manufacturing jobs
Increasing proportion of the population that are economically active
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Rhenish Model - Challenges
Maintaining high proportion of GDP accounted for by the state
Creating enough new jobs in high wage/high productivity work in the face of increasing international competition and technological change
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Emerging Models
Emerging national business systems with an evolving orientation towards social benefits systems and the globalisation process
Challenge what kind of national business system will help them to catch up to the labour productivity levels of the richer members of the EU and to maintain international competitiveness
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Nirvana Model
High productivity
High growth and
low unemployment
High welfare benefits
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Nirvana Model - requirements
Business system which can deliver high productivity in the face of increasing international competition and technological change by overcoming problems of inappropriate characteristics in labour force, eg low economic activity, low or the wrong skills, low adjustment capacity, poor levels of education
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Realistic models
Countries with high degree of consensus about social norms and highly educated populations – versions of the Nordic model
Countries with diverse and conflicting views on social norms and high proportion of unskilled or wrong skilled labour with high proportion of poorly educated labour – versions of the Anglo-Saxon model
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Realistic models
Countries with diverse and conflicting views on social norms and highly educated populations with appropriate skills – versions of the Rhenish model
However, it is not clear if even France and Germany have the conditions necessary to sustain Rhenish models
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Role of the EU
Flexible social and economic policies that permit development of different national business systems that can tackle the different challenges that face the member states
A flexible EU with inner-core members in some areas and peripheral members in many areas
Problems of labour migration within the EU from low to high income countries
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Role of the EU
Creation of a nirvana model by strong and uniform social and economic policies with large scale transfer of income to help poorer member states to compete with high social costs
Systems that generate sufficient high wage/high productivity jobs to finance high social welfare benefits
A very difficult project to create, implement and sustain