Summary of my new paper: “Lisbonizing vs. financializing Europe?”

A friend – Vlad Mykhenko – and I have just had a paper published called “Lisbonizing vs. financializing Europe? The Lisbon Agenda and the (un)making of the European knowledge-based economy” in the journal Environment and Planning C. 

For certain strange-ones who walk amongst us, the European Union, Commission and all things Euro-cratic intrigue and frustrate in equal measures – I’m a signed up member of that weird tribe by all measures. Although I can’t profess to a level of expertise that some people have of the intricacies of the Euro-beast (which is not to disparage it unnecessarily), I’ve become more fascinated with Europe the more I’ve done research on it, its regions and its policies. Which brings me to the purpose of this post … 

What’s it about? Well, the Council of the European Union (CEU) and the European Commission came up with a strategy back in 2000 to make Europe the world’s “most competitive and dynamic knowledge-based economy” by 2010. By this the Commission and others mean that they wanted to turn Europe into an economy based on high-tech innovation and employment in new technological fields like information & communication technology, biotechnology, nanotechnology, etc. Obviously 2010 has now come and gone and little it seems has changed in Europe – it has not turned into a new, gleaming hub of high-tech employment or innovation (not that these things are necessarily ‘good’ per se). Notwithstanding the global financial crisis (GFC), the Lisbon Agenda (or Strategy) was derailed long before the likes of Greece, Spain, Portugal, et al. went belly-up. This led us to ask two pretty simple questions:

• Did the Lisbon Agenda turn Europe into a knowledge-based economy? We suggest not.

• If it did not, how did the Lisbon Agenda actually shape Europe’s economy?

Our contention, after some convoluted, abstract and jargon-filled arguments, is that the European economy was thoroughly ‘financialized’as a result of the Lisbon Agenda – not despite the Agenda, even though it was based on very different priorities (e.g. promoting high-tech employment and innovation). What we mean by this is that the European economy became increasingly oriented around the expansion of the financial sector (e.g. banks, insurance, real estate). This is because European policy-makers – both in European institutions and member state countries – had (and still do) conceived of innovation and how to promote it in a very particular way; primarily they see it as a consequence of private sector business decisions and activities. We know this is nonsense as a result of the work of people like Mariana Mazzucato. This short-sightedness meant that policy-makers promoted financial ‘reform’ as a major goal of the Lisbon Agenda – they assumed that innovation would blossom once they had created the right kind of financial markets; that is, those with few regulations, short-term priorities, selfish incentives, etc. – or Dragon’s Den at a much larger scale. This is evident in the Commission’s 2005 Financial Services Policy white paper:

“Financial markets are pivotal for the functioning of modern economies. The more they are integrated, the more efficient the allocation of economic resources and long-run economic performance will be. Completing the single market in financial services is thus a crucial part of the Lisbon economic reform process; and essential for the EU’s global competitiveness.”

•  Europe has been losing labour productivity since 2000, even though GDP growth has been pretty steady – what this implies is that the Europe economy is only growing because there is growth in low-skilled rather than high-skilled (and therefore productive) employment. Not exactly knowledge-based or innovation-centred! 

• Europe has increased its employment rate quite considerably since the 1990s – which is an important achievement. However, these new jobs are more likely to be part-time, temporary and less well-paid compared with the USA or Japan. Moreover, there is a widening gap in average pay between Europe and the USA. 

• Europe has failed to add any high-tech employment during the 2000s, while high-tech manufacturing employment actually declined. Instead, the fastest growing employment sector has been in the FIRE sector (i.e. finance, insurance and real estate) – basically bankers and others. These employees are also the ones who’ve benefited most from any rising wages across Europe.

“Thus, despite the earlier assurances of [Daniel] Bell (1973) and [Peter] Drucker (1989), it is not the scientist, engineer or designer but the banker who has been empowered to command a higher price in the new world of the KBE [knowledge-based economy]” (p.122).