Business and Politics in Europe - Term Paper Example

 «Business and Politics in Europe» Table of Contents Introduction 2 Differences between the major European countries regarding the Economic and the Political system 3 Governance and Functioning of the EU 6 The impact of the EU on domestic systems of policy making and governance 8 Characteristics of lobbying and expression of interests within the EU 11 Conclusion 14 References 16 Bibliography 18 Introduction The European Union is an organisation that forms an association between various neighbouring economies of Europe, with the objective of association being an entirely political one. The main target of the governing body is to form a single strong region which is able to claim a competitive edge over international transactions. However, there are certain features about the European Union which have not been wholly accepted by the member nations. One of the most important among them is a lack of transparency in the operations of the EU which often raise concerns as per the protection of the interests of member nations in the true sense of the term. Another essential factor which the governing body must give an emphasis to is the extent to which the opinions of the member nations would be given a priority to. Given that an insider is more aware of the problems looming in her economy, it is always preferred that the former be presented with an important position in the arena. Even though the internal systems of the member nations are different from one another, the decision making body of the EU pays almost no attention to the problem and frames policies which are in coherence with general objectives. Moreover, the EU also allows interested companies to lobby their goods in the European market. Though apparently it sounds to be good enough, a detailed inner-look will reveal ample scope of corruption in the process. The prime reason being that the lower the number of people involved in the administrative process, lower will the number of people that the corporate houses need to pacify to serve their means. In case there were a huge number of people involved, these businesses would have tried fair processes to seek a market share. Hence, the European Union is often alleged to bother low about the attitude of their member nations while making their policies. The present paper deals with the ways of operation of the body and hints at the ways it can adopt to correct the same. Differences between the major European countries regarding the Economic and the Political system There has been much political and economic influence on the functioning of the European Union. There is much social cohesion among the applicant nations. This shows that the situation in future is likely to be much different from the present (Weise, et al., 2001, p.9). The last few decades has witnessed drastic changes among applicant nations in the EU. The main objective was to transform the socialist system to market economies. This would be achieved by developing greater political and economic relationship between member nations of the EU. In Europe the United Kingdom was the main representative of the capitalist market. However it is considered that USA would be the most appropriate type suited for the model. Among the other European countries, Germany, Austria, Netherlands and Denmark are different variants of the managed capitalist model” (Schmidt, 2003, p.3). France was an exception in capitalism. Italy called it a state which was led by indirection. Spain also resembles the capitalist society. It is seen that in Asian countries capitalism is followed based on maintaining business and government relationships. Three of these countries are Taiwan and Korea and Japan. Government policies were significantly different among the European nations before the occurrence of the war. Britain’s capitalist market followed a liberal and spectacular policy which limited its relationships with business. It played limited role in influencing economic factors and preferred leaving administration of the rules to be monitored by the self governing bodies. However it did not withdraw from assistance to the development of industries and other strategic activities. The situation in Germany was somewhat different. Its main focus was to facilitate business activities through targeted aid towards the industries. This was done by providing loans and subsidies in favour of education, research, development, training programs and apprenticeships. It left much of the activities to be collectively administered by the economic actors (Schmidt, 2003, p.4). In Germany relationship among firms were strong having close connections with the customers, suppliers and banks. But the situation in France was different. The state was supposed to moderate relations between the firms, set the corporate strategies through industrial policies and planning. It even invested undercapitalised businesses, at times without demanding financial returns. The main objective of the state is to increase employment and increase production in the strategic areas. One advantage faced by the EU from Germany was that it had a stable economic environment favourable for doing business. Businesses in the country continued to earn steady profits and this catalysed the growth process of the nation (Schmidt, 2003, p.5). On the contrary, Britain encountered an unstable economic situation. This was on account of injection of monetary police into the system. The nation’s industrial policies have very little influence in the development of training and product innovation. The nation’s business practices focussed more on achieving profits and less on the investing in plants, machineries, technologies and innovation. Its labour policies were also poorly designed which led to low wages, poorly trained workers and increased production costs (Schmidt, 2003, p.6). Despite the differences in competitiveness, Britain, Germany and France faced severe