GLOBEEU2016 Flashcards
What is Anders Fogh’s government especially known for?
Strict immigration policies focused on not letting foreigners misuse the benefits of the Danish welfare system.
As of 2016, what is the country of Denmark and its economy known for?
- Good economy with low unemployment (3,3 %)
- Positive current account
- High GDP per capita - one of the richest countries in the world
- Happiest population in the world
- Most equal society in the world (income)
- Short workweeks
- Rated as the best place in the world to do business.
- One of the leading countries in green energy
Who united the Danish Kingdom and when was it?
Margrethe 1 in the 14th century united DK, Norway, Sweden, Finland, Faroe Islands, Iceland and Greenland under the Danish Crown.
The Lutheran reformation strengthened the bond (sharing religion).
About what percentage of the Danish workforce is part of a labor union?
Some of the most profound and strongest labor unions in the world. Unions with 80 % of the workforce.
Who invented the “flexicurity” system?
Poul Nyrup came up with “flexicurity”
What are some of the keywords behind Denmark’s success?
- Probusiness (liberal and open economy)
- Prounion (happy employees, work-life-balance, good conditions)
- Pro-education (high skilled labor)
What is it that the US (especially Bernie Sanders) find interesting about Denmark?
Danish socialist capitalism. Left-winged welfare system.
Happiness, income equality and competitiveness all together.
What are the primary factors it has been hard for Danish politicians to create jobs after the crisis in 2008?
- Private consumption is lacking as people pay off their debt (Denmark had a world record in private debt as the crisis started).
- Public consumption could not be increased, as our yearly public deficit could not exceed 3 % (The Stability and Growth Pact)
“Only” option is to be competitive and EXPORT (Foreign demand).
What characterized the Danish private sector from 1880-1980? (early capitalism)
- Many small and medium-sized businesses (imagine the city of Copenhagen where the size of the buildings are the businesses)
Changed in 1980’s to LARGE CORPORATIONS (even globally). Imagine skyscrapers.
2009: The 5 largest companies by revenue (Mærsk, ISS, Carlsberg, Novo Nordisk and Vestas) had a total revenue equivalent to 32 % of the Danish GDP (in 1994 it was 10 %).
When did Denmark start running current account surpluses?
From 1989 and onwards (despite 1993).
What are the four phases of capitalism in the Nordic region?
- Early liberalism (1850s-1880s): weak states, small public sector, conflicts internally in the state, liberal markets, SMEs, economic periphery = Germany, UK and USA as drivers. All big corporate founders had been abroad in their 20s to these countries to get inspiration.
- Organized capitalism (1890s-1920s): More active states, organized labour markets cartelization and export. Everything got more organized.
- Welfare capitalism (1930s-1970s): Triangle of welfare states, organized labour and industries (mixed economies)
- Market-based capitalism (1980s-xxxx): Economic integration, strong state emphasis on markets capitalism.
What was the two fundamental problems with Martin and his co-authors conclusions about the four phases of capitalism in the Nordic region?
- The phases did not explain change - why did it happen? How did we move from one layer to another
- The phases reflect changes in most West European economies (too general to be specifically Nordic).
What was the primary idea behind the Treaty of Rome in 1957?
Economic integration leads to more competition and more efficiency.
Supply/demands role increases.
Increased specialization.
European economic integration is based on neo-liberalism.
What is the argument of economic sociologists?
Neo-liberalism will not work alone. When P = MC the suppliers will start to cooperate and form allies and potentially monopolies (competition will be destroyed).
⇒ REGULATION is also one of the main drivers for economic efficiency
How can you illustrate different political economies in terms of competition and regulation?
- X-axis with: Restrictive vs. competitive
- Y-axis: with public regulation vs. private regulation
What is and what characterizes a bazaar economy?
Very competitive that is privately regulated.
Extremely unstable situation as things will be negotiated all the time.
(Utopia - rarely exists in real life)
What is and what characterizes a cartel economy?
Restricted economy that is privately regulated.
No antitrust laws.
Instead, businesses will form cartels.
What is and what characterizes a planned economy?
Restricted economy that is publicly regulated (this does not need to be communism but in extreme situations it is).
What is and what characterizes a common market?
Very competitive economy that is publicly regulated.
Free market with the strong state. This is the mix of neo-liberalism for the market itself and regulation of common market ⇒ EU.
What is meant by co-operative liberalism?
Co-operative: help for self-help and solidarity
Liberalism: free market, individual rights and a strong reliance on access to the surrounding markets.
What were the 5 periods Denmark’s capitalistic development was split into, and what are some keywords?
- The early liberal society (1857-1898): Bank establishments, Receiving compensation for loss of Schleswig-Holstein and the Sound Dues (Øresundstold)
- Regulation and internationalization (1899-1932): Stationsbyer = SMEs, Technical education, Merging-period (“United”), Increased public expenditure due to Social Democrats in power, economic crisis as Germany and UK was hit by WW1
- Industrial growth under protective restrictions (1933-1956): Kanslergadeforliget, Marshall Plan, Organization for European Economic Co-operation (OEEC) ⇒ Focus on lowering tariffs
- Export orientation and the expanding welfare state (1957-1981): EEC, EFTA and OECD large players in increasing exports. Increasing public expenditure (public jobs)
- The global division of labor (1982-2007): Immigrants from 3 % to 9 % of population in the time period. Poul Schlüter saving Denmark’s public finances by cutting public expenditure.
