Home > Uncategorized > ‘Free EU movement of workers’: new rules. But we need better economic policies.

‘Free EU movement of workers’: new rules. But we need better economic policies.

Fig 1

Inter-EU flows of ‘labour’ have dramatically increased (figure 1, figure 2), which leads to problems in sending as well as receiving countries. New EU legislation tries to restrict the extent to which entrants can be used to circumvent existing labour laws to unfairly undercutting labour in the receiving countries (and ‘fairness’ is as fundamental an incentive to people working as their wage). This legislation is welcome. But it is too late. Or is it ‘too little’? Can sending countries afford to lose up to 15% of their active labour force in a few years? Can receiving countries deal with the influx? Aside – this is not just about the EU. Albania has a population of about 2,9 million people. About 500.000 of these seem to be residing in Italy alone…

Fig 2

The EU knows four economic freedoms, ‘freedom’ meaning: ‘national boundaries should not matter’. These are the freedom of capital, the freedom of trade in goods as well as freedom to provide services. And the freedom of movement of workers. Basically all citizens of an EU state are allowed to work in all other states. This is a big thing, literally (graph 1, graph 2). Millions of people left Romania and the Baltic countries and flocked to the UK, italy and Spain! This is the new normal. In theory it is a good thing when people can leave a bad economic situation or lousy employers to move ahead. But markets need sound, well-tested and evolved rules, habits, knowledge and attitudes to work for the common good. Do we have these sound rules, habits, knowledge and attitudes? The new EU rules try to make the rules fairer. As I see it this is a step in the right direction: national laws should apply to new entrants, too, which puts a whole bullshit industry which helps companies to use new entrants to undercut existing labour to rest. I don’t know if it will be enough. Time and people with more knowledge about this than me will tell (for one thing, truck drivers are as far as I know excluded).

Also, knowledge (of languages and rules!) is often lacking while attitudes towards new entrants are, ahem, not always entirely positive (with respect to Italy and its hard right new government: Italy can not evict Romanians but it can try to evict Albanians). Attitudes won’t improve as long as unemployment in Italy is high and growth is low. What we need beyond better rules are also sound macro-economic policies which are, like those in the sixties, not aimed at unsustainable current account surpluses but at fostering employment, equality and investment. And we need restrictions of the free flow of capital. Soon, lots of money may be moved from Italian banks to Swiss banks and the Italian state will be pressured to increase the debt to help the banks, at the cost of an increase in unemployment. Don’t underestimate the willingness of the EU to accept ultra-unemployment, look at what happened in the Baltic states, Greece, Spain and the republics formerly called Yugoslavia. Headline rates of 20, 25 and even 30% were the rule. An increase of a government deficit of 2 to 3% makes people panic while 25% unemployment is accepted as a matter of fact… Do we really want to solve such unemployment by international migration only or do we outsmart the Chinese and start to invest in the future? Even when you think that government expenditure should not be increased, pension funds nowadays are awash with money which can finance such investments. The new EU rules are a good thing. But they are too late. And won’t work unless sound and prudential macro economic policies aimed at putting people to work instead of fostering the balance sheets of banks are applied. As I stated: there is plenty of money to invest.

Aside: kudo’s to Eurostat which published these data right on cue!

  1. June 2, 2018 at 4:39 pm

    Freedom of movement is not just an economic freedom but a political one. For those of us coming from small, not so well governed countries, freedom to pick another European culture is key to a fulfilling life. We need to preserve freedom of movement for people, quite apart from the technocratic rules that may apply to business.

  2. June 2, 2018 at 5:54 pm

    In your second sentence I think you meant to say “circumvent” not “circumcise”.

  3. Blissex
    June 3, 2018 at 8:31 pm

    «Don’t underestimate the willingness of the EU to accept ultra-unemployment, look at what happened in the Baltic states, Greece, Spain and the republics formerly called Yugoslavia. Headline rates of 20, 25 and even 30% were the rule.»

