Prof Dr Vieth Dinh, Professor at Georgetown University Law Center in Washington, USA
	I come to the question posed: what model of economic and social organisation is most appropriate for Europe, the continental model or the Anglo-American model? not simply from a perspective of judging what policies are adopted pursuant to the model or what policies are followed by the respective countries or by the continent. And indeed, not even to note the temporal advantage that the American economy seems to be enjoying; I say temporal because what is now seen as stagnation of 10% unemployment --on the continent or elsewhere--may very well be the state of affairs in America probably not so far off in the next years. And so it is not just economic policies that resolve from the model or the temporal advantage that these policies produce, but I want to take a step back and look at the core model itself and see how those policies arrived.  This seems the most appropriate level of generality attacking the base of the mountain - as Minister Lanc had proposed earlier - rather than simply addressing the top or the peak or the surface of the mountain with respect to the policies or the practises they are in. I will first take a look at the role of law, the role of institutions in the respective models, most and in particularly the model I am familiar with, the Anglo-American model.  Then I will talk about the role of regulatory competition, i.e. how the competition for regulatory policies manifests itself within the structure of law-based economic regulation. And finally, I will touch upon the core question: what model would serve Europe best? and I will be true to my role and advocate the Anglo-American Model of economic and social regulation as I sketch out here.  I hope to provide new, more honest descriptions rather than simply portray the model as a completely unregulated free market model.  As the Director Ambassador has noted in the beginning, it is not about a conflict between laissez-faire economics versus a social regulation, but it is really about the degree of market restraints that we are talking about. I think the advantage of having this discussion after the experience of the last two decades is that there is now a general consensus that some form of market economy is the best model for economic regulation. But on the other hand, the market economy should not be an unrestrained and completely free operation like it was in the 19th and 20th century in America. And so the question is really what form of market regulation should Europe and indeed, the world and America follow? First, as a student of legal theory I note that as the European Union contemplates further expansion an exclusive focus on the economic conditions of applicants, in addition to respective discussions in Nice and elsewhere, are somewhat misplaced. Economic policies are of course important because at its core the EU is an economic union, an economic and financial union.  But it is more than that; economic policies are reliable only to the extent that members of the union also have reliable legal systems and public institutions and promote and enforce those economic and social policies. So it seems to me that a discussion on much more basic levels of legal and structural institutions with respect to the applicants to the European Union is also very important in law. When I graduated from Harvard Law School the President of the College conferred upon me the Degree of Law and defined the degree as the students being experts of law. Law being a system of wise restraints that set men free in order for new members to be competitive with current members or in this case, the would-be members of the EU to be competitive with the current members of the EU, it seems to me critical that the central and eastern European markets be free and more efficient. Such efficiency depends critically on a system of wise restraints that we call law. These legal institutions provide the transparency, the predictability, the accessibility and the impartiality that we loosely call the rule of law, which is essential to a well functioning market economy and a well functioning and orderly system of social interaction based on individual choices, not on centrally commanded control. And it seems to me that one of the critical issues we should focus upon is not only what the current policies and economic conditions of the applicants to the EU are but also, structurally what legal and economic institutions they have to facilitate the functioning of the free market economy, i.e. whether they have set in place a system of wise restraints that would set men and enterprises free. Second, just as private competition among individual preferences have proven a market based system to be the most efficient system of resource allocation since the demise of the command and control model of economic allocation, I think healthy competition in public policy is desirable in a federal system such as that contemplated by the European Union. This process of regulatory competition among the member states is very well outlined in the classic 1960s article by Charles Divot, and has been developed both here on the continent and in the States. That model most promised to encraft the rules for the economic behaviour of business enterprises and individual economic actors with their increased mobility of both capital and more importantly, of labour within the European Union. These factor inputs will migrate to locations that provide the best mix of economic and social regulation. And by 'the best mix' I mean a balance between the promotion of productive efficiency desired by the contributors of capital corporations, business enterprises and investors and the protection of social security or wages by the contributors of labour, the workers. The compensated wage differentials among these member states will prompt workers to migrate to countries that provide the best package of wages and other income compensations such as insurance for medical, unemployment and retirement needs.  