What characterized the period of the early liberal society (1857-1898)?
- First banks established. Completely free and un-regulated market (Privatbanken first in 1857, Landmandsbanken 1871, Handelsbanken 1873)
- Compensation for the loss of the Sound Dues and Schleswig-Holstein made the Danish government financially stable and Denmark became a net creditor. Also, the industrial companies could lend money at low interest rates.
Competitive market and private/market regulation.
What characterized the period of Regulation and internationalization (1899-1932)?
- Stationsbyer (railway) in especially Jutland gave rise to many industrial SMEs
- A period strongly focused on technical education institutions
- Entrepreneurs more or less all had a technical background and ALL big Danish entrepreneurs in this period, had been to UK, Germany or USA to seek inspiration
- Fx. Wilhelm Hellesen with the dry battery
- Merger-period: all companies named “United …..” ⇒ The liberal market became a problem as it gave the opportunity for merging into monopolies
- The agricultural sector benefitting from increasing grain-prices due to increasing demand as the European population increased.
- Landowners became much richer as the value of their real estate more than doubled in 30 years time.
- This led to co-operative farms and dairies who started exporting to the UK as the Danish market with stagnating prices was not profitable ⇒ Increased quality and exported (Lur butter etc.)
- Labor rights: unions started forming
- The Danish economy in crisis after WW1 as both Great Britain and Germany (the two biggest export markets) were hit hard by the war.
- The social democratic/social liberalism was in power from 1929-1940 and increased public expenditures. As always, it was hard to draw these economic benefits back and the new liberal/conservative government failed to do so
More and more restricted economy and getting less and less privately regulated.
What characterized the period of Industrial growth under protective restrictions (1933-1956)?
- Unemployment peaked at 38 % in 1932
- Kanslergadeforliget (in Staunings apartment - liberals and social democrats)
- Devaluation of the Danish currency to help the agricultural sector + reduction of the property tax, conversion of debts, bulk purchasing of beef and prolongation of contemporary crisis settlements
- The employers’ demand of a 20 % salary reduction was AVERTED. However, real salaries still decreased due to devaluation.
- Venstre (Liberal Party) confirmed that it would not oppose the implementation of the social reform prepared regarding
- Accident insurance for the employers to pay
- New social insurance with increased grant-in-aids for medical treatment
- New general public assistance that succeeded the poor law of 1891 under which recipients lost their civil liberties
- Unemployment insurances
- Labor market agreements improving the rights in 1952, 1954 and 1956
- Family-owned farms started to disappear due to lack of competitiveness. Bigger farms and companies were created.
- Marshall Plan helping out European countries with financial aid and cheap loans after WW2
- Organization for European Economic Co-operation (OEEC) ⇒ Focus on lowering tariffs
The economy starts getting more competitive again but this time with public regulation.
What characterized the period of Export orientation and the expanding welfare state (1957-1981)?
- DK one of the fastest growing European economies from 1957-1970 due to:
- Growth of export-oriented industries ⇒ EEC, EFTA and OECD playing a large role.
- An explosive expansion of domestic service industries, particularly in the public sector
- H.C. Hansen formed one of the only majority governments in Danish history (Social democrats).
- Strongly increased public spending focused on improving health care, education, retirement support and infrastructure
- H.C. Hansen formed one of the only majority governments in Danish history (Social democrats).
The economy gets more and more competitive again with public regulation.
What characterized the period of the global division of labour (1982-2007)?
- Immigrants from 3 % of population in 1980 to 9 % in 2007 whereas only ⅓ was from western countries (immigrants from especially Middle East and Africa)
- Poul Schlüter’s government
- Cutting public spending to improve government finances
- Focus on liberalization and creating growth on private initiatives (attracting FDI)
- Increased privatization of all industries (even state-owned companies)
- European integration despite “no” to the original Maastricht treaty
- Danish companies started merging (economies of scale), investing (R&D for productivity) and expanding internationally.
- Arla Foods, Danske Bank, Danish Crown, ISS,
- Flexicurity system
- Improved the current account balance through “Kartoffelkuren”, which limited private consumption and of course also led to some unemployment
- WTO
Very competitive market formation with public regulation (common market).
Who was C.F. Tietgen and what did he mean for Denmark?
The most important business man in Denmark in 1860s and 1870s.
He focused on technology regarding infrastructure: Telegraphy, telephone and railways.
Also part of founding DFDS (shipping), The Great Northern Telegraph Company
…and part of a lot of mergers with Privatbanken such as with: Tuborg Fabrikkerne, De Danske Spritfrabrikker, Faxe Kalkbrud, Burmeister & Wain etc.
