Bengt-Ake Lundvall: The Portuguese Manifesto Sends a Message to Europe’s Elite That Austerity Has Failed and “Project Europe” Must be Rethought

Interview of Bengt-Ake Lundvall by Jorge Nascimento Rodrigues © March 2014. Originally posted by Yanis Varoufakis on his blog.


  • “We might be approaching a political breaking point where the widespread frustration among European citizens takes a more constructive and clear political direction.”
  • “As I see it, what appears to be feasible now brings us closer to the end of the European project. Therefore the only possible strategy is to ask for what seems to be out of reach. We know that history offers us surprises from time to time. Let us hope for a positive surprise.”

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The Danish economist Bengt-Åke Lundvall (born in 1941) is one of the 74 foreign economists that signed the Portuguese Manifesto for the Sovereign Debt Restructuring published March 2014 by other 74 Portuguese economists, including former Finance Ministers, from the right to the left in the political arena. Lundvall is professor at the Department of Business and Management at the Faculty of Social Sciences of Aalborg University in Denmark, since 1977, and at the Collège universitaire de Sciences Po in Paris, France, since 2007. He was also a visiting professor at the Tsinghua University in Beijing, China, in 2004-06. During 1992-95 he was Deputy Director at DSTI, OECD. Since 2002 he coordinates the worldwide research network Globelics. In close collaboration with the late English professor Christopher Freeman, he developed the idea of innovation as an interactive process and the concept of National System of Innovation in the 1980s. In the beginning of the nineties he developed the idea of the learning economy in collaboration with Björn Johnson, a Finance professor at Driehaus College of Business, DePaul University, in Chicago, US.

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RODRIGUES Q: Why did you sign the Portuguese Manifesto?

LUNDVALL A: I signed the petition primarily since the negotiations on a restructuring of Portugal’s debt would raise wider issues about changes in the political and economic architecture of Europe that I see as necessary to avoid that the next crisis will lead to a complete disaster for the European Project. Also it would signal a protest against the dictatorship of ‘the market’ and against what I see as misdirected austerity policies in Europe.

Q: What do you mean by “wider issues” beyond the Portuguese problem?

A: Restructuring the debt of Portugal or other single countries now victims of Austerity policies will not by itself bring about necessary changes. But it sends a strong signal to the European Elite that there is a need to rethink ‘project Europe’.

Q: So the Portuguese Manifesto is a kind of first move?

A: It could become a trigger for change. We might be approaching a political breaking point where the widespread frustration among European citizens takes a more constructive and clear political direction. That would make it more difficult for the political elite to define all critical reactions to the current European strategy as populist. But it requires that all those who want a Europe that is competitive, democratic and fair go beyond national self-interest and begins to work together for a different ‘project Europe’ where international solidarity goes hand in hand with protecting the weakest citizens in each single country.

Q: What went wrong in “project Europe”?

A: The current architecture is dysfunctional but self-inflicted. For decades a common strategy among the European elite has been to move ahead with financial and trade integration without moving ahead with social and political integration. Federalists assumed that economic integration more or less automatically would be followed by the building if a political structure.The most risky step taken by the elite was the establishment of a Monetary Union bringing together economies with very different economic structure into one common currency area. It was the most extreme act of faith and political gambling by the federalists. Portugal is one of the victims of this hazardous step.

Q: In what sense has the financial global crisis of 2008 and the following sovereign debt crisis inside the Euro zone after 2010 worsened the situation?

A: After the 2008 crisis it has become even more clear that economic policy has become subordinate to ‘the market’ and what is presented as ‘the necessary policy’ – sometimes referred to as the competitiveness pact – results in an increase rather than a reduction in the gaps in welfare between the North and South of Europe. This is as I see it in direct contradiction with the very foundation of the European project.

Q: So the financial global crisis was a stress test for “Project Europe”?

A: Europe did not pass the test. The short term response was insufficient and it left the most vulnerable nations and citizens in precarious situations and the long term strategy agreed upon – the so-called competitiveness pact – is in conflict with basic principles of Project Europe. While it is true that the European Union did not break up with this crisis, it is also true that the current long term strategy does not safe-guard its existence for the next crisis.

Q: What is necessary to change the course?

A: There were elements in the Lisbon Strategy – building a socially cohesive learning economy with better jobs – that could have countered the structural differences and dampened the effect of the crisis. Instead neoliberal economic dogma set the agenda for Europe and now we all pay the price.

Q: How do you explain the kind of policy that came out of the 2008 crisis, as illustrated by the April 2010 informal summit of Madrid when “expansionist austerity” and “internal devaluation” for the peripheral Eurozone countries emerged as the dominant medicines for the sovereign debt crisis?