challenges at the beginning of 1970. The most significant challenge was due to the collapse of Bretton Woods. The attempt of implementing fixed exchange rates was a failure because of the two consecutive oil crises. It led to currency volatility, inflation and reduced competitiveness (Schmidt, 2003, p.6). Different countries had different modes of economic growth. Changes in the institutional system tend to move the economies along different growth paths. It is difficult to change the institutional settings as they are permanently embedded in society (Knell & Srholec, 2007, p.40). Another challenge was faced by the nations on the onset of globalisation. This led to the increase in internalisation of the national markets. This was regarded as a challenge because it opened up the domestic markets to foreign competition by integrating all the economies into one single market. All markets for goods, services, capital and labour were integrated into a common market. There were also attempts to develop one single currency which all the 16 countries would have to use. But unfortunately the market lost faith on this attempt made by the EU as it failed to fix the problem of currency fluctuation (The Economist, 2010, p.15). As a measure to respond to process of globalisation, the European countries took up steps and attempted to operate in a more market oriented path. The government policies were based more on the supply side factors. The country’s’ businesses practices were more driven by the market. They were also reliant on labour relations and market factors. In response to the challenges faced by the countries their respective governments took up policies to counter the effects. The policies aimed to make the nations more competitive by liberalizing the financial markets, privatising and deregulating businesses and decentralizing the labour markets (Schmidt, 2003, p.6). Governance and Functioning of the EU Over the last few years the European Union has emerged as the world’s leading economic powers. This has increased the global responsibilities of the European countries in the promotion and maintenance of security and stability. The EU follows semi-pluralist system of policy making. In pluralist nations several groups compete to achieve their own interest without considering interest of other groups (Maastricht University, 2010, p.3). This has a differential impact on the policy making processes of member countries. It has disrupted the statist system prevailing in Britain and France and the corporatist system prevailing in Italy and Germany (Schmidt, 2006, p.1). The macro pattern of policy making in the European Union is different from that followed in the member countries. In fact presently it has become relatively less distinctive than the past. The policies in the “White Paper on Governance’ (2000)” (Schmidt, 2006, p.1) presented a number of complicated policies, which called for greater transparency from the European Union Commission. Europeanization has not only affected the traditional ways of formulation and implementation of policies of the states but has also affected the traditional ways in which “societal actors gain access and exercise influence in policy-making” (Schmidt, 2006, p.1). The project tries to focus on the interrelationship between politics and business in the European Union. It is seen that extreme diversity prevails in Europe. Its existence is much more than mere cultural differences between the member nations. Governance in the EU is not very simple or straightforward. The European integration is not only about creating a market common for all. It means much more than that. It also formulates the political regulations. The European decision making policies has had impacts on the substantive policies. The European community follows the “sui generis” (Kohler-Koch, 1998, p.10) policy of governance. Under this, although the political system internationally organised it does not follow the notions of a federal state. The European Union has benefitted the nations in two ways. Firstly, it has extended the realm of the sovereign nations much beyond their political borders. It has also tried to construct a political system which is not expected to convert into a state in future (Kohler-Koch, 1998, p.10). The most prominent character of the system is the way it is governed without the existence of a government. The people are considered to be sovereign as long as they reside within their respective state’s boundaries. There is no existence or democratic representative beyond the borders of the state. Delegation of power from the state level to the top authority of decision making in the European Union does not exist. Further, policies are formulated at the top level and these decisions are applicable for every citizen in each member state and its citizens. This implies the fact that citizens are governed even without the existence of a formal government. The EU has also been facing both political and economic crisis. It has been blamed of creating imbalances in the financial markets as well (The Economist, 2010, p.5). Analysis of the policies throws light on the similarities between the legal framework of the European community and the outcomes and processes of the Community governance. It is seen that the European Community System properties give rise to particular actor relations which accounts for the characteristic features prevailing in the community System. Much debate has taken place regarding the quality and performance of the system. Some people feel that the system is biased towards certain actor groups than others (Kohler-Koch, 1998, p.11). The research tries to analyze the performance of the European Community system. It tries to investigate the mechanisms in the system and it’s effectively in making decisions and solving problems. The European Economic Community (EEC) Treaty had recommended an action plan which was supposed to be implemented by the European experts. Political