THE STATE OF THE ART

» During the 1990s, the tide turned in continental Europe as

corporations began to try to become more efficient. Pressure
from foreign investors is encouraging better disclosure, broader
ownership, and a wave of deal-making. Global competition
and the single European market are forcing companies to use
their capital more effectively and expand outside their national
borders.

» Plans for EU enlargement to admit 13 new member countries are

being delayed as applicants need to converge economically and
politically with EU norms before they join. The new members
are poor enlargement is being handled delicately to avoid
problems.

» The EU's single currency has boosted investment and company

restructuring for efficiency by providing a single European
market for investment capital. It is expected to help lower prices
by removing exchange rate risk within the EU and creating price
transparency.

» The EU's agriculture is inefficient because of the protectionist

Common Agricultural Policy (CAP) that favors farmers over
consumers. Created at a time when 20% of EU workers were
in agriculture (there are now less than 4%), the CAP is being
reformed. Further reform will be needed to cope with the admis-
sion of Eastern European countries that have large agricultural
sectors.

» There is a consensus that the rich countries cannot afford not to

help poorer countries develop. While the NICs have successfully
transformed themselves into vigorous free market economies,
other LDCs are in serious trouble. The current emphasis is on
encouraging free markets, a balanced mix of better agriculture
and industry, and exporting rather than import substitution. It is
hoped that the rapid population growth in LDCs will self-adjust
downwards as nations get richer as it has, for instance, in
Japan and Singapore.