Austria's Economic and Social Policies in Response to the Globalisation of Markets

Head Table Guests

Anne Libby, Co-Owner, Libby's of Toronto Art Gallery and a Director, The Empire Club of Canada; Owen Clarke, grade 12 student, Rosedale Heights Secondary School; Bob Long, Vice-Chairman and Regional Managing Partner, Ernst & Young; The Very Rev. Douglas Stoute, Dean, St. James Cathedral; The Hon. Edward Lumley, P.C., Vice-Chairman, Nesbitt Burns; Christine Vranitzky; The Hon. Roy McMurtry, Q.C., Chief Justice of the Ontario Court of Justice; Walther Lichem, Ambassador of Austria to Canada; Michael F. Garvey, FCA, Partner, Price Waterhouse and Honorary Treasurer, The Canadian Club of Toronto; Royden R. Richardson, Secretary and Director, Richardson Greenshields of Canada Limited; Ingred TichySchreder, Vice-President, Austrian Federal Economic Chamber; Frank Stronach, Chairman of the Board, Magna International Inc.; Prof. Dr. Hans-Guenther Abromeit, Honorary Consul General, Consulate General of Austria; and Herbert Phillipps Jr., President, The Canadian Club of Toronto.

Introduction by John Campion

Charlemagne Contemplates Canada

Marchfeld is a plain on the north bank of the Danube across the river from Vienna. It stretches away into the misty distance as one looks out from the tower of St. Stephen's cathedral. This plain is soaked with history. For centuries immemorial, it has served as a highway of invaders from the East--Huns, Avars, Magyars and Turks. It was Rome's eastern outpost. Marcus Aurelius died there. It was the site of one of the most decisive battles in European history when in the 13th century, Rudolf, Count of Habsberg, chosen in 1283 as the new German King, met and defeated the King of Bohemia and gave Vienna control of Charlemagne's old Ostmark. This battle in effect made the House of Habsberg, the House of Austria. This plain was the arena for great events: the battles with the Turks in 1683; the Napoleonic battles; it has been involved in the great events of this century.

The empire that was the Habsberg's monarchy ebbed and flowed from 1283 to 1916. In the end, it had its critics but, it had its positive attributes. It is to these attributes that still affect us today that I would like to draw your attention:

(1) it was a successful and enduring complex of interdependent peoples--that was and is something to be striven for by all decent means;
(2) it foreshadowed the attempt in our century to make the people of Europe develop common cause with each other;
(3) it was the first government to try and articulate a multi-national state, through the competing notions of federalism versus centralism;
(4) the great Bohemian patriot Palacky said that if the Habsbergs empire had not existed, it would have been necessary to invent it;
(5) the founder of the modern Czech state, Thomas Mazarick, who was partly responsible for the dismemberment of the empire, acted with the greatest of reluctance and sorrow knowing that what he was helping to destroy, was irreplaceable;
(6) its high culture embracing the persons of Mozart, Mendelsohn, Beethoven, Bach, Liszt, Schubert and Strauss and others, bring joy and light to our lives, through music;
(7) its scientists, such as Freud and Jung, have plumbed the depths of our beings and affect the very essence of our self-perception. Canada is like Austria of old, a complex of interdependent peoples, a decent place and a vast territorial empire: from the harsh Atlantic coast, down the St. Lawrence River Valley, across the Great Lakes and Hudson's Bay water sheds, to the great prairie stretch, to the foothills, Rockies, Monashees, Coastals, down the great river valleys of the Fraser, MacKenzie, Saskatchewan and Nahanni, the Pacific coast and the snow desert of the Arctic. Canada is a beacon of openness, fairness and generosity to all its diverse citizens--a multi-national federal state. Although Canadians are unassuming, Canada has produced her share of great men and women in high culture, learning and internationalism.

If Canada did not exist, the modern world may be unable to create it.

The Federal Chancellor obtained a Doctorate of Business Administration and a degree in Economics and International Trade from the Vienna University for World Trade. He was employed with the National Bank of Austria, was the Federal Minister of Finance, Chairman of a bank and was made Federal Chancellor of Austria in 1986. He has served as Federal Chairman of the Social Democratic Party of Austria since May, 1988, and is one of the Vice-Presidents of the Socialist International. Please welcome the Chancellor and let us together recognize the pre-eminence--past and present--of his wonderful country, Austria.