So in a way, the answer to the question we have addressed here today can be largely found in a structural rather than a substantive solution. That is not to argue whether we should adopt the more laissez-faire approach of America or the more social democratic approach of the continent, but rather perhaps we should think about how to foster the conditions through which the member states can come up with their own substantive answers.  The process of competition for labour and capital among the member states will result in some sort of substantive answer of what the right mix is.  That way the answer will not be provided from the ivory tower by people like me who have never seen the real world or from decision makers from up high, but rather by the member states themselves, by the localities who try to find the best mix of regulation, by the voters in this market for regulated competition, by the provider of capital (businesses) and by the providers of labour (workers). So what needs to happen is that we not answer the question of the outset: what are the best and optimal rules for economic and social regulation? We need simply to set up a system wherein both labour and capital are fully mobile and whereby member states--or whatever the sub-units or sub-national units are--enjoy certain autonomy to compete among themselves for contributors of labour and capital, i.e. the workers and the business enterprises.  Through this process of trial and error in regulation or the expression of public preferences through private choices, we arrive at an optimum mix much more easily than we can by simply theorising or dictating from up high. But of course I recognise the potential for imperfections or failures in the market for regulatory competition, just as I recognised the failures of markets which present the needs for regulation. All this really leads to my third and final observation regarding what the optimum mix at least should contain. Because the member states or locality in the federal system will compete primarily for decision makers in the supply of capital and labour, their policies disadvantage those who do not or cannot make the decisions, i.e. the non speakers in this market, the non-voters. Most significantly, the non-voters in the labour market are people who do not or cannot work, the retired persons or workers who are unemployable because of medical disabilities or because they do not possess the minimum skills necessary to participate in the modern economy. Such a failure in regulation competition in the market for policies demands a national or unified solution. And that is why even the free market in the 'wild wild west' of the United States there is still the provision for a national system of retirement security and income and medical insurance. I know that it is much more minimal than that enjoyed in continental Europe and I will get to that, but even though the market regulatory competition in the United States is probably one of the strongest markets for state competition for policies, there is still the recognised need to protect against market failures in that competitive process. That is why there is a national solution for social security (i.e. retirement) and also in Medicare for seniors (i.e. medical expenses during retirement). Likewise, there are national standards for minimum provision by states of unemployment insurance. And there are national standards for states that guide the provision of welfare benefits to non-working persons. Those are examples of market correction that I believe to be necessary, even in a fairly free market based system like in the United States. Now as to how far those corrections should go, I believe, goes to the question of the difference between the American system and the European/Continental system. I believe--and the American experience has born this out--that less is more in this context. Only that regulation which is indeed necessary to correct actual market failures should be adopted.  That is, if you believe these policies--welfare security, child labour laws, minimal wage standards to states--will not result in efficient competition because of a 'race to the bottom,' whereby the sub-national units compete against each other to attract businesses and workers toward the bottom at its least advantages rather than a 'race to the top,' whereby they would provide the most efficient forms of regulation. You adopt only those corrective national policies that are necessary to prevent this 'race to the bottom' and so you provide the minimum protections and standards for wage and labour: retirement and medical expenses during retirement. But beyond that minimum point, you should not extend the basis for correction beyond the need for correction. Because if we do what will result is what we call the social security net--that which I described as the correction of processes at the national or union level.  The social security net will fail in its justification as a protection at the bottom for the regulation of the economy but will be transformed into a net at top that will encompass the entire system rather than only catch those of the bottom. It then becomes a dampening net that pulls the entire system down. It seems to me once you transgressed beyond the need for correction the system has the danger of becoming a system not of depression but of economically inefficient regulation. I think that is a situation that contents the danger of such a transformation of a social safety net into a restraining bubble for the social systems of the regulated entity; this is the core reason why I advocate a system that is based upon an Anglo-American approach--one that recognises market failures and corrects when necessary and one that respects a competition not simply among primary economic actors, individuals and business enterprises, but also competition among policy makers or policy making entities so that we trust this process of trial and error.  This very process of competition can come up with the optimal result rather than simply trying to theorise or dictate from up high.
