A chinese perspective on lisbon strategy （Zhou Hong）

Abstract:

The Chinese interpretations of the Lisbon strategy fall mainly into two different aspects: one focuses on the more or less neo-liberal orientation of the Lisbon Strategy, the other tries to assess the implications of this orientation toward the norms of national social welfare states. This article focuses on one of the main functions deployed by the Lisbon Strategy, i.e. the “innovation” discussed its definitions, contents, practices, and constraints. This article concludes that the direction of the Lisbon Strategy is more important than the quantitative goals it has set up to achieve, and China can in many ways learn from European experiences in designing, integrating and implementing development strategies. 

1. Chinese Reading of Lisbon Strategy

In recent years, the EU model for developmental strategies has been closely followed and carefully assessed by Chinese researchers.[1] Researches on this line has led to a systematic evaluation of the EU Lisbon Strategy of March 2000, followed by equally keen interests in the Sapir Report and other critics of the Lisbon Agenda in China.[2]  

The Chinese readings and interpretations of the Lisbon strategy fall mainly into two different aspects: one focuses on the more or less neo-liberal orientations of the Lisbon Strategy, emphasizing the challenges of global competition and the need for Europe to adopt more dynamic economic policies. The other tries to assess the implications of the neo-liberal economic policies of the Lisbon Strategy against the norms of national social welfare states. The first aspect asserts that globalization, which is irreversible and irresistible, shall at the end predetermine the direction to which the society and social provisions are going to be shaped. It should therefore be a priority of any decision maker to follow closely the wave of globalization in order to connect the new social provisions with the newly emerging economy. The second aspect focuses on the EU way of inventing and constructing new tools and institutions to balance economic growth and social cohesion, as well as tools and institutions to harmonize the efforts made by both the Union and the Member States.

According to the Lisbon Strategy and its related documents, “innovation” is a catchword found on multiple levels of the EU: on the economic level, it represents scientific and technological breakthroughs; on the social level, it represents reselection of social provisions and redefinition of social values; on the political level, it represents restructuring of institutions and reevaluation of social responsibilities. After the mid-term review of the Lisbon Strategy in 2005, a stronger focus was put on the central role of the innovation policy as the key to the success of the Lisbon Strategy. In 2006, the European Commission came to the point of calling “innovation” a “strategy” in its recent Communication Paper.[3]

The innovation is also a concept embraced by the Chinese and their leaders, because it provides them with positive solutions to the numerous problems of Chinese society, which is witnessing a major transformation. The Chinese believe that the EU experiences are applicable to their own situation, though the Chinese have yet to determine in what areas and to what extent adopting those EU experiences are appropriate.

2. One Globalization, many Responses?—the Uniqueness of a European Strategy

One way of understanding the uniqueness of the EU model is through analyzing its responses to the challenges of globalization. As the world is now united with mainly one market while at the same time divided into many political and social entities, the responses from these entities are bound to be diverse, each depending on its own internal format and on its development level. Countries respond to the challenges of globalization based on their command of resources, their organization of production, and their mobilization of people. For the US, globalization has offered an opportunity for easy access to the global market, an opportunity not seen for long in human history. Free flow of capital, goods, services, and labors generate profits and extend businesses beyond national borders. For the EU, globalization poses both opportunity for business and challenges for societies. For China, globalization is a rapier—It has brought capital, technology, resources, and a global market fueling China’s economic growth, and by the same token, it has posed challenges to Chinese society in adjusting to dramatic changes. China, as well as Europe, must look at their own strategic positions in development and their own internal outfit at home to determine what kinds of means and tools they deploy for their own transformation in the age of globalization.

The EU has been constantly looking at itself for the symptoms of development fatigue. In 1998, a Forward Studies Unit was appointed by the European Commission to assess “Globalization and Social Governance in Europe and in the US”. The final report publicized in the following year highlighted the changing relations among the state, business, and European citizens. The hypothesis of the report was built upon a 1998 report by Kenan Patrick Jarboe titled “Globalization: one World, two Versions”. In the latter report, the author clearly states that Europe was situated in between “the late-industrial age, and the early-information era”, and in between the two modes of production: the industrialization age, requiring the division of labors, and the information era, requiring enhanced workers’ skills. The two modes generated strikingly different social governances, the former, “a centralized, hierarchical, technocratic form of government management,” the latter, “a decentralized, network system of governance.”[4] Essential changes from the industrialization age to the information era takes form in the organization of production and the role of trade unions in the society, and political institutions for public goods and services must be reconstructed as a result.