Franz Vranitzky

Ladies and gentlemen,

For Austria the year 1995 started with a step, which in its political and psychological importance can well be compared to the restoration of the Republic in 1945 and the resumption of full sovereignty as a result of the State Treaty in 1955. As of January 1, Austria has become a member of the European Union.

This step happens at a time when Europe--and I dare to say the whole world--sees itself confronted with dramatic changes. As to the effects of all these changes, there are still quite different and probably not very clear ideas. I would like to list five factors which characterise this new situation:

1. The globalisation of markets, capital flows and production has exposed our national economies to permanent worldwide competition;
2. This global competition, as well as fundamental changes in lifestyles and demographic trends--such as a rapidly aging population--are forcing us to review the function, the working and the solidity of our social safety nets;
3. Path-breaking technological advances, such as the digital revolution, are changing and penetrating all areas of life;
4. The increasing scarcity of resources and the need to preserve the environment are questioning traditional growth policy;
5. Finally, with the breakdown of Communism and the dissolution of the Soviet Union, our system of reference, which (despite its polarisation and unacceptable philosophy) provided stability has disintegrated.

In view of these changes, we have to acknowledge that in many fields we have reached the limits of effective national policy-making, and that we can only master the challenges facing us through joint strategies and common action.

This also means that our political decisions are put to a global test day after day and that politics has become a constant effort to reach higher international standards, whether in the economy, regional planning, technology, or with respect to our social and educational structures.

One of the reasons why the Austrian federal government strove for EU-membership was precisely because we are convinced that it is only through a joint approach at the European level that the present economic, ecological, social and security policy challenges can be met consistently and efficiently.

One of the greatest challenges in the coming years will be to ensure the competitiveness of our industries.

Over the last years, with the dynamic East Asian economies and the East European reforming countries, new players have entered the international scene which are able to compete with the industrialised countries in many sectors; and other countries, like some in Latin America, have overcome the debt crises and are now joining in the worldwide competition for investments, market shares, foreign exchange and, above all, jobs.

What dynamism there is, notably in the East Asian economies, can be seen from the fact that the Union Bank of Switzerland, in a recent study on the future perspectives of various economic locations, lists only one classical industrial nation, Japan, among the five most promising. The number of countries whose economic potential is close to ours, but which start from far more modest conditions with respect to social and environmental standards--and hence from far lower production costs--is thus getting bigger and bigger.

We therefore have to do all we can to design and implement new, future-oriented strategies for qualitative and quantitative growth. As some of the most important points of leverage, I would mention:

1. the modernisation of our infrastructure in the fields of transport, energy, the environment and telecommunications;
2. more investment in our greatest resource--human capital--through a broad training and qualifications offensive;
3. and a sweeping initiative to encourage research in order to develop innovative, resource-saving products and processes and to get them to the market.

Only if we succeed in achieving the desired breakthrough in these areas, will we be able to create a sufficient number of new jobs in Europe, as well as in North America.

Let me add a few remarks to the goal of creating a single currency within Europe. It seems to me that the target date (1997-1999) for a single currency has been chosen a little bit too ambitiously. I do think, however, that with a delay of a few years we will have a European Central Bank and we will also have a European currency. The Austrian Schilling--with an outstanding record of being one of the most stable currencies in the world--will clearly be in the league of the currencies meeting the so-called Maastricht criteria. Austria believes that a joint European social policy is inseparably linked to economic development.

Social policy in the Union is largely left to the member states; but precisely for this reason it will be necessary to develop a joint programme for social convergence as a complement to the Economic and Monetary Union, in order to prevent a distortion of the internal market through social dumping.

Also the big ecological problems, such as the greenhouse effect, the protection of water resources and the careful use of fossil fuels can only be tackled by co-ordinated action at the continental and global levels. Environmental protection should not limit itself to regulatory measures; economic incentives are just as important. In this context, we have witnessed an important change in economic thinking over the last few years: the internalisation--and thus avoidance--of environmental costs is not perceived by all sections of society as an investment in their own future.

