Bengt-Ake Lundvall: «The Portuguese Manifesto could become a trigger for change.»

Interview by Jorge Nascimento Rodrigues © March 2014

«We might be approaching a political breaking point where the widespread frustration among European citizens takes a more constructive and clear political direction.»

«As I see it, what appears to be feasible now brings us closer to the end of the European project. Therefore the only possible strategy is to ask for what seems to be out of reach. We know that history offers us surprises from time to time. Let us hope for a positive surprise.»

The Danish economist Bengt-Åke Lundvall (born in 1941) is one of the 74 foreign economists that signed the Portuguese Manifesto for the Sovereign Debt Restructuring published March 2014 by other 74 Portuguese economists, including former Finance Ministers, from the right to the left in the political arena. Lundvall is professor at the Department of Business and Management at the Faculty of Social Sciences of Aalborg University in Denmark, since 1977, and at the Collège universitaire de Sciences Po in Paris, France, since 2007. He was also a visiting professor at the Tsinghua University in Beijing, China, in 2004-06. During 1992-95 he was Deputy Director at DSTI, OECD. Since 2002 he coordinates the worldwide research network Globelics. In close collaboration with the late English professor Christopher Freeman, he developed the idea of innovation as an interactive process and the concept of National System of Innovation in the 1980s. In the beginning of the nineties he developed the idea of the learning economy in collaboration with Björn Johnson, who is also professor in Economics at Aalborg University.

Q: Why did you sign the Portuguese Manifesto?
A: I signed the petition primarily since the negotiations on a restructuring of Portugal’s debt would raise wider issues about changes in the political and economic architecture of Europe that I see as necessary to avoid that the next crisis will lead to a complete disaster for the European Project. Also it would signal a protest against the dictatorship of ‘the market’ and against what I see as misdirected austerity policies in Europe.

Q: What do you mean by “wider issues” beyond the Portuguese problem?
A: Restructuring the debt of Portugal or other single countries now victims of Austerity policies will not by itself bring about necessary changes. But it sends a strong signal to the European Elite that there is a need to rethink ‘project Europe’.

Q: So the Portuguese Manifesto is a kind of first move?
A: It could become a trigger for change. We might be approaching a political breaking point where the widespread frustration among European citizens takes a more constructive and clear political direction. That would make it more difficult for the political elite to define all critical reactions to the current European strategy as populist. But it requires that all those who want a Europe that is competitive, democratic and fair go beyond national self-interest and begins to work together for a different ‘project Europe’ where international solidarity goes hand in hand with protecting the weakest citizens in each single country.

Q: What went wrong in “project Europe”?
A: The current architecture is dysfunctional but self-inflicted. For decades a common strategy among the European elite has been to move ahead with financial and trade integration without moving ahead with social and political integration. Federalists assumed that economic integration more or less automatically would be followed by the building if a political structure.The most risky step taken by the elite was the establishment of a Monetary Union bringing together economies with very different economic structure into one common currency area. It was the most extreme act of faith and political gambling by the federalists. Portugal is one of the victims of this hazardous step.

Q: In what sense has the financial global crisis of 2008 and the following sovereign debt crisis inside the Euro zone after 2010 worsened the situation?
A: After the 2008 crisis it has become even more clear that economic policy has become subordinate to ‘the market’ and what is presented as ‘the necessary policy’ – sometimes referred to as the competitiveness pact – results in an increase rather than a reduction in the gaps in welfare between the North and South of Europe. This is as I see it in direct contradiction with the very foundation of the European project.

Q: So the financial global crisis was a stress test for “Project Europe”?
A: Europe did not pass the test. The short term response was insufficient and it left the most vulnerable nations and citizens in precarious situations and the long term strategy agreed upon – the so-called competitiveness pact – is in conflict with basic principles of Project Europe. While it is true that the European Union did not break up with this crisis, it is also true that the current long term strategy does not safe-guard its existence for the next crisis.

Q: What is necessary to change the course?
A: There were elements in the Lisbon Strategy – building a socially cohesive learning economy with better jobs – that could have countered the structural differences and dampened the effect of the crisis. Instead neoliberal economic dogma set the agenda for Europe and now we all pay the price.

Q: How do you explain the kind of policy that came out of the 2008 crisis, as illustrated by the April 2010 informal summit of Madrid when “expansionist austerity” and “internal devaluation” for the peripheral Eurozone countries emerged as the dominant medicines for the sovereign debt crisis?
A: There was a clear shift in the direction of the European project already before that. The Lisbon strategy was watered down at around 2005. Those who lay the foundations for the European project after the Second World War were quite pragmatic in terms of economic philosophy. They were open both to government planning and public ownership and they had a realistic understanding of the limits of a pure market economy. Pragmatism was undermined when neoliberal economic philosophy became dominant at universities and ministries of finance. As neoliberalism gradually took hold in the Commission and especially in its economic directorates it led the European project astray.

Q: So the radical group “cleaned out” project Europe in a critical moment of crisis?
A: It is remarkable to what degree Europe’s leaders took a defensive approach to the economic crisis. It is difficult to imagine a situation offering more room for showing their citizens the usefulness of being a partner of a wider European community. In a corresponding situation president Roosevelt launched the New Deal in the US signaling a special concern for the unemployed and poor regions in all parts of the US. But the national leaders in the EU were unwilling to engage in fiscal transfer across borders and therefore they agreed on a series of incomplete and temporary solutions. This went hand in hand with a new European political discourse infested by moral indignation – with Northern politicians referring to corruption in the South as a major cause of the crisis. The crisis tested the European project and the test results were not flattering. After five years economic performance indicators on income and employment levels still remain below what they were just before the crisis.

Q: That means that a debt restructuring operation in Portugal is not sufficient, you need a Euro-wide initiative?
A: As I said in the beginning a debt restructuring could result in a shake-up of the current economic and political order. But what is needed is a radical rethinking of the relationships between economic integration on the one hand and political and social integration on the other hand. We would need European leaders who were honest on the fact that economic integration without political and social integration leads to growing inequality and to instability. One important signal could be to call for a time-out for economic integration while Europe starts to establish some elements of a common fiscal and social investment policy. It could begin with modest measures related to minimum income and unemployment support. European-wide programs aiming at upgrading the skills of the low skilled, labor market flexicurity and modern open education systems would send signals to all Europeans that Europe from now on would build it competitiveness on competence and not on low wages. Green investment plans would show that Europe takes into account also the survival of the coming generation.

Q: Is it politically feasible in the present European context?
A: As I see it, what appears to be feasible now brings us closer to the end of the European project. Therefore the only possible strategy is to ask for what seems to be out of reach. We know that history offers us surprises from time to time. Let us hope for a positive surprise.

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