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The Neomercantilist Constraint

Concern about competitiveness in high technology has induced the European countries to pursue a policy of accelerated modernization. Raising the level of investment has become first priority, which implies reduced individual and social consumption and a distributive bias in favor of capital at the expense of wages, government revenues, and externalities, or environment. In addition, labor-saving innovations in process technology are speeded up without demand for final products being allowed to rise proportionally. The policy model is therefore bound to tolerate mass unemployment. Worldwide, the neomercantilist strategy creates large-scale overcapacity and leads to a race of competitive downward adjustments vis-à-vis increasing low-cost competition. The preferable alternative for Europe is a combination of Continent-wide free trade and controlled external trade in order to achieve both industrial modernization and economic growth.