Unconventional ideas are also required for a new, environmentally minded transport policy. Such regulatory action should be complemented by infrastructural measure, permitting a sustainable shift of traffic from road to rail or water. The EU's transport projects in the framework of the Trans-European Networks are proof that the European Union is ready to take the future of European transport into its hands.

All strategies of European integration--whether in the area of industrial or regional policies, environmental protection or social security--can only be successful in the long run if we succeed in bringing in the reforming countries of Central and Eastern Europe. Both the political vision of a unified whole Europe, as well as pragmatic reasons adduced during the trauma of many decades of partition, tell us that the participation of these countries in the process of European integration must be our declared medium- and long-term aim.

The integration of the new democracies is an extremely complex task and requires--in analogy to developments within the EU--a substantial process of convergence, especially in the economic and social spheres. This convergence will not come by itself, but must be actively supported by the Union. The "Structured Dialogue" recently presented by the European Union is an important step to familiarise these countries with the institutional framework of the European Union and to involve them now, as far as possible, into the work of the Fifteen.

In this context, I have launched a regional initiative to develop infrastructure in the Eastern neighbouring countries, mainly concerning the areas of transport, energy, telecommunications and the environment. Private investment should be encouraged also to link up the infrastructure networks between East and West.

Austria has perceived the opening of the East as a great opportunity for itself: not only has foreign trade developed extremely well since 1989, but Austrian companies have also made full use of the new possibilities and are among the most active investors in the region. In addition, Austria provides--next to Germany--the highest per-capita rate of financial assistance; and these initiatives by the federal government have helped to make Austria the country with by far the most intensive relations with the East.

My basically optimistic assessment of the trends in Eastern Europe must not make us lose sight of the facts that violent conflicts are still part of political realities and that the danger of the emergence of new demarcation lines in Europe continues to exist. Therefore, the establishment of a comprehensive European peace order, together with the need for the construction of a co-operative partnership with Russia and the Ukraine, constitutes one of the biggest challenges for the coming years. It should also be a central issue for all Western policy makers.

Once inhuman wars (like in Chechnya or Bosnia) have broken out, it is very difficult to break the vicious circle of violence, hatred and misery. We must therefore do what we can to create structures to help us to spot and defuse potential crises in their initial stages.

In these areas, I see for Austria--also on the basis of its self-perception as a neutral country--a wide and important field of action. I am convinced that, on account of our experience in peacekeeping operations, for example, we shall be able to make some substantial contributions. In this area I could also imagine closer co-operation between Canada (which has so far sent over 75,000 Blue Berets to trouble spots around the world) and Austria (with her total of 34,000 volunteers for UN peace-keeping missions).

With all the importance of regional integration processes which we see in the framework of NAFTA in North America and which are now also beginning to emerge in Latin America as well as in South East Asia, it is necessary to point out the danger of these regions as opponents and competitors rather than as partners.

I have always warned against this kind of "fortress building" and I will continue, within the framework of the EU, to advocate strongly an open-door policy of co-operation with other regions in the world. This basic philosophy of openness on the part of the European Union must particularly apply to the countries of North America, with whom we are so closely linked by history, culture and values.

Austria has prepared herself very carefully, politically and economically for EU-membership, which is the best guarantee to preserve and safeguard our vital interests in the coming decades. We approach our work towards integration with confidence, but not with naivete. Conflicts of interest do not disappear simply because one has joined up with others to form a bigger unit. Hence, both at the European and global levels, nobody can relieve politicians from the burden of seeking to conciliate these interests.

A fair distribution of wealth, the quality of life and the } environment, social and personal security, and human dignity and cultural autonomy are goods and values that have to be fought for again and again. International cooperation gives us the possibility to shape the vision of a united, peaceful world inspired by solidarity with our friends. Canada will find in Austria a reliable partner in her efforts to move closer to these goals.

The appreciation of the meeting was expressed by Herbert Phillipps Jr., President, The Canadian Club of Toronto.