Most economies, including the EU and China, have declared that economic growth is the first and utmost priority in their strategic formations. Yet, different approaches toward growth are distinguishable among these countries. The strategy known as Washington Consensus has chosen privatization, deregulation, free trade, interest rate liberalization, and tax and fiscal policy reform as its orientation. The extension of market under the banner of free trade has more or less neglected public goods such as a social safety net, environmental protection, and corporate social responsibilities. The message from the Washington Consensus is clear: freer competition for greater returns.

The Europeans do not completely agree with the Washington Consensus. When declaring their commitment to a free market economy, they also add social cohesion, political democracy, and preservation of nature as indispensable parts of their fundamental value system. Recognizing that the greater part of Europe still lives in the age of late-industrialization, the Europeans try to live with different kinds of bureaucracies, work together with them in a coordinated way towards common goals.

What common goals do proud European Nation States share and how will they achieve them? The Lisbon Strategy serves as a window for the understanding of this extremely complex and uniquely shaped European Model. March 23-24, 2000, the European leaders met in Lisbon for their usual and unusual intergovernmental debates, this time, over European development strategy, as they want to steer the EU boat towards a peaceful and prosperous future in the new millennium. These leaders found a heavy task on their shoulders, as they saw impending globalization challenges pressing their agendas. Worse than that, in Europe, globalization and Europeanization were taken as scapegoats for higher unemployment rate (over 10% of European workforce, or 15 million people, are unemployed). Compared with the US, Europe has slower economic growth, lower level of employment in service sectors, and above all, noticeable skill gaps of European workers in the information and technology sector, due to underinvestment in education, training and research.[5]

The EU Lisbon Summit does not simply aim at pushing for economic growth, but mainly at creating more and better jobs that promote people’s prosperity and well being by taking advantage of economic growth. The critical step is to set up a competitive platform, and above all, to facilitate a “transition towards a knowledge-based economy,”[6] and for that goal, to prepare European citizens for the upcoming information era. The Lisbon Strategy thus advocates that the strategy is a forward looking blue print for the development of the EU and thus shall not focus on one specific area; it addresses issues of economic development and social cohesion; it is developed through a consensus from the representatives of the EU Member States, which is unique and important. In addition, the Lisbon Strategy is a working plan, a blue print for practice and further amendments. The main task of the strategy is to promote economic growth and competitiveness, while at the same time preserve European Core Values.[7]

How does the EU approach the aforementioned two goals? The first step and the core concern for the EU administration is to “make the business environment more innovation-friendly,”[8] i.e. to introduce innovation-friendly policies to all relating policy areas such as education and research; moreover, a major shift is required to channel public spending from re-distributive approaches to proactive approaches, i.e. investing in knowledge and innovation, enhancing business performance, education and training, as well as facilitating aging, young, and women employment. In other words, public spending shall be diverted from welfare redistribution to welfare creation. This strategy, according to the Europeans, is uniquely European, as it stresses the balance between economic growth and social cohesion, as well as the balance between human development and preservation of nature, in the meantime paying attention to social inclusion and cultural diversity. It is not the American way, nor any other way, but distinctively European.

3. Institutional Innovation for Growth

The Lisbon Strategy suggests that Europe is now facing the dawn of a new era. To survive and blossom in it, some fundamentally revolutionary measures have to be taken, including “pushing economic reform to prepare the knowledge economy” and strengthening “the European social model by investing in people.”[9] For the EU model, two tasks are deeply rooted and intrinsically related, rather than in conflict with each other.

According to the Lisbon Strategy, economic globalization challenges the social redistribution system of the EU member states. However, promoting economic growth and welfare provisions is not necessarily a zero-sum game if the welfare provision is understood as an investment in the people and not simply as a provision for the people. The equilibrium established among national economic, social and political institutions in post-World-War-II Western Europe, as depicted by Karl Polanyi, belongs to the past. [10] In a much extended economic territory, all European social and political actors shall engage in a governance innovation. It is exactly this innovation that the Lisbon Strategy has been trying to push for.

To restore equilibrium between economic, political and social interests in an enlarged single market is by no means an easy task, especially when many nations are involved. The problems are two-folded: on the economic side, the problem refers to how modern societies view economic growth and social contingencies. In the industrialization age, people’s social contingencies mainly came from aging, injury, and illness; in the information era, social exclusion and long-term unemployment could result from the lack of knowledge and skills. On the political side, the problem rests in the readiness of national governments to invest for the future. Nearly all European leaders claim to know what to do for reforms, but they do not know how to get reelected after performing the reforms. One of the fundamental European values, the relevance of national mass-democracy for a much enlarged market, is here at stake. The call for re-constellation and re-alignment of powers bows down to the question of who gets what in what conditions for what reasons and in what fashions? In other words, powers must be reallocated to determine the distribution of wealth in the EU.

