3.11.15 PS131 - lecture notes PDF

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3.11.15 ● ● ● ● ●

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escalating social spending business taxes Kohl reforms of retirement qualifications EU’s Libson Agenda The 2009 CDU/CSU-FDP government seeks to undertake further neoliberal reforms to spur business at the expense of social benefits and labor safeguards ○ wanted to increase the age of retirement even more Kurzarbeit ○ When businesses begin to sell less, or have cost increase, there is great temptation to reduce the workforce (lay off people) but in Germany they have a government program, Kurzarbeit, a federal agency that allows businesses to reduce the pay and time (hours) of the workers rather than lay off the workers, and the government will give that employee up to 60% of what they used to be working ○ avoids massive lay offs ○ saved as many as 1 ½ million jobs in the last election and think it will continue to grow as much as twice as fast ○ more economically sensible In the 2013 Grand Coalition, the SPD secures commitment (had some conditions) for a legislated minimum wage and achieves it in 2014 (8.50 euros aka $11.60 per hour) ○ softens the 2007 Grand Coalition decision to gradually raise retirement age from 65 to 67 by allowing those contributing to the pension system for at least 45 years to retire at age 63 ■ Germany remains the EU’s fastest ageing population ● low birth rate and the people are living longer

European Union and Further Challenges to the Social Market Founding purposes of the EU ● something had to be done to end Europe's internal warfare ○ more economically independent ○ more prosperity ○ promote post-World War II peace and prosperity through economic integration ● wisdom in having a continent that was economically integrated to be able to deal with Germany’s future economic and political power ○ Germany would be welcomed into the EU to feel a part of Europe and hopefully won’t use their future economic and political power in destructive ways ● ambition ○ if Europe can continue to integrate economically and grow then eventually there could be a politically united Europe

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hopes that one day Europe could be like the United States ● Germany would be like our version of Ohio

Treaty of Rome 1957 ● Common Market ○ a place to trade freely ○ collective market as a free economy ○ harmonizing standards ■ Germans may have one definition of beer, where U.K has a different version ■ negotiations to agree on ingredients and standards of products being sold ○ treat their economies as a free thing ■ workers, products, consumers can transport freely Euro 1999, 2001 ● budget deficit under 3% of GDP ● national debt under 60% of GDP ● inflation level not exceeding 1.5% of the average 3 lowest ○ fine of .5% of GDP ● 19 countries in Europe to date using the Euro Failed effort at EU Constitution in 2005 Treaty of Lisbon 2009 ● President of the European Council: ○ one renewable 2.5 year term ○ presides over and spurs the work of the council and is the EU’s foremost representative to the world ○ Herman Van Rompuy of Belgium ○ Donald Tusk of Poland as of August 2014 ○ European Council chooses ● High Representative of the Union for Foreign Affairs and Security Policy ○ 5-year term ○ main coordinator and representative of the EU’s Common Foreign and Security Policy ○ Catherine Ashton of Britain ○ Federica Mogherini of Italy as of August 2014 ○ European Council chooses Features of EU ● Nearly 500 million inhabitants ● As a block, largest GDP ● 26% of GDP as social spending (11% US) ● Incarceration rates lower than the US ● Child poverty rates lower than the US

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Infant mortality rates lower than the US Defense expenditures lower than the US ○ stress society of belonging rather than belongings ■ focus on togetherness of Europe rather than just having a lot of things

Challenges to Social Market Economy ● Trade between EU states lower by 2-3 times that of internal US trade ○ only 10% income spent on goods from fellow EU members ● Open borders -common market and Schengen Area- facilitates capital flight to lower wage areas and increases joblessness ● Open borders facilitates influx of job seekers from lower income states and depresses wages ○ Companies can easily relocate to not have to pay high taxes/wages ● Fiscal and monetary requirements of the euro restrict budgetary outlays for social benefits of the social market ○ endangers goal of a responsible capitalism ● Individual member states cannot devalue euro exchange rate, adjust interest rates or euro supply to combat downturns ● Harmonization of standards required by the Common Market limits the flexibility needed for implementing framework regulations by semipublic institutions in the social market ○ prior to 2008 financial crisis, support for EU had been higher in low income states such as Lithuania and Greece than in higher income states like Britain and Germany ■ with enforced austerity, southern European support becomes mixed ○ financial crisis sparks resentment in Germany over perceived profligacy and duplicity of Greece and southern European members and ensuing German-led conditionalized aid via harsh austerity embitters recipients ■ the union is under strain ■ significance of the protest vote for the AfD in 2013 ■ is the EU project in jeopardy?...