Toespraak eurocommissaris Kroes over het vermijden van protectionisme tijdens de economische crisis (en)

European Commissioner for Competition Policy

Address at conference "Nouveau Monde, Nouveau Capitalisme": Round table on "Globalisation and social justice"

Paris, 8^th January 2009

Ladies and Gentlemen, dear friends,

There is no alternative to globalisation.

The current global crisis will not be solved through local regulation or through a protectionist re-nationalisation of global markets.

Social justice will be achieved not only by promoting welfare equality. It will also be achieved by providing equality of opportunities, in particular through free and competitive markets.

The current global crisis is an eye opener and it forces us to go back to basics, so to say. As harsh as it may be, the crisis should not cloud the fact that globalisation has contributed to pulling millions out of poverty. Yes - the market economy comes with bubbles and recessions, but the long term trend has been towards prosperity. Nobody can deny that competitive and open markets have been a main force behind the wealth and prosperity that the world has obtained so far. And few dispute that markets must play a key role if we are to maintain and extend that prosperity.

The crisis has also illustrated clearly that government interventions are unavoidable and that global inter-dependency requires a new type of global governance.

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  First, we need governments to set the rules of the game, to regulate markets so that they do not degenerate to crony or casino capitalism and to ensure that the incentives of participants are right, so that we don’t pollute our planet or destroy our social fabric.
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  Second, we need governments to complement the markets. To deliver the services that are not provided automatically by the market, but which we believe our citizens deserve.

How big a role the State should play is a long and old debate. You will find plenty of devotees on both sides. One thing is certain. Blind faith is of little use, whether it is in laissez-faire or planned economies.

The real question is how we frame and -if necessary- correct markets to work for the public interest. We surely need governments to intervene and provide better regulation, but it needs to be done in a way that preserves the dynamism and innovation that comes from free competition.

One of the areas at heart of this debate in the European context is our state aid rules. The recent weeks demonstrated the importance of these rules and the danger of subsidy races for the common interest.

Without state aid control, governments would simply be subject to the biggest corporate blackmail in history; sound companies would be penalised and reforms put off. As a result our economic engine would run slower, not faster.

It may also be tempting to panic and resort to protectionism. To de-globalise, if you will. May be not in its most naked and apparent form, but disguised and dressed up as a concern for something else.

Many people already compare the current situation to the great depression of the 1930s. Back then the crisis came hand in hand with trade barriers such as the Smoot-Hawley tariff act in 1930 and antitrust exemptions such as the National Industrial Recovery Act (NIRA) in the US. That set off a cascade of protectionism and a steep decline in world trade.

We all share a responsibility to avoid falling into that same trap this time!

Let me be as clear as I can: if the survival of a company depends on whether it is well connected to politicians in a wealthy state willing to hand out taxpayers' money or to raise protective barriers, we are not getting more social justice, we are getting less.

The concern for social justice should not lead us to deprive citizens of the freedom and benefits that come from flexible markets where efforts are measured in a competitive market and rewarded accordingly. But it should lead us to carefully design our social institutions so that everybody can truly participate in the economy on equal terms.

The response to the crisis or the concern for social justice should not lead us to scale down markets through protectionism, but rather to scale up the regulatory response so that it fits better to a world where we are all in the same boat.

We have lived through that experience in Europe already, albeit at a smaller scale. We moved closer together and created a Single Market. That was complemented by closer cooperation and coordination on many fronts. The European Union is in a way an ongoing laboratory for how best to allocate responsibilities at different levels.

The European response to the crisis could be replicated at a global level:

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  The fiscal stimulus to boost demand remains the responsibility of the EU Member States, but has been co-ordinated in a way that helps make them more effective. Fiscal policy has positive externalities and work better if they are synchronised.
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  The support schemes to the financial sector remained in the hands of Member States, but our state aid rules allowed the Commission to provide a framework that ensured consistency throughout the Union. If left unchecked, state aid to banks in one country would have had negative effects on banks in neighbouring countries.

Some initiatives need even more centralised structure. Our common currency, the euro, has been a strong stability factor. The European scheme for tradable CO2 emissions is a government-created market which we would be delighted to globalise to fight climate change.

We need global responses. On the competition policy front the trend is in the right direction. A closer network of competition systems is slowly emerging after decades of work. Global rules on state aid would also be helpful.

Let me end by wishing that this crisis will be used as a catharsis and not as a curse.

No, globalisation will not be stopped.

Yes, we can build global governance structures, and not only for competition policy.

Social justice does not need to be the victim of globalisation but can go hand in hand with regulated markets offering equal opportunities. The European Union is a small-scale example of this.

Thank you!