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INEQUALITY IN EUROPE: UNEQUAL TRENDS
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higher growth because they still have a low pro-
ductivity level due to their small capital stock
(relative to GDP). From the same theoretical
model, we could infer that developed econo-
mies show lower productivity growth due to
their modern and high capital endowment.
But history has proved this model to be ac-
curate only in exceptional cases. Globally, poor-
er countries (especially in Africa and Latin
America) have for a long time been growing
more slowly than the richer North. The Eastern
tiger economies (first Japan, then Korea, Taiwan,
Singapore and Hong Kong) were exceptions,
followed later by China and some Southern
Asian countries (Malaysia, Thailand). Catch-up
processes in the EU have also been weak for a
long time. Accordingly, Greece and Ireland fell
relatively behind right after their accession.
Along with many country-specific factors,
which can be analysed as varieties of capitalism
(cf. Hall 2015)
3
(different economic policies, in-
dustrial relationships, education and innovation
systems), the consequences of the European
and global market integration should also be
held responsible for the different development
of the EU Southern and Eastern periphery. The
industry of the Southern periphery specialised in
production with low and middle level technolo-
gies and correspondingly low wages. With the
opening of Eastern Europe, China’s integration
in the world economy and the further opening
of Europe towards other global suppliers, these
countries have lost their competitive advantages
(cf. Dauderstädt 2016).
4
Central and Eastern
Europe could, on the contrary, gain quite a bit
of ground thanks to low wages still in place, as
3
Hall Peter A.: Spielarten des Kapitalismus und Eurokrise.
In:
WSI-Mitteilungen
4/2015, 245-5.
4
Dauderstädt Michael:
Wachstumsstrategien für Südeu-
ropa
. Bonn: FES, 2016.
well as a relatively well trained workforce.
Another advantage was its geographical proxim-
ity to the German market, too distant in principle
for the Southern periphery. The German manu-
facturing industry also changed the structure of
its supply chains and production networks from
the South to the East and internationally.
The euro was important for this evolution
but not decisive. Some euro countries also be-
long to the group of Member States that are
rapidly growing. Membership in the Eurozone
certainly complicated the management of the
crisis in the South, where no strategically clever
solution was found for the conflict between
goals like budget consolidation, real deprecia-
tion and growth (cf. Dauderstädt
op. cit.
). All in
all, growth in the Eurozone was weak due main-
ly to the restrictive fiscal policy.
In summary, it could be said that inequality
between EU countries has decreased since 2000,
thanks to a faster growth of the poorer Member
States from Eastern Europe compared to that of
the richer North Western EU countries. The de-
velopment in the South is more problematic and
has, as a perverse effect, the closing of the in-
come gap between these countries and the
poorer East, while it’s opening again in relation to
the richer North. All these observations don’t
take into account the inequality in the income
distribution within the countries though, a topic
we will approach in the next chapter.
The development of inequality within the
countries
Income distribution within the countries can be
described from different points of view and with
various indicators:
– The wage share.
– Regional disparity (dispersion).