regulation remained under the control of member states to an extent as they could use their veto power in cases of negative integration. With the development of the community and the changes occurring in the global context, the conditions of legitimacy of the system has changed. This has called for institutional reforms without changing the combination of legitimacy in the system. A number changes were recommended to be implemented to make the system more democratic in nature. This accounts for strengthening the system’s unitary character. Most importantly, steps are taken to encourage the concept of partnership and empower the people in the programming and framing of the Community policies. The impact of the EU on domestic systems of policy making and governance European Union constitutes of a handful of nations in Europe each of which have associated with each other with a common objective. This common objective comes in the form of political interests which are binding upon the member nations by the governance of the policy-makers of the European Union (Kohler-Koch, 1998, p. 1). According to the White Paper on European Governance, which specifies the principles to be emphasized upon by the Community, the areas where the organization basically intervenes are those related to trade (The idea encompassing this statement is that the European Union forms a conjunction between nations to benefit them in terms of international trade). Its governing body comprises of three entities, viz., European Commission, European Parliament and the Council of the European Union. The Union’s decision making process is divided into three phases, namely, co-decision procedure, opinion of the European Parliament and lastly, arriving at a decision common to the interests of the member nations. Prior to forming of a particular decision, the Community holds meetings in Brussels where representatives of member nations meet. This is the co-decision phase when they can raise their domestic points in such meetings, though it does not guarantee that their voices would be heard (The Scottish Parliament, 2002, p. 3). In the second stage of decision making, the opinion of the European Parliament is sought out, since the body is in a position to implement its opinion as the framed policies. Finally, in the last stage, all member nations along with the governing body meet to put forth the policies to be implemented throughout the European Union (The Scottish Parliament, 2002, p. 5-8). One change which has surfaced with the inclusion of many European nations within the EU is that they have all been stripped of their individualities to some extent. A clarification of their new stance is the incorporation of Euro as the common currency of all member nations of EU, in 2002. Though it helps to maintain a financial integrity across the region, the nations had to forego their traditions amidst these changes (The Economist, 1999, par. 8). Moreover, it is often alleged that inclusion of a nation within the European Union takes away its freedom of deciding its own policies and handling its administration. In fact demonstrations were raised against the lack of transparency in the policy-making procedure of the European Union, where most of the member nations demanded for a justification in their respective needs. EU employs a central board of policy makers who did not necessarily belong from the member states and hence, the interests of most of them remained to be served, since it is rather impossible for an outsider to be aware of the exigent situation prevailing in a given nation. Moreover, the administrative body of the EU forms all the rules and regulations to be followed by the member states keeping in mind the joint objectives of all of them. Such a strategy might hurt the sentiments of the governing bodies of the member states, since their decision no longer stands as the ultimatum for their nationals. The approach that the EU adopts in this process is termed as a “semi-pluralist” view where the member nations are free to make suggestions but have practically no influence over the final decision being made (Schmidt, 2006, p. 671). One of the remarkable features of the European Union is that it is devoid of any definite structure as a governing body and the organization lacks a democratic way of making its policy decisions. Its governing body consists of three different organisations each of which have different views regarding the control of the community; choice is only made between their views rather than taking into consideration those opined by the representatives of the member nations. Though not left completely unattended, the opinions of the member nations are not given a priority while implementation of the policies. This has initiated protests from the nationals belonging to the member nations, since not only are their voices heard through their representatives, they have no avenue themselves for making the same happen. Such happenings have triggered concern among the Union. This is the reason why the European Union has decided to open its doors to the common man as well, where the latter may find some channels to let the authorities know of their opinions. Such a measure, if actually taken might lead to the welfare of the member nations in a more efficient way, since insiders are always more aware of their problems than outsiders who actually are employed in the task (Commission of the European Communities, 2001, p. 3). Characteristics of lobbying and expression of interests within the EU Corporate houses often are termed as avenues which bail-out any region from a potential economic crisis. The concept of corporatism however, stands completely opposite to what is meant by pluralism; according to popular belief, corporatism implies “within an advanced industrial society and democratic polity, the co-ordinated, co-operative and systematic management of the national economy by the state, centralised unions and employers (these latter two co-operating directly into the industry) presumably to the relative benefit of all three actors.” (Siaroff, 1999, p.177). The European Union is often found to be lobbying with business houses through which they expect to have some of their interests served. Such a feature often leads to biased policy decisions as only those companies are given a freeway, which can serve the policy makers in some way or the other. It becomes extremely one-sided given that opinions of the member states are not given a priority. The supply of products from part of interest parties to lobby their goods in the European market however, is not a one-sided phenomenon; rather the demand among the governing body components is equally high to provide them an entry into the market, as is explained by the theory of exchange and resource dependence (Bouwen, 2002, p. 368). More generally, the interested groups of firms try to pacify the European Commission to serve their objectives of entry into the EU market, which is regarded as one of the largest markets in the world. In fact, even though the European parliament is regarded as a highly important part of the governing body, it has not been able to (Eising, 2007, p. 387). In their urge to attract interested partied within their domain, the European union often takes a pluralistic stance, in contrast to their popular semi-pluralist attitude. In fact, the competition between lobbies has become extremely high these days with the seeds of globalisation having touched almost every market around the world. However, the process of lobbying has changed over time, with the given level of competition; this process is that of forming an association between interest parties who have common interests. The underlying diagram shows how such an alliance between industries probable of being integrated vertically can organise between them so as to produce a stronger influence over the governing body of the EU or rather the European Commission (Gueguen, 2007, p.17). Source: Gueguen, 2007, p. 17 However, amidst the liberty being provided to the interested companies to lobby for a space in the market, the strategies being implemented for shooing away the competitors are also unique in nature. Nowadays, in an age of increasing concerns about global warming and maintaining a green ecosystem, interested companies often raise their voices against rivals who do not avail to such techniques of production. There are reasons behind the unpopularity of these techniques given their high-cost methods. Such an unpopular public upheaval ensures the former company of an increased market share and possibilities of a greater influence over the European Commission (Hanoteau, 2009, p.34). On the other hand, companies which can actually afford these techniques of production and still maintain a good product market are the ones which actually are preferred by the European Union. Nokia for instance, is one such company which employs environmental friendly techniques of production and lobbies this particular feature as one of their unique ones (Kautto, 2009, p.107). Thus, the prime characteristics of interested companies lobbying for a space in the market for European Union could be briefed as follows. Firstly, they try to influence the decision of the most influential of all components of the European Union; given that the European Commission is the one which is the most dominant in the group of three and the one whose decision is generally not slighted by the other two, these parties try to impress it. Secondly, the European Community often tries to lure these interested parties towards themselves through allowing them to frame their own policies, so that the former adopts a pluralist approach which is quite contrary to what it usually does. Thirdly, the companies often try to form an association between themselves to strengthen their influence over the European Union; the technique they typically use is to form an organisation between companies which are probable to be integrated in a vertical chain. Finally however, these companies try to attain a competitive edge over their rivals through lobbying against them through focussing on aspects which might negatively influence their market shares. Conclusion While doing the project it was found that the political and economic situations were different for all member nations in the European Union. The European Union was formed with the view to increase social cohesion between nations. This was difficult as the conditions prevailing in each member nation were significantly different from one another. The countries which were predominantly different in terms of their social and economic conditions were Germany, Britain and France. The most competitive of these was Germany. The nation made huge investments in favour industrial development and economic progress. On the other hand, France was more governed by the state. The country also wanted to be the most powerful among all European countries. Thus they had to adjust to the fact that they would have to come under the EU (The Economist, 1999, p.2). During that time the situation was Britain was unfavourable. There were economic instability in the nation and this required active participation from the government. The governance of the European Union primarily aimed at increasing the unity among member nations. But this could not be attained easily. It left little sovereignty in the hands of the member state. The member nation had their own decision making policies which created a conflict with those framed by the European Union. The decisions formulated at the top level were bound to be followed by all member nations. Lastly, it is seen that the concept of lobbying gained popularity in the EU. The basic intension was to occupy a place in the market. This was done to impress the European Commission as it was the most influential components in the EU. 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