Europe Not Yet Reaping the Full Benefits of Globalization, Says New Academic Study
While economic globalization remains a contentious topic for many Europeans, a new academic study shows that it has in fact delivered significant benefits to the region. Not all citizens, companies and countries have benefited equally, however. The study set out to examine why this is the case, and what can be done to ensure a more even spread of benefits across the European Union.
Economic globalization has brought many benefits to Europe, but not everyone is yet benefiting equally, according to a major new academic study.
Published in February 2008, the study, entitled Globalization and Europe: Prospering in the New Whirled Order, was conducted by economists Daniel Hamilton and Joseph Quinlan of Johns Hopkins University in Baltimore, Maryland. Commissioned by the Executive Council of the American Chamber of Commerce in the EU (AmCham EU), it aimed to assess the effects of economic globalization on European citizens, companies and countries, and to suggest ways in which European Union member states can draw the maximum amount of benefit from globalization while minimizing any negative effects.
A ‘new whirled order’
The study notes that the world economy has globalized rapidly since the turn of the millennium. Advances in communications technologies have made international trade and co-operation easier, while government policies have enabled the flow of workers, capital and ideas across borders. It is now easier than ever to source goods, labor and investment funding from across the globe. The speed and chaotic nature of these changes have led the authors of the study to describe the current situation as a ‘new whirled order’.
Globalization has brought many benefits
EU stakeholders – including consumers, workers, companies and countries – have benefited in many ways from these developments. European exports, particularly to developing nations, have increased in the past five years, bringing prosperity to the region. Imports from developing nations have helped to increase consumer choice and keep the costs of many key commodities lower.
The study also finds that inflation would be greater without downward pressures from lower-cost products made available through globalization. Unemployment has remained low in many European countries, while disposable incomes and real wages have both increased. In Western Europe, the influx of migrants from Eastern Europe and further afield has helped to offset declines in the local workforce caused by ageing populations and falling birthrates.
Furthermore, the authors believe the ‘offshoring’ trend has not impacted the EU nearly as much as is popularly believed. The region has created 18 million more jobs than it has lost over the past 10 years, and a lot of ‘offshored’ work actually remains within the EU, with many companies choosing to create ‘near-shore’ manufacturing and service centers in central and Eastern Europe as well as in Ireland and Spain.
EU has its own ‘China’ on its doorstep
Another important conclusion of the study is that the EU has its own ‘near-China’ in the band of emerging economies that surround it to the east and south. The region that stretches from Russia through Eastern Europe and the Middle East is possessed of a market size and economic growth rates that rival those of China itself. The EU is particularly well placed to benefit from this, thanks to its geographical proximity and its existing investments in the region.
But while the EU as a whole has demonstrably benefited from economic globalization, this isn’t to say that all citizens and all nations have benefited equally. The study finds that the ability to benefit correlates directly with the willingness and ability to embrace and keep pace with economic, commercial and technological developments.
Citizens must learn new skills
For citizens, this predominantly means learning new skills to ensure they remain employable in an economy that is rapidly transforming from industrial to post-industrial. Many people who have traditionally worked in manufacturing or agriculture must now re-skill for a service-based economy. Even those who are already employed in the service sector – which now accounts for some 70% of jobs in Europe – must continue to update their skills to keep pace with economic and technological developments. Unskilled workers will find themselves progressively less employable and therefore less able to contribute to society or to enjoy the consumer benefits of economic prosperity.
Not all European countries are well placed to benefit from globalization, either. Those that are, according to the study, are the countries that are investing heavily in innovation, skills, and research & development, and that actively engage in European and global trade. These countries can offer high-quality and often unique products and services to a global market, alongside a skilled workforce and a welcoming business environment.
Innovation, education and R&D are key to success in the global economy
The Nordic countries are cited as examples of highly competitive and innovative European nations who are exploiting the forces of globalization to their own benefit. At the other end of the scale, the study finds that southern and eastern countries like Italy, Greece and Poland are the least equipped to cope with globalization, due mainly to low investment in relevant education and skills and low investment in new enabling technologies. Without making these vital investments, these countries risk losing out to more dynamic emerging economies both within Europe and elsewhere in the world.
Commenting on the findings of the study, Karl Cox, VP for Public Policy and Corporate Affairs, Oracle EMEA, said: “Many of the findings are borne out by Oracle’s own experience. As a major employer and technology supplier in the EU region, we understand the economic and social benefits of investing in 21st century skills and modern technologies and of exploring opportunities in Central and Eastern Europe and Central Asia.”
“We have also found that in countries where governments are open to working with industry and the academic community on life-long education and R&D, their ability to innovate and to compete economically on the global stage is greatly enhanced,” he said.