Wealth gets distributed according to powers and needs. The enlarged market requires new social provisions and new social institutions to combat new social contingencies defined as the lack of skills and knowledge, the insufficient protection for labor mobility, as well as the neglected needs resulting from social exclusion. Traditional social redistribution schemes based on the eligibility of citizenship or residence attract only beneficiaries but not benefactors, and thus provide European decision-makers with no desirable or even possible alternatives. The new and forward-looking alternative should empower individuals. According to the Lisbon Strategy, it is clear that the Europeans decided to choose the latter and the new alternative, since the EU forecasted that information technologies and the growing economy shall provide EU citizens with better and more job opportunities and higher incomes, and therefore the EU should adopt policies preparing EU citizens for those better jobs.[11]

As earlier mentioned, a free market without appropriate social provision is unacceptable to the Europeans, who have the slightest intention to build a market economy of the American stereotype. But it is easier said than done. The enlarged EU market has been more or less free of state regulations, and therefore has posed challenges to the national welfare state toward the direction of deconstruction: competition has been facilitated and provided for by the EU legal systems, and EC policies and social welfare provisions in many EU member states has been faced with huge pressure to reform. The EU key strategies are thus:

●   to free market forces, allowing the market to play a greater role in the allocation of resources,

●   to activate social policies and prepare citizens for future employment: “every citizen must command the skills to live and work in the knowledge society”,[12] and

●    to provide for and prevent social exclusion and continue to try to reach consensus through social dialogue, not only on the national level, but also and especially on the EU level.

This border-cutting policy orientation is bound to meet constraints and resistances, and major constraints come from European citizens who, until most recently, concentrate their political pressures on their own national governments. The major constraints for the successful implementation of the Lisbon Agenda, again, come from the political outfit and social structures of the EU.

To implement the Lisbon Agenda, the EU has deployed one old principle, i.e. the principle of subsidiarity, and one new method, i.e. the “Open-Method-of-Coordination” (OMC). With the principle of subsidiarity, the Member States are left to do things they do better, while the Union does only what the individual Member States cannot accomplish. In this way, the diversities and social autonomy of each of the nation states are respected. The social provisions at large continue to be the responsibility of nation states. The national and local governments shall care for their own citizens with policies and institutions relevant to them but within the framework of the Lisbon Strategy. The OMC serves to transform and improve the effectiveness of subsidiarity. Member States and other stakeholders are supposed to be engaged in a coordinated process, which involves negotiations, mutual influences, common goals-setting, collective problem solving, collective integrated indicators and benchmarks, separate implementation, information exchanges, and introduction of standardized surveillance and evaluations. The OMC has cut cross, or embraced, all the four types of EU governance depicted by Fritz. W. Scharpf.[13] It can start in a bottom-up fashion, travel through intergovernmental negotiation and coordination, involve in mutual adjustments among Member States with innovations, result in joint decision makings, common goals setting and benchmarking, and be carried out, in some policy areas at least, in a top-down hierarchical way. With the process of OMC, a new type of governance exercise is established on both the level of the EU and Member States, with a whole set of new concepts and institutions to cope with the challenges of globalization in a coordinated EU way while also respecting national diversity.

When the European Commission came to evaluate the Lisbon Agenda in 2004, it found out that in the post-Lisbon years, 600 million jobs have been created. Competition policies have been introduced to electricity, telecommunication, airspace, etc. The knowledge-based economy has become a reality. Sustainable development has been emphasized, and hundreds of rules and regulations are in place to guard the development. Nevertheless, the EU as a whole still falls short of workable public policies, and Member States are still hesitating at the crossroads of reforming and not reforming. By 2005, citizens of France and Netherlands went into the street to express their dislike and mistrust of the common European future. Mr. Juncker, the president of Luxembourg, the EU Presidency at that time, believed that the EU was not in a crisis, but was in a situation of deep crisis.[14]

This deep crisis is found mainly on the national level. It is the political and social norms of the nation states that are severely resisting the rules of free trade in a larger market. The more successful the market proves, the deeper the crisis the nation states are going to face. In 2005, the fastest growth was found mainly in the new Member States, where less social resistances are found against the Common Market. Among old members of the EU, only two have followed the Lisbon Agenda to invest 3% of their GDP in research and development; only five countries have adapted to the EU directives in their own countries. Five years after the ambitious Lisbon Agenda was launched, the EU economy continues to slug, with productivity growth lagging behind that of the US, and per capita GDP lingering around 70% of that of the US.[15] The US was far ahead of the EU in the knowledge economy and service industry, while the Europeans continue to spend large amounts for social security and social redistribution.