What were the three phases of structural changes that the financial sector undertook? (Danske Bank)
- Phase 1: Preparing for international competition through a number of large mergers e.g. Danske Bank, Handelsbanken and Provinsbanken (1990)
- Phase 2: Diversification through acquisition of national insurance companies, real estate agents and mortgage-credit institutions in order to create “financial supermarkets” catering to all needs of corporations and private customers
- Phase 3: Internationalization - Had taken place since 1970, but the deregulation of national banking laws in Europe in late 1980 and the creation of EU in 1993 made large-scale international operations possible and attractive
How did the market structure in Denmark change over time in regards to competition laws? (1850-2000):
- Very slow in implementing laws against monopolies
- 1937: still legal to have cartels with price agreements but the agreements should be registered as the Danish state wanted to show power and be able to estimate taxes
- 1989: No longer a monopoly law or council but a COMPETITION law.
How big are EU as an international player?
- EU 28 is the biggest single market in the world measured by nominal GDP (US is close)
- +500 mio. people (US 335, China 1.4 billion, India 1.3 billion)
What are some similarities between EU-member states?
- Low fertility rate and an elderly population
- Neo-liberal policies since 1990 (after Soviet Union and Yugoslavia breakdown)
- All threatened by the emerging markets around the world (especially Asia) in the perception of Europe being the old economic player now getting overrun by new players.
What are some differences between EU-member states?
- Level of public spending and size of welfare state
- Big difference in size of economies
- Big difference in GDP per capita
What are the four different social models of the first 15 EU member states?
- Nordic model: high public spending, focus on active labor and flexicurity, high skilled labor and new technologies
- Anglo-Saxon model: (UK and baltic similar) ⇒ Low unemployment protection, the free market, weak labor unions
- Continental model: insurance-based benefits, strong labor unions (but weakening) - France, Germany, Belgium, Austria etc.
- Mediterranean model: low social spending, family networks sharing the burden
What were the goals of the EU 2020 plan?
- Employment: 75 % of 20-64 year olds to be employed
- R&D_ 3 % of GDP to be invested in R&D
-
Climate change and energy sustainability:
- Greenhouse gas emissions to be at least 20 % below 1990-levels
- 20 % of energy to come from renewables
- 20 % increase in energy efficiency
-
Education:
- Early school leavers rate to fall below 10 %
- At least 40 % of 30-34 years old to have tertiary education
- Fighting poverty and social exclusion: 20 million fewer people to be in or at risk of poverty and social exclusion
What is worth noting about EU members and competitiveness and ease of doing business?
- Northern European countries (Scandinavia, UK, Netherlands, Germany) ranks in the top of the world
- Eastern European and Southern European are far from the same level
Big difference in competitiveness; big part of what led to the EURO-crisis.
How can you describe the size distribution of European business?
Large MNCs and SOEs are important. SMEs are underdeveloped but still very important for the European market.
State-owned enterprises (SOEs) also play a very important rule with 80 % of the value added for Russia and 48 % for Norway to give some examples.
In short, how are European firms doing in terms of global services and manufacturing?
European firms are central to the global services industry but are declining in importance in manufacturing.
What are the benefits to Europe of SMEs?
- SMEs acts as vehicles for knowledge spillover which can be accessed by LSEs
- SMEs creating an increased degree of competition in the input market which, in turn, promotes innovation and the spread of new ideas
- Increasing the degree of diversity within the marketplace.
What are the different forms/levels of economic integration?
- Free trade area (FTA)
- Tariff and quota-free trade between member states
- Goods from third-party countries usually enters via the member state with the lowest tariff
- Customs union
- Free trade WITH a common external tariff
- Single market
- Freer mobility of factors of production: Goods, services, capital, and labor
- Cooperation of development of other policies such as competition and regional policies
- Economic and monetary union (EMU)
- Limits on the independent actions of states
- Monetary stability as an accompaniment to economic unification achieved via fixed exchange rates or a single currency
- More fulsome centralized supranational power
- Policy harmonisation
When was the first step towards European integration taken?
With the Treaty of Paris back in 1951.
Establishment of ECSC with Belgium, France, Italy, Luxembourg, Netherlands and West Germany.
Since when has Europe had a common agricultural policy?
Since the Treaty of Rome back in 1957 with the establishment of CAP; the Common Agricultural Policy
When did the UK and DK buy into European economic integration?
In 1960 with the creation of the European Free Trade Area (EFTA).
UK, Norway, Sweden, Denmark, Austria, Iceland, Portugal and Switzerland joined.
When was the Single European Act (SEA) signed and what was the key features?
SEA in 1985 ⇒ Focus on establishing the single market the Treaty of Rome back in 1957 had called for.
- More qualified majority voting to the Council of Ministers ⇒ Making it easier to implement the program quickly
- Increased role of the European Parliament ⇒ making it more democratic (voice of the people with bigger role).
- Enhanced policy competence to the European Commission regarding environment, R&D, technology and economic and social cohesion.
- Creation of a new court - Court of First Instance (CFI) to relieve the heavy burden on the European Court of Justice (ECJ)
When was the Maastricht Treaty signed and what was the key features?
Signed by most countries in 1992 despite Denmark who voted no with 50,7 %. Thus, the Edinburgh agreement was established with 4 opt-outs for Denmark and was finally signed and put into place in 1993 working from November 1, 1993.
- The European Community governing and regulating the single market, CAP, and new elements such as EMU
- More power to European Parliament with a veto-right
- Ombudsman created to receive complaints from citizens
- European Court of Justice could now give fines to member states
- Common foreign and security policy (CFSP) - a unified Europe
- Cooperation in justice and home affairs (one of DKs opt-outs)
- Includes asylum policy, controls on external borders, immigration policy and residence rights of third country nationals, police, customs etc.