    If those are not domestic policy issues (the EU treaties forbid the EU to interfere in the economic policy of members) then what did the UK and the USA did to help those countries? IIRC the UK vetoed the use of any EU funds to help even the poorer regions of those countries, and the USA provided zero dollars in loans or debt forgiveness or fiscal transfers.
    On the contrary, other EU member countries continued to pay to those failed economies significant “convergence” help (in the case of Greece 4% of greek GDP is donated by other EU countries), and also cut interest payments to nominal levels and greatly extended repayment times, despite those countries being bankrupt. And they forgave over 50% of private debt, bailing out the private creditors involved.

    The idea that there is a “willingness of the EU to accept ultra-unemployment” is just cheap malevolent rhetoric; The UN, the IMF, ASEAN, all accepted ultra-unemployment in post-bubble countries.

    Anyhow the “Headline rates of 20, 25 and even 30%” were due entirely to the policies followed by those countries, first creating very deliberately a borrowing fueled bubble and then doing very little to soften the resulting bust.
    In the special case of Greece its GDP currently is the same as before the bubble, when it was considered a prosperous country with “only” 15% unemployment, and the current report of 25% seems due to a statistical illusion, and in any case the plight of the extra 10% unemployed can be easily fixed with in-country redistributive fiscal policy.

    • David Harold Chester
      June 4, 2018 at 8:36 am

      Indeed we do need better economic policies. The flow of labor seeking immigrants is obviously away from the least opportunity-providing places and towards those countries where there are better chances of getting a reasonable wage. That is why if and when the taxation id used to enable greater opportunity there will be greater progress.

      This opportunity is mainly due to the availability of natural resources which are not being withheld by their owners, particularly those provided by land. Where there is speculation in rising land prices, there will be higher land access costs (rent) and less inclination for entrepreneurs to find places where their efforts to employ and produce are worthwhile.

      Consequently this aspect of the various nations economy is a big factor in where the labor seeking immigrants choose to go.TAX LAND NOT LABOR; TAX TAKINGS NOT MAKINGS!

  4. Helen Sakho
    June 4, 2018 at 2:38 am

    Exceptions apart, the only thing that moves freely in the current world system is hate, poverty, pollution, death and misery except for those totally devoted to different forms of cheapened narcissism.

  5. June 19, 2018 at 11:31 am

    Yes, we need better economic policies. But such is not possible unless these policies are based upon and support peoples’ cultural values and responsibilities. In the words of the country and western song, “Freedom’s just another word for nothing left to lose.” In other words, freedom is not just about the right to do as one wishes; to pursue jobs, investment, or opportunities. Freedom is also about duties and responsibilities to one’s culture and fellow citizens. The latter must always take precedence, if each culture and the humans dependent on the culture are to survive. Break the common spirit and devotion and the obligations they involve. Thereby placing human survival in danger. I see nothing about any of this in the above discussion.

  6. Robert Locke
    June 19, 2018 at 11:38 am

    Gemeinschaft vs Gasellschaft

  7. June 19, 2018 at 11:47 am

    An example of the negative effects rudderless economic policies is the current “free capital movement” amid collapsing cultures in many parts of the west (e.g., democracy falling, immigrants mistreated, autocracy on the rise). The stock market rises ever higher, and investors grow ever richer, but there is less and less sense as to why this is necessary or even important.

  8. June 19, 2018 at 1:32 pm

    Before us today, in living color is an orange, big-mouth, blowhard who exemplifies the dilemma we face. But Trump is just an extreme example of how capitalists relegate culture to a basement, or lower, on theory that it’s not necessary for business. Something that’s been the norm in the west for nearly 400 years. In an op-ed over the weekend Robert Kagan of Brookings commented as follows:

    Trump’s America does not care. It is unencumbered by historical memory. It recognizes no moral, political or strategic commitments. It feels free to pursue objectives without regard to the effect on allies or, for that matter, the world. It has no sense of responsibility to anything beyond itself. Trump’s policies are pure realism [realism is a constructed way of life, and thus a choice], devoid of ideals and sentiment, pursuing a narrow “national interest” defined strictly in terms of dollars and cents and defense against foreign attack. Trump’s world is a struggle of all-against-all. There are no relationships based on common values. There are merely transactions determined by power. It is the world that a century ago brought us two world wars.

    Gemeinschaft and Gesellschaft doesn’t quite capture the situation. It is not choosing one or the other way of life. Both are part of a single culture. We need them both. But in the correct sequence and in the proper proportions.

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