A: There was a clear shift in the direction of the European project already before that. The Lisbon strategy was watered down at around 2005. Those who lay the foundations for the European project after the Second World War were quite pragmatic in terms of economic philosophy. They were open both to government planning and public ownership and they had a realistic understanding of the limits of a pure market economy. Pragmatism was undermined when neoliberal economic philosophy became dominant at universities and ministries of finance. As neoliberalism gradually took hold in the Commission and especially in its economic directorates it led the European project astray.

Q: So the radical group “cleaned out” project Europe in a critical moment of crisis?

A: It is remarkable to what degree Europe’s leaders took a defensive approach to the economic crisis. It is difficult to imagine a situation offering more room for showing their citizens the usefulness of being a partner of a wider European community. In a corresponding situation president Roosevelt launched the New Deal in the US signaling a special concern for the unemployed and poor regions in all parts of the US. But the national leaders in the EU were unwilling to engage in fiscal transfer across borders and therefore they agreed on a series of incomplete and temporary solutions. This went hand in hand with a new European political discourse infested by moral indignation – with Northern politicians referring to corruption in the South as a major cause of the crisis. The crisis tested the European project and the test results were not flattering. After five years economic performance indicators on income and employment levels still remain below what they were just before the crisis.

Q: That means that a debt restructuring operation in Portugal is not sufficient, you need a Euro-wide initiative?

A: As I said in the beginning a debt restructuring could result in a shake-up of the current economic and political order. But what is needed is a radical rethinking of the relationships between economic integration on the one hand and political and social integration on the other hand. We would need European leaders who were honest on the fact that economic integration without political and social integration leads to growing inequality and to instability. One important signal could be to call for a time-out for economic integration while Europe starts to establish some elements of a common fiscal and social investment policy. It could begin with modest measures related to minimum income and unemployment support. European-wide programs aiming at upgrading the skills of the low skilled, labor market flexicurity and modern open education systems would send signals to all Europeans that Europe from now on would build it competitiveness on competence and not on low wages. Green investment plans would show that Europe takes into account also the survival of the coming generation.

Q: Is it politically feasible in the present European context?

A: As I see it, what appears to be feasible now brings us closer to the end of the European project. Therefore the only possible strategy is to ask for what seems to be out of reach. We know that history offers us surprises from time to time. Let us hope for a positive surprise.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. Podargus

    The only surprise in Europe will be how quickly the whole bizarre structure falls into a heap.

  2. The Dork of Cork

    The objective of the european project from the get go was to destroy us.
    It has achieved this objective…….

    Now we will get these “reform” solutions coming from left field.
    We are merely witnessing the monster maturing into a larger banking construct.

    Need I remind dear readers – the US and UK banking unions are nightmare non places.
    “Reform” it seems succeeds for the few once again.
    I am always reminded by Fridtjof Nansens visit to the States and how appalled he was by the greed of this non place.
    Well Europe has now become another US with dire consequences for the local culture and economy as all interactions are now of a monetary nature.
    Cooperation between people is now impossible as they either come from a different cultural background and increasingly have no bedrock foundations to speak of.
    Welcome to the US fractured society folks.

    Have a nice day……………………….

    1. Banger

      Well said. This is becoming increasingly obvious–why would Euro folk want to be like the USA?

      1. hunkerdown

        Why would anyone, without being surrounded by smarmy shills or ignorant Aspirants who portray the belief that the sole right and proper primitive of social intercourse is sales messaging?

  3. The Dork of Cork

    The future of European politics.
    From Boston to Washington.
    From Cork to Brussels.

    The Kissenger nightmare of their man at the apex is upon us.
    Of course once localism is destroyed there is nothing to control other then a gradual decent into entropy.

  4. The Dork of Cork

    How the modern European market state operates today.

    Kerry mountain rescue ( a Voluntary organization ) wishes to seek a VAT reduction on its equipment.
    It logically bypasses the local estate clerks and goes direct to Mordor.

    A quite unbelievable state of affairs.
    This concentration of power is both absurd and of course catastrophic to real life but is a natural consequence of the bank scaling up its operations for no other purpose then the acquisition of power for its own sake.

    The solution does not reside in Europe.
    Europe is the heart of darkness.
    They seek to micromanage us into the abyss.

    The signs are everywhere now.
    Health Fascists are running a muck destroying the last little escapes for men.
    Family and village life has broken down.
    Absurd Barroso characters wish to speak for Europe when Europe as a real place does not exist.

    Let us remind yourselves what Europe has done for us.
    They ( the Anglo Dutch monetary / oil cartel) has Industrialized peripheral Europe and now wishes to tax us for this very same capital goods overproduction and its subsequent depreciation.
    The Audacity of these demons knows no bounds.