Even in these dire circumstances, the Lisbon Strategy was not given up. Mr. Barroso, the new president of European Commission, declared a re-launch of the Lisbon Strategy immediately after he assumed office in early 2005. In the amended Lisbon Strategy, only some figures and measures were changed. The EU’s role as a political engine, i.e. a governance center, was strengthened rather than weakened. The EU has gained powers to coordinate policies, provide policy guidelines for the synergy between macroeconomic, structural and employment policies. Furthermore, the EU became responsible for working together with the Member States, and to adapt to the Lisbon Strategy in each nation’s individual environment and adapt it in concrete policy fields, such as the information society policy, education policy, research policy, and social inclusion policy. The emphasis has been put on governance. A stronger and closer partnerships and shared responsibilities between the Union and the Member State for the common goals of growth and employment have been emphasized. The legal systems of Member States have been challenged to reform in accordance with the EU law, to represent the development of the Common Market irrespective of political and social powers within the nation states.

The amended Lisbon Strategy continues to stress technology, innovation, and education as the main driving forces for the improvement of European productivity, and the key to upgrading European competitiveness globally. This amendment, compared to the previous document, has more concrete measures, quantitative as well as qualitative indicators and benchmarks, periodical monitoring, evaluation, and peer reviews organized by the EU. European societies must undergo major reforms on their social spending, employment policies, pension and training systems. The relation between the EU and its Member States has been identified as “New Partnership”, in which the European Commission no longer plays a passively subsidiary role, but shall have to be responsible for drafting common principles and frameworks for Member States to adapt to reforms in their country strategies. Reform has thus become a must and not a choice. Member States are to take actions “in favor of innovation in the framework of the National Reform Programmes based on the Integrated Guidelines of the renewed Lisbon Strategy for Growth and Jobs.”[16] The partnerships have also been extended to other social partners on national, regional and local levels. In addition, a new institution, i.e. the special coordinator for Lisbon Strategy has been established, and annual reports have been made on the developments and achievements of the Lisbon Strategy.[17]

4. What Can China Learn from EU Social Model?    

China can draw from certain experiences of the EU. Firstly, the Lisbon Strategy, old and new alike, has put emphasis on growth. It was not only growth in GDP, but a balanced growth with economic development, social cohesion, and environmental protection, which is relevant to China. Somewhat like Europe, China is undergoing major reforms with rapid extensions of the internal market, which calls for public and social service systems to be reformed to cope with the new social contingencies. It is not until recently that the government of China has taken notice on an economic, social, political and environmental equilibrium based on growth. China has further developed the Scientific Concept of Development, spelled out in the five balanced developments: balance between economic and social development, rural and urban development, coastal and hinterland development, human and natural development, and between internal development and open-door policy.

Secondly, in terms of scientific development, the Chinese watch closely on European concepts and practices of innovation. In the beginning, innovation was understood as a purely technological term. Following the rapid development of the economy and market in China, old managements and institutions prove to be obsolete for either growth or stability. The concept of innovation has thus gained new content. It is no longer restricted to technological breakthroughs, but contained a whole system which enables innovative thinking and practice. In that area, China is going to continue to watch the experiments in the EU.

Thirdly, China has started to take account on the principle of subsidiarity and the Open-Method-of-Coordination, and is amazed by the accomplishment of the EU. The EU, with very limited resources of the union and many diverse interests imbedded in the Union, was still able to push forward a Common Project such as European Iintegration. China watches the EU as a source of soft powers, i.e. power to agree and to enable agreements. Coordination and integration processes are viewed as the power of knowledge, skill, and culture. In fact, both subsidiarity and OMC could be applicable to China. In China, subsidiarity could mean a shared responsibility between the central and provincial/local governances, and OMC could involve cross-sectoral dialogues and coordinated actions, and it could thus contribute to the establishment of a coherent and harmonious society that China is aiming to create.

5. Concluding Remarks

Several conclusions may be drawn from the above analysis: first, the direction of the Lisbon Strategy is more important than the quantitative goals it has set up to achieve. In 2004, when the Sapir Report severely criticized the Lisbon Agenda and the European Council came to alter some of the targets of the Lisbon Agenda, neither came to the point of challenging the ultimate goal of the Lisbon Strategy. The EU has sent a clear message to the world on developing the EU “as a global model”[18], and that “model” may be identified as a dynamic economy with social cohesion. Lisbon Strategy has provided for innovation of institutions to cope with challenges of the enlarged market which has at the same time developed new concepts and new practices of governance. The new governance does not involve either force or hard powers for enforcements, but deploys power of knowledge, power of communication and negotiation skills, and power of processes. It respects diversity while stresses coordination, coherence, and a common future. For that reason, the world may see more of such governance take place in the future. Therefore, it does not matter much if the quantitative targets of the Lisbon Agenda will not be matched in full by 2010. It matters much if the Lisbon Agenda is a qualitative success in the sense of generating conceptual and institutional innovations.