What was the most important elements of the Amsterdam Treaty?
1997.
- Anti-discrimination became a key objective:
- gender ,racial, ethnic origin, religion or belief, disability, age or sexual orientation
- European Parliament’s role further enhanced
- President of EC gained rights to object to appointments of Commissioners and to allocate and reshuffle portfolios
What were the main features of the Lisbon Treaty?
(came into force in 2009)
- European Council and Council of ministers formally separated
- Powers of European Parliament to be extended via application of co-decision procedure to more policies, especially in areas of justice, security and immigration
- MEPs to be reduced to 751
- Citizens’ initiative ⇒ If signed by a million EU citizens, an initiative can require the EC to submit proposals in specific policy areas
- Common energy policy and a strategy on global warming
- “Solidarity clause” if a member state is subject to terrorist attack or the victim of a man-made or natural disaster.
What is the trend regarding EU citizens view of the future of the EU? (optimistic/pessimistic)
What is the trend regarding EU citizens view of the EU image? (positive/negative/neutral)
What is the size of the European Parliament and which countries have the largest amount of seats?
751.
Germany (96)
France (74)
UK (73) ⇒ LEAVING = changes in the political structure within EP.
Who is the current president of the European Commission?
Jean-Claude Juncker (Luxembourg) from 2014-2019.
What is the structure of the European Court of Justice and where is it based?
Based in Luxembourg.
- 28 judges - one from each member state.
- 9 advocate-generals who deliver preliminary opinions on cases brought before the Court to assist the judges in their deliberations.
Despite EP, EC and the European Council (and Council of the EU), which other institutions does the EU have?
- European Court of justice; making sure that member states adhere to the laws
- The European Economic and Social Committee (EESC):
- Involve representatives of civil society in the creation of the common market. 353 members from employers, workers and groups representing professional and community associations, youth organizations, women’s groups etc.
- The Committee of the Regions
- The European Central Bank (ECB)
- Focus on the EURO and price stability
- Major role in the banking union as supervisor or systematic banks (Single Supervision Mechanism (SSM)).
- The Court of Auditors
- Ensures that spending takes place in line with the Union’s budgetary rules and for the purposes for which it was intended.
- The European Investment Bank (EIB)
- Provides long-term loans for capital investment to promote EU development, integration etc.
- The European Investment Fund (EIF)
- Ombudsman
What does article 50 say in the EU?
Article 50: when you want to leave the EU, you have 2 years to negotiate some agreement with the EU.
If you don’t come to an agreement you are OUT as in only having the same rights or links to EU as any other country in WTO.
Why is it important for both the EU and UK to find an agreement?
-
UK:
- Internal market access
- Leading financial center (capital) - they will most likely lose this position
- FDI in UK (services) ⇒ UK headquarter hub (will move to Germany, France etc.)
- 50-70 % of business related laws/regulations are made in the EU
-
EU:
- Losing UK is already a HUGE backlash to the EU. The mission failed so to speak.
- UK is one of the biggest markets
What are the 5 freedoms in EU?
- Mobility of goods
- Mobility of services (EX+IM of services + freedom for FDI)
- Mobility of capital
- Mobility of labor (migration, business travel, exchange of students)
- Mobility of data, ideas and information (digitization of goods and services + data and communication flows)
Regarding the apple case from Margrethe Vestager’s competition policy department in EC, why are all parties mad?
- EU commission: Ireland only gave state-aid to Apple. If they gave the same rights to ALL companies it would be okay
- Apple: “acted in good faith” + has been going on since 1991. Of course mad as they are asked to pay back 30 billion euros.
- Ireland: sets the Irish government in a bad lighting,
- US: EU is according to US targeting only American companies
For how long has the EU had a monetary union?
Monetary Union since 1998 with the Euro as a single currency. 19 of 28 current EU countries adopted the euro.
What are the three pillars of the dream house of the Euro-zone?
- Monetary Union (9/10 now)
- Banking and financial union (6/10 now)
- Fiscal Union (3/10 now)
What is the objective of the Euro-zone’s monetary union?
Monetary union: ECB sets policy, monetary and exchange rate policy focused on price stability and growth
- Working quite well (9/10)
What is the objective of the Euro-zone’s banking and financial union?
Financial supervision, policy set for euro-area as a whole, objective is stability of the European financial system
- A distinguished systemic banks (large such as Deutsche Bank, Nordea, Raiffeisenbank etc.) and non-systemic banks (small banks supervised by national central banks) has been made
- The banks supervised by ECB (the systematic) works well
- The banks supervised by national central banks under ECB guidelines often does not work as countries do not follow the guidelines in all cases
- In Italy, the government wants to save their banks at the moment by government takeovers (due to the close link between national government and small national banks, issues have a hard time being solved quickly as if a French bank bought the small Italian banks - the ECB best practice is not enforced).
- 6/10 - half of the way
What is the objective of the Euro-zone’s fiscal union?
Enforces sustainable national government budgets
- the 3 % yearly public deficit rule does not always apply to big countries in practice as the small countries can benefit from the higher spendings (first the commission has to accept a budget - if they don’t you can take it to the member states (where you need the majority to accept your budget) or make a new budget.
