Is it fair to point the blame for the EU’s poor international competitiveness at inflexible labour markets?
THE EU’S LAGGING COMPETITIVENESS
In a report produced for the European Commission, published in November 1998, it was argued that the EU lags behind the USA and Japan on most measures of international competitiveness. Gross domestic product per capita, sometimes used as an indicator of international competitiveness at the country level, was 33 per cent lower in the EU as a whole than in the USA and 13 per cent lower than in Japan. The EU’s poor record in creating employment was singled out for particular criticism. As this appeared to apply across the board in most industrial sectors, it suggested that the EU’s poor performance related to the business environment in general and, in particular, to the inflexibility of Europe’s labour markets and excessive regulation In markets for goods and services. A shortage of risk capital for advanced technological development and high cost and inefficiency of Europe’s financial services were also highlighted by the report. For one reason or another, European industries generally lag behind in technology industries. if measured by the number of inventions patented in at least two countries, the USA is well ahead of most European countries, as well as Japan. Despite these shortcomings, the report’s authors focus attention on flexible markets, market liberalisation, and the creation of a competitive business environment rather than on targeted intervention by the EU or national authorities.
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I would argue that the article you refer to is somewhat outdated. An article published in 1998 about global competitiveness is not very up to date.
As you can see from this link, six of the top 10 countries in terms of global competitiveness were members of the EU. This shows that it cannot be accurate to argue that the EU as a whole has policies that make competitiveness difficult.
It is certainly true that some countries in the EU suffer from overly regulated labor markets. This is particularly true for places like Greece and Spain, both of which are in fairly severe difficulties at the moment due in part to those regulations.
Another issue that might be blamed for a lack of overall EU competitiveness is the fact that so many EU countries are new to the EU and are (in the case of the previously communist countries) fairly new to market economies in general.
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