But this is a different subject. What I was trying to say is that social democracy can only exist in a fairly homogeneous managed environment, it’s a highly regulated model that’s always looking for an equilibrium, unlike the neo-liberal one that has a clear direction: higher returns and the rest be damned. So, all I am saying is that it’s difficult to believe that two of each can be integrated into one.

I think that this is a very important set of results. There’s a general sense out there of inevitability – that social democracy is inexorably threatened by interdependence in an increasingly globalized world. Yet there isn’t all that much empirical evidence out there that this is so, and a lot of evidence that suggests that it isn’t so. Where people like Colin Hay and Mark Blyth really do us a service is in pointing to the importance of the ideological layer in there. In other words, much of the pressure on social democracy that we are seeing comes not so much from external forces as such, as from an ideological consensus that social democracy can’t really compete as a model of economic organization. This, to my mind, is a quite pernicious myth – and if we buy into it, we’ve lost the battle.

I’ll only point out that his arguments (capital doesn’t have perfect information, capital is not 100% liquid, etc) don’t necessarily refute this notion of ‘hyperglobalization’; they only suggest that hyperglobalization is not going to happen overnight, it’ll be advancing slowly. You know, maybe existing companies won’t move to Turkey, but most of the new ones will open in Turkey – that kinda thing. So, OK, maybe it’ll take 5-10 years for the strongest welfare state to be undermined, not 6 months. So what.

It is important to be clear about this. Capital is not blessed with perfect information; its does not enjoy perfect or even near perfect mobility; the cost of capital flight (as distinct from the hollow threat of capital flight) is not zero; cheap labour and deregulated labour markets do not correlate well with economic performance in contemporary Europe, let alone provide optimal returns on capital invested; and, as a vast recent literature has demonstrated, exhibited patterns of capital investment clearly belie any notion that social democratic policies are unambiguously corrosive of competitiveness (see, for instance, the pioneering work of Swank 1998, 2002). In short, each of the assumptions of the model has been demonstrated to be false.

As he argues, the problem isn’t economic integration as such; it’s the institutional form of integration, and, most particularly, the straitjacket that the ECB creates on social democratic forms of policy intervention.

4.This brings me to a final and in many respects a most important point. In so far as strong pressures for policy convergence can be identified within EU-Europe they are more easily attributed to the institutional architecture of EMU that they are to any globalisation of EU-European economies. Indeed, there is a strong argument to be made that it is in the interaction between deepening European economic integration on the one hand and the specific deflationary bias enshrined at the heart of monetary union on the other that contemporary pressures for welfare residualism and the further neoliberalisation of all EU-European social models arise.

In short, the problem is not one of Polish plumbers – it’s of the specific kinds of institutions that we have. The causation is simply taking place at a different level to the one that you’re claiming it is – and it’s a level where there are possible reforms that don’t undermine European integration as a whole.

Downward pressure on wages is not the only effect of integration. Illegal employment is bad in itself and for local legal workers in particular. There are also other effects that are less negative. British farmers are one of the strongest lobbies in favour of allowing east European workers into the country because many of them would cease to be viable without the help. Integration also helps Poland so that fewer people will wish to leave. We haven’t been flooded yet, we have survived similar things quite happily, and it is easy to overestimate the competitiveness of east european industry for example.

The same wage adjustments also help cope with the pressure from China. I believe that Germany had more immigration from Poland before it joined the EU.

Just like the social security debate in the US the mixed effects of European integration are being used to distract attention from the politically inconvenient elephant in the room which is the huge cost of welfare payments to French farmers, unhelpful demographics and a general lack of adaptability. There is no reason to expect French tarriffs, even if you could justify them in theory, to be any more effective in practice than was the Bush steel tarrif.

It is also hard to be so precise about what counts as labour interest. Subsidies are often paid for by workers and received by factory owners or farmers. That is certainly not what popular opposition is about in Britain.

In any case the debate is shockingly low minded. Sometimes it is worth doing something because it would help someone else. The French have their heads in the sand and their government is doing little to make them pay attention. They are using the same “Look, over there” tactics with the debate about the British rebate.

I’m personally rather sceptical that the EU can really go too far in this direction without causing more problems than it solves.

What the EU does best is technocratic market shaping activity, where the aim is to set ground rules that everyone can live with. Think trade policy, competition policy, and the single market.

What it tends to do badly is handling “fuzzy” policy areas where there are big distributional concerns in play, because then rent seeking gets in the way of getting the policy right (think CAP, budget). Like social policy.

But once you integrate with someone, you pretty much lose control.

That’s exactly what happened as the South became integrated into the US economy starting around the turn of the century. The South’s growth definitely hurt some Northern workers in the short term. It almost wiped out the New England textile industry. It has been one of the biggest factors in holding down union power in the US, since the South never unionized. Southern workers—black and white—moved North in large numbers starting in the 30’s (and were not well accepted, for both cultural and job-competition reasons).

I agree with AB—integration will put downward pressure on Western European wages and social protections, although the impact is likely to be less severe than that of globalization in general.

My point is that the problem still exists even if we don’t let Poland into the EU. In fact I think Poland inside is much less of a problem than Albania outside for example.

To recap, there are pressures. These pressures wil l doubt force change. Some of that change willbe painful. I’m saying almost the same thing as you but drawing a different conclusion. I think that these forces you identify do exist and can’t bewished away, I believe and indeed hope that they will force some changes. On the other hand I don’t want to throw up my hands in horror and resign myself to being replaced by a cheaper Pole.

This is hardly a new problem, we have done it before with Spain, Greece, Ireland and the rest and it hasn’t been a disaster. In particular European integration is not the source of the problem but merely a way of handling it. In addition mny of the problems of France may be exacerabated by the process but not caused.

How do you ameliorate the laws of nature? There was a dam. You start making holes in the dam. Water starts running downhill, first little by little, then stronger and stronger, and then you can’t stop it until it finds some new equilibrium.

If everything goes well, then the new equilibrium will have wages, social safety net and prices somewhere in-between France and Poland (or whoever, say, Turkey).

Those things are quite likely to happen even if you don’t put the two countries together as with China and the US.

Poland is not the only and possibly not the main pressure on French social security. In fact France might be better off importing some Polish workers rather than exporting jobs to Poland. France would have demographic challenges under the best of circumstances.

There are real discomforts caused by integrating Poland into the EU but that is not to say that nothing can be done to ameliorate them. On the other hand more discomforts are atributed to such integration. There is a lot of messenger shooting going on here. The devil remains in the details.

When you integrate two dissimilar countries, like, say, France and Poland, there are natural consequences that are bound to happen: businesses will move to Poland attracted by cheap labor (‘giant sucking sound’) and labor will move to France attracted by higher wages and more generous social safety net. This is as certain as that water is running downhill. This will inevitably create pressure in France to weaken social protection and to lower the wages.

If you try to raise wages and social protection in Poland to the level of France, then businesses in Poland fail and the Polish economy will be quickly destroyed, just like it happened in East Germany. Pols will move to France and it’ll weaken social protection there and bring down the wages. See unification of Germany for a recent example.

These are simply laws of nature, the only policy that can minimize this is the policy of minimizing the integration itself.