- the budgets are based on cash-basis accounting = an investment in new highways fx. will ALL be accounted the same year
- 3/10 not working yet
What are the roles of EC, EP and the Council of the European Union?
- EC: right of initiative, voice of EU as a whole
- European Parliament: Share legislative power with the council. The voice of EU citizens.
- European Council: Shared legislative power with the parliament. The voice of state.
What is the process of getting new legislators approved?
First a proposal by the European COMMISSION that has to be approved by both the European Parliament and the European Council:
- First reading: amendments can be made by both EP and the EU Council (67 % of all proposals has been approved in the first reading since 1999)
- Second reading: amendments can be made by both EP and the EU Council
- ⇒ In case the proposal is NOT approved by both parties in the second reading, a conciliation process will start
- Conciliation: members of the EP and EU Council meet to negotiate a compromise to set up a new proposal
- The proposal can only be FULLY approved or FULLY disapproved, whereas parts can be approved and disapproved under the first and second reading.
- 9 % have been concluded through conciliation since 1999.
What is the structure of the commission?
- 1 President
- 7 Vice presidents
- 20 Commissioners
One commissioner per member state, whereas each commissioner is responsible for a given area.
What is the role of the European Commission?
- The face of the EU - Foreign Trade policy
- Proposes new laws
- (to be approved by EP and EU Council)
- Budget supervising of states and supervisor of parliament members
- Implementation and enforcing
- (the “police/law enforcer” of EU)
What is the external market roles of the European commission?
- Trade relations with global powers
- Fx. TTIP on the moment
- Foreign policy to meet ongoing crisis
- Fx. ongoing migrant crisis at the moment
- Expansion policy for new members
- Talking to Kosovo, Serbia, Turkey at the moment
What are the primary current challenges & future prospects for EC?
- Brexit
- The growing issue of nationalism
- Risk of Brexit being precedent for other EU members such as DK.
- Article 50 - 2-year negotiation process
- The growing issue of nationalism
- Refugee crisis migration agenda
- Clear asylum policies
- “Youth Wing” with 100,000 strong youth-corps
- Europe 2020 Growth Strategy
- Overcome the financial crisis of 2008
- Smart, sustainable and inclusive growth
What is the structure of the European Parliament?
- 751 members
- 8 different groups of parties
What is the role of the European Parliament?
- Legislate
- Can reject proposals by the EC and approved by the EU Council
- Supervise
- Elects commission president (since Amsterdam 1999)
- Question and review reports on commissioners
- The president of the Parliament can speak before all council meetings
- Budget
- Amendment and final approval of the EU’s long-term and annual budget
Previously just advising but has grown to be a more powerful entity over time.
When did the European Parliament get powerful?
- First direct election for the EP in 1979
- Treaty of Amsterdam in 1999 ⇒ Got equal say in the codecision process. Appointing members of the commission.
- Treaty of Lisbon 2007 ⇒ Extended budgetary capabilities
What are some important facts about the increasing scepticism towards the EU?
- Declining voter-turn at European elections from 62 % in 1979 to 43 % in 2014
- The positive image of EU has declined radically to only represent 30 % of EU-population
- Scepticism appears to be growing in all countries including traditionally supportive countries
How has the codecision process in the EU changed over time?
What are some countries with high voter turnouts for the European parliament and which countries have a low voter turnout?
- Belgium: 89 %, Luxembourg 85 %,
- DK 56 %, Germany 48 %, Greece 59 %
- Czech Republic 18 %, Slovakia 13 %, Poland 24 % (post-communist countries but are they really against the EU?)
What are the 5 myths that go against the idea of post-communist countries being against the EU due to their low voter turnout?
- 44 % of the population in post-communist countries have a positive attitude towards the EU which is higher than 37 % average in other member states
- Voter turnout for national elections is also very low
- 50 % are satisfied with the EU compared to an average 44 % in the EU
- The post-communist countries that have had most EU elections (those becoming members in 2004), has only had 3 elections and is therefore not used to casting a ballot.
- Lack of strong political party identification reduces the voter turnout as EU citizens, in general, don’t vote for the MEP as a person but more for the party they are a member of.
How is the structure of the European Council?
Split into two:
- The European Council( The prime ministers of the 28 EU member states)
- Instruct the council of the EU
- Nominate people for the European commission
- The council of the EU (ministers of EU states that form “expert” groups within their field
- Take part in the codecision making with the European Parliament after proposals by the European Commission
What is the main focus areas of the European council today?
- EU and globalization: focus on introducing trade and business policies to protect EU states
- TTIP
- Euro commitment
- Migration throttle
- mass migration from Middle East due to ISIS
- Heavy strain on social and economic systems
- Unity and collaboration
- Disparity from Brexit
- National elections in France and Germany
What are some global financial regulations?
