Changing economic order and European integration

The interaction between political initiatives and autonomous economic forces in Europe has developed through three phases since the Second World War. The first may be characterised as high growth and the creation of common institutions; the second, stagnation; and the third, the creation of the ‘internal market’. The recent period has seen greater trade and capital, though not labour or mobility. Intervention has become the exception. The creation of complete economic and monetary union should be the key issue of the 1990s. There remains, however, considerable disagreement over the benefits of the monetary union and the effectiveness of the exchange rate instrument in macro-economic policy. As high unemployment becomes a structural feature of the European economy, and as economic inequality grows, the legitimacy of the new economic order is being increasingly challenged.