In the Danish capital, the EC's heads of government seemed at last to grasp that western European wage rates and the costs to employers of sustaining relatively lavish social benefit provisions threatens to price many goods and services out of world markets. Like so much else, the old order both arose and prevailed courtesy of the Soviet Union. The Iron Curtain sealed off western Europe from an adjacent source of cheap labour and competing goods. At the same time, the ideological challenge of Communism helped to create the benevolent 'Rhine model' of capitalism, as it has been called, with its generous social benefits.
Across the Atlantic, the US offered an alternative version, redder in tooth and claw, the mobility and productivity of its labour force encouraged, inter alia, by high legal and illegal immigration and a porous border with Mexico.
Britain was always something of a hybrid. It helped to pioneer the welfare state, but its business philosophy was much closer to America's. The big question now facing the EC is whether the Rhine model can be sustained or if an adjustment towards the Anglo-American model would (as American experience seems to suggest) create greater dynamism and more jobs.
The answer must surely lie in the disappearance of the old order that for so long protected the western European model of prosperity. In eastern Europe there is a large pool of skilled labour available at a fraction of west European rates. The longer-term question for the EC is how Europe as a whole, not just the 12 plus four prosperous new members, can maximise its overall resources to take on the challenge of the United States and the Pacific Rim. The political imperative of embracing Poland, Hungary and the rest can only reinforce the economic case for such a pan-European approach.
The actual outcome of the Copenhagen gathering looks meagre even by the low standards of these occasions. Discussion of how to help Bosnia's Muslims produced much heat but little of substance. Formal invitations to join were extended to the eastern European countries, although these were hedged about with conditions. The agreed target date for the accession of three Scandinavian countries and Austria was confirmed; and the European Commission was asked to produce for the December summit a White Paper based on Jacques Delors' judicious mix of ideas for reanimating the economies of recession-bound member states and reducing unemployment. Realism suggests there can be little confidence that any resulting action plan will be effectively implemented.Reuse content