- Basel 3
- Voluntary
- Capital requirement, liquidity, leverage ratio
- Aim is to strengthen banking industry’s resilience
- Dodd-Frank (US) and MIFID 2 (Europe)
What are some of the important agreements regarding regulations in the banking industry? (timeline)
- 1973: Recognition of “National treatment” principle
- 1977 First banking directive - home country regulatory responsibility
- 1989: Second banking directive - mutual recognition of member state authorization
- 1999: European System of Central Banks (ESCB)
- Article 105
- 1999: Financial services action plan
- 2002: Lamfalussy process
- 2009-xxxx: Common rules (Single rulebook) + Banking union discussed
- Stricter rules regarding liquidity; holding more cash
- Sustainable portfolios reducing risk
- Higher protection of savers of up to 100,000 euros
- 2014: Single Supervision Mechanism
- 2016: Single Resolution Mechanism
- Future: European Deposit Insurance Scheme (EDIS)
How has the EU managed to keep resistance from people losing their jobs to other member-state countries?
Welfare-policies focused compensating people who have their jobs because of increased competition by providing job training, generous unemployment and pension benefits, and national healthcare insurance.
What are 3 traces that has helped increase European integration?
- The common market making the European economies more and more dependent on each other such that supporting the EU has become more and more important
- The European Court of Justice as it has made it clear that national governments were not going to be able to protect national firms by ignoring the treaty of Rome and European Law. It thereby encouraged member-state governments and their firms to increase their cooperative activity in Brussels and create more legislation.
- Lobbying groups and the creation of policy fields in Brussels ⇒ EC relies on the expertise of member-state governments, consultants and the representatives of lobbying groups.
What is the difference between positive and negative integrations?
- Negative integration: this implies the elimination of barriers that restrict the movement of goods, services and factors of production.
- Positive integration: this refers to the creation of a common sovereignty through the modification of existing institutions and the creation of new ones.
What is positive integration?
Positive integration: this refers to the creation of a common sovereignty through the modification of existing institutions and the creation of new ones.
What is negative integration?
Negative integration: this implies the elimination of barriers that restrict the movement of goods, services and factors of production.
What is the absolute largest cost-area of the EU?
The common agricultural policy (CAP) that accounted for 70 % of the budget in 1992 and around 50 % in 2005. Still a big player though declining.
What is the average percentage that trade accounts for in the GDP across EU-countries?
40 % of GDP on average. Higher for smaller countries.
Over 70 % of exports from the countries that make up the EU are to other EU-members.
What is a classic skepticism regarding the landscape of European businesses and the lack of integration in this field?
There are very few internationally owned big corporations.
The big corporations are still typically fully British, German, French, Swedish or Italian.
⇒ This makes it hard to make agreements about property rights.
What are according to Fligstein the four types of rules relevant to producing social structures in markets?
- Property rights:
- Who has claims on the profits or firms, issues of the relationship between shareholders and employees, local communities, suppliers, and customers and the role of the state
- Governance structure:
- Competition, cooperations and definitions of how firms should be organized. Antitrust, anti-cartel, reduce barriers to entry and promote competition.
- Rules of exchange:
- Who can transact with whom and under which conditions.
- Shipping, billing, insurance, the exchange of money (banks/financial market)
- Health and safety standards ⇒ Product standardization
- Conceptions of controls:
- Reflect market-specific agreements between actors in firms on principles of internal organization (hierarchy), strategies regarding competition and cooperation.
- The role of the state and its sovereignty
Is USA a single market?
Not fully.
There are no set of rules defining property rights and there are some differences in rules of exchange across states.
Around what percentage or world trade comes from the EU-countries?
Around 40-50 %.
73,2 % of the trade of EU-countries is between EU-members - the most concentrated trade area (Asia 51 % and North America is 56 % - all numbers from 2003).
What percentage of UK’s, Germany’s and France’s manufacturing trade is with other countries in the EU?
Cautious: Data from 1997.
Nonetheless the data is old, this shows that UK is less dependent on EU than the other two superpowers within the EU ⇒ Explains the bigger skepticism in the UK (they are simply not as connected to the EU-market as most other countries.
What does “property rights” include in Fligstein’s market diamond?
- Defines who has the claim on the profits of firms
- Issues of the relationship between shareholder and other stakeholders: employees/local communities/suppliers/customers
- The role of the in investment and owning firms
- A continuous battle/not the outcome an efficiency process
EU is lacking this area.
+
USA is also lacking some rules in property rights.
What does “Governance structure” include in Fligstein’s market diamond?
- General rules that define relations of competition, cooperation and how firms should be organized
- Two forms:
- Law-based
- Informal institutional practice
- Some societies support corporation other enforce competition
- Competition is regulated both within and across societies (anti-trust, anti-cartel etc.)
- Tariffs and trade barriers to help national industry to compete
What does “Rules of exchange” include in Fligstein’s market diamond?
- Who can transact with whom and under which conditions?
- Shipping, billing, insurance,
- Health and safety standards, and product standardization/compatibility standards
What does “Conceptions of control” include in Fligstein’s market diamond?
The dominant worldview that makes it possible to interpret the actions of others in 4 levels:
- The market specific relations between key actors in firms (hierarchy/structure)
- The tactics for co-operations and competition (survival/strategy)
- The relations of firm dominance in the sector
- The perception of how a particular market should work
Conceptions of control are historically (specific to a certain industry/society).
In which way is the crisis of 1930’s and 2008 similar?
- Middle class’ real income was stagnating and they increased their debt to keep the same living standard
- Both periods were characterized by an extreme inequality. Top 1 %.