		Mr. Dohnanyi asked what Americans can learn from the European experience, and I think that those lessons actually help to mediate and bridge the gap of disagreement between the two previous speakers. I think there is common consensus that globalisation is neither a policy nor an ideology. It is a fact of technological progress. It is a fact of life in the modern 21st century to which governments and policy makers have to respond in their own way. We cannot put the tiger back into the cage, as it were; we now have to deal with the tiger. With respect to the assertion that America has a great deal to learn from the European experience, a most significant point is that our historical benchmarks differ. Part of the conversation here as to why America has increasingly gone the way of Europe and why Europe has increasingly gone the way of America is explained by the fact that that we started out in different places. There is this mediating effect concerning the proper response to the globalisation of the world economy.  America has to be competitive with Europe, Europe with America, and both with the Asian economies-and also to respond to a challenge coming from Russia any time now. In that sense it is just a matter of time for a moderating policy to develop as a competitive strategy in a global economy. Things change in ways neither America nor Europe may very much like in light of our historical circumstances, but responding to those changes is necessary for either continent to compete in the global market. In addition, not only as a competitive strategy but for much more intrinsic reasons, I think America could learn a lot from the European sense of community-to move somewhat away from the traditional individualistic competitive spirit of America, although there is a lot of good there. Moving away from the most radical form of that spirit, at least on an intellectual level, gives citizens of America a sense of belonging that is increasingly necessary as borders decrease in terms of economic significance. Europeans have an advantage to Americans in that sense--that the European states and communities date back to the beginning of time, if not to the Thirty Years War and the Peace of Westphalia. In that respect Americans have a longer way to go to developing that sense of community.  The need for such a sense of community was recognized in the very beginning of the American republic, in the civic debate between the Madisonians and the anti-federalists at the birth of our republic. The need for that sense of civic belonging has been lost throughout the years, especially in the end of the 19th century and in the early 20th century with the focus on an ideological laissez-faire policy. In this way Americans can learn a lot from Europeans. Finally, the input of workers in the governance of corporation is very important given the need for human knowledge as the primary component of modern industry. Here the debate regarding labour union and work councils obviously becomes very important. A number of US industries have adopted voluntary mechanisms resembling work councils, obviously not the versions of co-determination described in German and Austrian law, but at least work councils at the shop floor level so that supervisors can participate in team efforts in learning what makes workers more productive. The best companies have produced better products and increased employee productivity and happiness. That said, I think the demise of labour unions, certainly their demise in the United States, and the relative decline of union memberships throughout the world may not be a reflection of anything the unions are doing or of the wishes of the workers. Rather, I think it reflects the structure of the industries that are finding prominence. The reason why the information sector -- at least in the United States -- is not unionised is because the traditional justification for unions is not there. The traditional justification--that unions are a solution to the collective action problem and facilitating a unitary labour bargaining unit against a unitary management--simply is not there for information-based and knowledge-based industries.  In those industries, the workers really have the advantage because it is specialised knowledge that the companies are seeking.   The more specialised one's knowledge, the more valuable he is as a worker.   The worker would not want to dilute that specialization or, to put it another way, there is no gain to that specialised input if the worker joins a union.  There's no need to join a union and, as a practical matter, one simply cannot unionise all those persons with similar skills--the person in Bangalore, India, the person in Leipzig, Germany, and the person in Palo Alto. The result simply is competition on both sides. Neither side has disparate market power so there is no need for a market response-either from collectivisation of the workers into union or collectivisation on the side of the companies into trusts.  It is a competitive market both on the labour side and on the employer side. It seems to me, therefore, the question is how we go about making these workers feel like they are part of the organisation so that you get the best of the flexible market without the worst, i.e. high turnover and short tenure without any contribution to the business.