John Zysman and Tobias Schulze-Cleven at the University of California, Berkeley ask a good question in a recent BRIE Working Paper: How do Wealthy Nations Stay Wealthy? (PDF) Their paper, subtitled "Challenges for the European Policy Agenda", makes two arguments:
First, countries and companies face an ever more volatile competitive marketplace. They have to maneuver in a competitive environment, in which the “sweet spots” for corporate success are constantly changing as company internal functions become products, products become commodities, and the sources of differentiation for products and processes are constantly evolving. This new “formula” for corporate success requires a social capacity for flexibility and adaptation.
Second, social protections often serve as essential sources of social capacity for adaptation and change. There is not an inherent contradiction between social protections and market flexibility. The essential issues are how those protections are organized and delivered. The dilemma of many continental European countries to provide “welfare without work” (Esping-Andersen 1996, Scharpf 2001) after a history of “adjusting badly” (Manow and Seils 2000) is only one possible outcome. To the contrary, if adapted rather than abandoned, European traditions can be the basis of continued growth and productivity in a competitive marketplace.
The authors "we feel hesitant to prescribe solutions – for that task we defer to our European friends." But they do favourably cite Sapir's recent paper, which argued that only the Scandinavian and Anglo-Saxon variants of the European Social Model will in the end be sustainable.
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