- Speculation: 1930s due to stocks and gold, 2008 due to property
What is the role of the visible hand (the government)?
- Provide key collective goods that markets won’t such as e_ducation, infrastructure, courts, basic scientific research_
- Reduce pollution and other negative externalities
- Encourage shared knowledge (positive externalities)
- Regulate the market to protect consumers and investors
- Provide or require certain insurance protection in regards to health care, retirement etc.
- Soften the business cycle and reduce the risk of financial crises
In regards to government size and economic wealth of a country, which form does not exist?
Rich countries with small governments (despite some minor oil states).
The visible hand (the government) is crucial for the invisible hand (the market) to work.
What is the primary message of “Introduction + The trouble with markets”?
The visible hand (the government) is important to make the invisible hand (the free market) work properly.
The US did great in the 20th century with a mixed economy that made the US the richest country the world had even seen with all layers of society getting better off in terms of wealth, education, health care etc.
By diminishing the role of the government, US has led itself into a very tough economic situation once again with low growth, increasing frustration etc.
What was the time period of early liberalism and what characterized the period? (4 Nordic periods)
Early liberalism (1850s-1880s): weak states, small public sector, conflicts internally in the state, liberal markets, SMEs, economic periphery = Germany, UK and USA as drivers. All big corporate founders had been abroad in their 20s to these countries to get inspiration.
What was the time period of organized capitalism and what characterized the period? (4 Nordic periods)
Organized capitalism (1890s-1920s): More active states, organized labour markets cartelization and export. Everything got more organized.
What was the time period of welfare capitalism and what characterized the period? (4 Nordic periods)
Welfare capitalism (1930s-1970s): Triangle of welfare states, organized labour and industries (mixed economies)
What was the time period of market-based capitalism and what characterized the period? (4 Nordic periods)
Market-based capitalism (1980s-xxxx): Economic integration, strong state emphasis on markets capitalism.
What is a market?
A social construction
Restrictive vs. competitive
Private regulation vs. public regulation
What is the problem of having free movement of labor without integrating tax policies and social policies?
People from less fortunate countries can take advantage of the social benefits in other countries.
Fx. Romanians getting free education, SU etc. in Denmark and then afterward a minimum wage in UK etc.
What is the job of the commissioner of competition?
To make sure that the transactions going on in EU, will be under a competitive and public regulated market.
- State-aid: (the state will try to make “plan economy” by helping domestic corporations)
- Anti-trust (companies will try to move down to the cartel economy)
What does Fligstein say about compensation in Europe?
That there is compensation around EU of people suffering from creating the common market.
Why do we see compensation of the people suffering from the common market?
There is no social tax integration ⇒ No tax integration in Europe.
The different tax systems depend on the different government-systems:
- Nordic
- Continental
- Southern
⇒ CULTURE
What are the two “end-points” of the EU?
The United States of Europe; the 5 freedoms + everything is integrated. ALSO tax integration and social policy integration (welfare system)
vs.
Intergovernmental market integration; focused on free-trade-area.
What are the ways that the EU can go from now?
In which way is the crisis of 1930’s and 2008 similar?
- Middle class’ real income was stagnating and they increased their debt to keep the same living standard
- Both periods were characterized by an extreme inequality. Top 1 %.
- Speculation: 1930s due to stocks and gold, 2008 due to property
What are the two types of innovation?
- Incremental: improving or combining existing technologies to something new (Facebook using the internet, Instagram using Facebook’s idea of photo-sharing)
- Radical: completely new (the internet)
What are some of the technologies in the second machine age?
- Internet (WWW 1989)
- Information technology
- Big data
- Artificial intelligence
What is the keyword for the two machine ages?
- First machine age: Electrification (engines, telephones, electricity)
- Second machine age: digitization
What does “bounty” refer to?
- More choice, greater variety, and higher quality in many areas of our lives
What is the discussion about the bounty and the spread about?
Bounty: everybody is getting better off all the time
But… We see a larger economic spread = inequality.
Are American factory workers being replaced by Chinese workers due to globalization?
About ¼ of the decline in America’s factory-industry can be allocated to outsourcing to China and other third-world countries.
That being said, however, China’s factory-industry has also declined in size looking at the number of workers employed ⇒ Automation is causing the primary decrease.
What are possible solutions to the future issues regarding labor relocation?
- The basic income principle (giving everyone a lump-sum so they can act as consumers and have a minimum living standard)
- Probably a bad idea anyway, due to the Three Great Evils and the importance of working
- The negative income tax (Milton Friedman’s idea of 1968)
- If you earn less than a given number X, the government will subsidize you instead of taxing you.
- This also helps avoid the black labor market
- If you earn less than a given number X, the government will subsidize you instead of taxing you.
- Artificial artificial intelligence
- Humans working cooperative with computers
What are the “Three Great Evils”?
Boredom, vice and need.
The basic income principle will only take care of the “need”.
⇒ Related to the 3 motivations from Drive: Mastery, Autonomy, and purpose
What are some wild/creative ideas to the issues we are facing regarding labor relocation?
- Create a national mutual fund distributing the ownership of capital widely
- Use regulation, grants, taxes etc. to incentivize technical change toward machines that augment human ability rather than substitute for it
- Pay people via NGOs etc. to do “socially beneficial” tasks
- Start a “made by humans” labeling movement (just as organic and fairtrade)
- Provide vouchers for basic necessities such as food, clothing, and housing to eliminate extreme poverty and let the market manage income above that level.
