For many years now, there has been a continuous lack of more than 20 million jobs in Europe. Also, many working Europeans only have a limited income. Approximately one quarter of all 508 million Europeans are poor or live on the verge of poverty. And those who do have better paying jobs need to balance the additional costs that mass unemployment and low income of the others produce. Consequently, they too have less money to spend than they would have in better circumstances. But what are the reasons for this situation?

There are two negative forces that influence the continuously weak condition of the EU Single Market: excessive cost-cutting of companies and states and mass consumption of cheaply produced goods. These forces strengthen each other. A third factor is contributing to worsening the effects of this disastrous situation: the further opening of the market to non-socially responsible goods through unqualified international trade.

  1. Too many companies have not invested properly in this market in the past. Following their objective of reducing costs, they have not considered the positive effects that labour costs have on consumerism (purchasing power of citizens) and thus their own income. Excessive indebtedness of consumers (a consequence of long-lasting wage stagnation in the past) is further deteriorating the purchasing power of the market. This in turn results in a decreasing sales potential for European companies.
  2. But European citizens too have not invested properly in their market. In Europe, for quite some time now we have not purchased enough of those goods that secure our standards and ultimately our own welfare. All too often we opt for cheap mass goods. However, cheap mass goods can not be produced according to the high social and environmental standards that we have installed in Europe to protect ourselves. Hence, our own employers, the vast majority of which do pay fair wages and invest in environment-friendly technology, are losing ground. Our mass consumption of cheap goods is problematic in this sense. It gradually undermines our own ability to consume.
  3. The continued and politically forced opening of the EU Single Market further increases pressure on our European companies. They need to face a much cheaper global competition, which is artificially placed on them through unqualified trade agreements. Sadly, many of these non-EU competitors can compete on unequal terms: they can use production methods (PPMs) that are incredibly cheap, as they do not have to pay respect to any of the (social and environmental) standards that we have established for our own companies. Increased consumption of such non-European goods is dangerous in regard to securing European jobs and maintaining our social security and pension systems. Consumption of non-European goods in general does not contribute to European wages and levies to the same extent that consumption of made in Europe goods does. Consumption of too many non-European goods also means that the prospects for creating jobs in Europe further diminish. In effect, one of the fundamentals of our welfare is constantly being diluted: the circular flow model [1]. The EU Single Market, in its current state is not sustainable.

These developments have led to the paradox of thrift (the paradox of saving) evolving throughout the economy. To escape this unfavorable situation, citizens and companies need to combine forces and work together. Both need to contribute to arranging the circular flow model tighter than it is today. Most of the goods that are purchased in Europe need to be goods that are also made in Europe. This will increase availabe income for many more Europeans and at the same time increase the sales base for European companies.

[1] http://economics.about.com/od/economics-basics/ss/The-Circular-Flow-Model.htm