    Europe is a pox.

  5. Stonedwino

    The European Union was an ill thought out experiment to begin with; an incomplete financial and trade union, without social or political integration was doomed to fail, since it made the EU into a loosely union of countries with a single currency, without much different political, cultural and economic societies. Like the professor said: “For decades a common strategy among the European elite has been to move ahead with financial and trade integration without moving ahead with social and political integration.” Basically like if a airplane was held together by duct tape – a disaster waiting to happen.

    There in lies the crux of the matter…

  6. Dan Kervick

    If you unify the monetary system, you are unifying the financial system. And if you unify the money and finance system of Europe without unifying the rest of the economy, you are essentially putting the bankers in charge of the whole economy.

    Private sector bankers always have the values of financial capitalism. Their entire industry is based on maximizing the return to financial capital. The thing these various European “pragmatists” forgot to think about is that socioeconomic change is driven by interests and power. If you surrender political power to a particular group, that group’s interests will become society’s interests.

  7. allcoppedout

    None of us know what the EU is. I’m with Dork in spirit. Banger asks if our elite had twigged austerity is a crock. The answer is both no and a realisation in saying this we really have no idea who the European elite is. I don’t know if I can explain, but can present something of the jumble,
    1. I don’t know who my MEP is. The only MEPs I’m aware of are the leaders of a fascist parties, the BNP and UKIP. I did know my last MEP, but this was because I bid for EU funds. NIce, hapless jerk might describe him. He at least admitted he had no power to help and got me fed and drunk on his Brussels’ expense account. We have elections in 2 months and I have no idea who is standing, I’m probably way more ‘EU literate’ than most voters here. If I do vote, it will be for UKIP on the basis MEPs don’t matter and this is my only way of trying to fire a rocket at our main parties.
    2. Good aspects of the EU for me have involved extensive travel and generally excellent food and company. 5 course meal for we Eurocrats whilst various victims of USUK freedom bombings starved in the hinterland. Previously unused modern languages schooling brought to use in ordering beer. I’ll cry if I detail the waste.
    3. I could no doubt write a decent essay on the origins and purposes of the EU whilst believing none of it. Most won’t know it was originally about coal and steel production.
    4. I know who Barroso is and that there are 28 unelected commissioners. So in more than 50 years we haven’t been able to organise elections. There are two physical parliaments, the gravy-train moving to Strasbourg for a month every year. This in the modern electronic age. The Commission does policy and the elected MEPs sweet FA.
    5. 100 jumbles later, we’d have no idea who the European elite is. The are mountainous websites, visited only by students writing essays. Pulling up the list of commissioners, I only recognise Barroso and Ashton (British ethnic token). I can name more US senators – Paul, Warren, McCain, Rubio and even Barrasso (surely not a clever alias).

    And, of course, as Dork implies, searching the Commissioners and MEPs is hardly the place to find the European elite anyway. Across Europe you can find the equivalent of the 7% British population that go to private school, the best universities and law and business schools and the best corporate training. We are still run by a old boy and girl network. Jane Marceau has done some pretty convincing work on the making of this elite.

    The EU is useless because it isn’t about people at all. As far as I’m aware, there is no politics of this anywhere.

    1. OIFVet

      Since you mentioned UKIP, I am curious about the Bulgarian and Romanian invasion that was predicted beginning January 1st. Has it materialized, or is it limited to Great Uncle Bulgaria? I am a euro skeptic, and that’s putting it mildly, but I must admit that the demonization of my fellow Bulgarians for political purposes would have been rather annoying had not Brits deployed humor to deal with the situation:

      “For Domescu, the final straw came during the funeral of Margaret Thatcher last week. ‘I was still thinking of coming to Britain, but then they broadcast those pictures of your Chancellor Osborne openly weeping on national television and it finally hit home how bad things must be for that to happen,’ she said. ‘So I’ll just stay here after all – the weather’s far nicer and I hear there’s a job going at the local horse abattoir.’”

  8. paul

    The tobacco products directive, just a small example of how europe is managed.

    One of the most effective, no cost, public health improvements, e cigarettes, have been railroaded into a bureaucratised duopoly for the the tobacco/pharmaceutical industries.
    One of which created the initial problem and the other having singularly failed to treat it.
    The MEPs voted on an unnecessary but workable bill but the commission and council of ministers told them to stop being silly and do what they’re fucking told.

    Result, a de facto ban except for overpriced, ineffective, expensively licensed products.
    I packed in the coffin nails 2 years ago using these things,
    Thanks to the earnest financial health concerns of the europlayers, many will not.

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