chapter  5
20 Pages

The crisis of the ‘German Model’: Europe should embark on the Fourth Industrial Revolution with a more balanced growth model

WithRémi Bourgeot

This chapter investigates the way in which European adjustment policies, especially since the euro crisis, have translated into a race to lower labour costs, generally at the expense of investment and productivity enhancements. It also offers a perspective on the way the current technological revolution could help to overcome the dilemma between employment and productivity that has emerged in Europe.

Adjustment policies have generally been presented as either inevitable structural reforms aimed at modernisation or an approach that is socially unfair and backward. This chapter attempts to reconcile the quest for economic modernisation on the one hand, and social demands of strong employment on the other hand, at a time when Europe suffers from a technological lag and structurally weak growth.

The chapter covers the economic and social trends precipitated by the global financial crisis and the euro crisis across Europe in terms of labour costs, productivity and employment. It identifies a bias in some adjustment policies – reminiscent at times of the classical gold standard – which tend both to impede technological modernisation and contradict social expectations. A dilemma has emerged across European nations between strong employment and productivity, leading to the current impasse marked by weak economic growth and a perilous level of social frustration.