The global economic crisis and the future of labor market policy regimes: Implications for economic governance in the European Union and Japan

To better cope with globalization, the European Union (EU), its Member States and many countries of the Organisation for Economic Co-operation and Development (OECD) have implemented labor market reforms with a market fundamentalist approach that is grounded in the Washington Consensus. Neoliberalism, which arose to replace Fordism (Jessop 1999), after the oil shocks in the 1970s has sought to mitigate or eliminate certain regulations that were embedded in market economies, including many of those governing the financial sector, and to enhance competitiveness by forcing enterprises and workers to adapt to free competition. The result, on the one hand, has been finance capitalism running out of control and, on the other hand, the erosion of internal labor markets built on the assumption of long-term employment. The EU and Japan have to take account of the total cost of their aging populations and the long-term impact of the current economic crisis. The extent of the European financial crisis triggered by the collapse of Lehman Brothers, especially the debt contagion that spread from Greece and Ireland to Portugal, Spain and Italy, will be exacerbated by unprecedented levels of aging and outdated social protection systems in the coming decades. As a result of the global financial crisis, the EU and its Member States have been forced to consider the long-term sustainability of their welfare systems. The increase in public age-related expenditure (pensions, long-term health care and unemployment benefits) in the EU as a whole is a matter of serious concern.