Why is Østasiatisk Kompagni an unusual Danish company? (two reasons)
- Always been extremely international
- Large corporation (skyscraper) during the 20th century
Why did Østasiatisk Kompagni grow and when?
15 years from started in 1897-1912; grew to 5,000 employees.
Why?
- Not build upon creating wealth but build upon the challenge of making Copenhagen important for international trade (the vision)
- Got funding from the market (the community as owners - the same way Elon Musk funds his companies. Including the community to make big ideas come true) ⇒ Funded by Glückstadt (the former CEO of Landmandsbanken ⇒ Danske Bank).
- About to go bankrupt due to lack of corporate governance ⇒ War between Russia and Japan created a demand for transportation/supplies by the Russian military, which got the company back running (coincidence here) + hired an experienced board of directors
Why did Østasiatisk Kompagni loose the leading position and when?
Was the largest company in Scandinavia but disappeared In 15 years between 1977 and 1992.
Why?
- Paradox: “the more globalization and trade in the world, the smaller Østasiatisk Kompagni became”
- The main competence was being able to beat the market and selling knowledge about distance markets. To do this on behalf of others, barriers to trade is benefitting you. As barriers decreased, it was possible for other businesses to navigate international trade themselves
- The most diversified company (took part in shipping, services, industry, motorbikes in SEA etc. ⇒ all over the world during everything. They diversified to limit risk but as competition grew they got outcompeted due to the limited focus on each business area (lack of key competence)
- External funding but kept internal control ⇒ In 1992 on 9/11, the investors claimed to become part of the board of directors.
When was the last largest danish corporation started? (+ 1000 employees today)
There haven’t been any since the mid 1990s.
What is the two main enablers of automation according to McKinsey?
- Increased affordability and accessibility of existing technologies
- Supermarket checkout systems, traditional robotics (production and assembling lines), cleaning robots, accounting software
- New disruptive technologies
- 3D-printing, AI, self-driving cars, robots, drones, autonomous cargo trucks
What is the optimist technology view?
- Exponential growth of technologies.
- Will transform the world and the economy.
- Up to 47 % are in the high-risk category of losing their jobs.
What is the traditional economist’s view of technology?
We have seen it all before - automated jobs for the last 40 years. We should not worry too much but we, of course, have to adapt our societies to the changes and keep all business sectors aligned with the new technologies.
What part of the danish workforce can be automated?
Total workforce is 2,7 million but 1,1 million can be automated (37 %) (number is higher in US due to bigger service-sector)
What are some of the barriers to automation? (McKinsey)
What will be some of the implications of the Second Machine Age for the individual? (McKinsey)
- Post-graduation uncertainty (uncertainty about future knowledge-demand (NEG)
- Displacement: risk of losing current job if majority of tasks can be automated (NEG)
- Replacement: alternative to displacement is redefining the job description and tasks (POS/NEG)
- Digital interactions: physical points of contact in citizens’ everyday life will evolve from human interaction to digital touchpoints (POS/NEG)
What will be some of the implication of the Second Machine Age for industry? (McKinsey)
- Disruption of traditional industries (POS/NEG)
- New emerging industries (POS/NEG)
- Localization of production: automation will enable localization of production, creating an upside in high-wage countries (POS)
What will be some of the implications of the Second Machine Age for the society? (McKinsey)
- Potential labor resources that can be allocated to other sectors (POS)
- Rising inequality (NEG)
- Increasing qualification gap (NEG)
- New regulatory challenges (new industries and markets without regulation require a quick response from the government’s) (POS/NEG)
What is one of the clear trends regarding competition in all industries? (McKinsey)
Incumbents are being attacked from all sides ⇒ Those we did not think of as competitors before is suddenly competitors.
Fx: banking industry: (Source: CB Insights - unbundling of a bank)
What are the 4 industrial revolutions based on?
- First: 1760-1840: railroads, steam engine
- Second: 1880-1920: mass production; electricity and assembly line
- Third: 1960-1990: semiconductors, mainframe computing (60s), personal computing (70/80s), internet (90s)
- Fourth: digital revolution and transformation (now); smart and connected machines, gene sequencing, nanotechnology, renewables, quantum computing. Artificial intelligence
What are some of the most important megatrends and technologies within these in the fourth industrial revolution?
- Physical
- Autonomous vehicles
- 3D printing
- Advanced robotics
- New materials: renewables, self-healing, self-cleaning,
- Digital
- Internet of things
- Big data
- Artificial intelligence
- Blockchain (bitcoin)
- Platforms (supply and demand meets)
- Biological
- Genetic sequencing
- Synthetic biology (writing DNA and customizing organisms)
What is the key change in regards to governments with the fourth industrial revolution?
Technology will increasingly enable citizens, providing a new way to voice their opinions, coordinate their efforts and possible circumvent government supervision.
(the opposite might happen as well – new surveillance technologies can give rise to all-too-powerful public authorities).
What is the key change in the job market in with the fourth industrial revolution?
Less security due to disruption.
On-demand jobs + more flexible work hours.
