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The economic locomotive of the world

by Jerome a Paris Thu Mar 29th, 2007 at 09:19:26 AM EST

From The European Attractiveness Scoreboard (pdf)

Now we may see growth as a double-edged concept on ET, but for most people, and for deciders, it's a decidedly positive notion. So here's a scoop: most of world growth in the past 5 years took place in Europe as demonstrated in the above graph, which comes form unimpeachable sources... So why are we talking about Europe's economic decline or stagnation, exactly?


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Ah, the wonders of a (finally) accomodative monetary policy, coupled with moral (and pro-growth) socialist welfare policies.

If only we could get Europe to spread the wealth to all of the EU.

Somehow, I doubt this narrative will be reproduced in the anglo financial press, though.

by redstar on Thu Mar 29th, 2007 at 09:58:14 AM EST
Page 30:

In contrast, the EU scores higher than the USA on the share of public research financed by business. This is another type of R&D cooperation between the corporate sector and governments. According to the OECD, business finances a growing share of R&D in the areas of higher education and government's laboratories, averaging 6% in the EU-25, against 3% in the USA.

Frumph?

Page 21:


As regards research posts, MST graduates face bottlenecks in the labour market,
partly a result of insufficient R&D financing. This also contributes to the tendency of some of the best brains to leave Europe

Have I missed a step?

by Nomad on Thu Mar 29th, 2007 at 10:26:51 AM EST
I think you are correct, that it was hard to connect the dots regarding the discussion on R&D.  I think the disconnect boils down to two things, first from the summary on page 29:
A scientific powerhouse
Although its R&D and other knowledge-intensive investments represent a lesser share
of its GDP than in the USA or Japan
As this statement suggests, I think the level of R&D spending is lower in Europe.  I have seen that in other sources, as well as this one.  So a migration of R&D talent out of Europe would make sense.  But second, in healthcare anyway (biotech, pharma, and medical devices) the US has a business approach that supports development of new ideas, backing them with money from private investment and venture capital, starting companies to further develop those ideas, take them through clinical trials and hopefully approval, and then launch the products that make it into the market place.  It's a very valued and supported concept, and one where if successful, the financial payoffs are significant.  I imagine there are pockets of activity of this in Europe, but I doubt it would compare to the US.  This would lead to a tendency to attract the cream of the R&D crop with good new ideas out of Europe, imho.  And I've seen a number of examples of this first hand.

I think there are many areas where the US can learn from Europe, but this is one where the reverse is probably true.

by wchurchill on Fri Mar 30th, 2007 at 03:21:02 AM EST
[ Parent ]
I've been beating the S&P500 by an annualized 530bp/year rather consistently.

I actually wonder if I should just stop investing in the USA altogether, as the exposure is dragging down my returns. :)

Have Keyboard. Will Travel. :)

by cskendrick (cs ke nd ri c k @h ot m ail dot c om) on Thu Mar 29th, 2007 at 11:01:11 AM EST
you are right that both the european and asian markets have outperformed the US.  I measure my investing results against a benchmark, and included in my benchmark I split equities 60% US and 40% international.  Like you I wonder if I shouldn't be more international, and note the -:), but as you know a lot of the return is exchange rate driven, and if that turns around,,,,,the numbers turn around.  and of course we spend $$ where we live and not euro's, pounds, or whatever.
by wchurchill on Thu Mar 29th, 2007 at 05:42:11 PM EST
[ Parent ]
One data item that has always bothered me has been worker productivity. If this is measured by how much "profit" a firm earns per worker (or per hours worked) then it is easily distorted. Here's an example.

One of the basic claims is that the rise in IT fueled the huge increase in productivity in the US over the past two decades. This is certainly an important factor for things like back office record keeping, transaction process and supply chain management. When I first started investing I had to call the broker to put in an order. He then had to call his floor person who had to walk over to the trading desk place a hand written order with the specialist and then repeat the whole thing in reverse when the order was executed. Now I just click the mouse a few times and computers do the rest. The cost of trades has gone down to 1/5 of what it used to be without adjusting for inflation.

But the aspect of the economy which has been ignored in the calculation is the shift from making physical "stuff" to dealing in information. A factory worker running a machine in an auto plant can just do so much per hour. Even when replaced by robots there are still limitations. So his productivity has a limit. When his job is outsourced to China and the new working class moves into, say, derivatives instead the picture changes.

Now a person can control millions in economic activity per day, and there is no physical limit to how big a transaction can be processed. Selling one share and one million shares requires about the same physical effort. This person may earn his firm millions per year in fees and commissions. His productivity is, thus huge by the usual measure, but in reality he has produced nothing. Entirely too much economic activity these days is of this type. It can't continue. Bubbles based upon financial speculation always pop whether they are in tulip bulbs, South Sea investments or exotic financial instruments.

My variation on the old joke: how many financial traders does it take to change a lightbulb? An infinite amount they never learned any real-world skills.

I'd like to see some discussions of "productivity" which factor in the changing nature of work.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Thu Mar 29th, 2007 at 11:10:59 AM EST
One of the basic claims is that the rise in IT fueled the huge increase in productivity in the US over the past two decades. This is certainly an important factor for things like back office record keeping, transaction process and supply chain management.

[...]

But the aspect of the economy which has been ignored in the calculation is the shift from making physical "stuff" to dealing in information. A factory worker running a machine in an auto plant can just do so much per hour. Even when replaced by robots there are still limitations. So his productivity has a limit.

Actually I don't agree at all. IT has increased productivity extremely much in industry, at least in Swedish industry. Worker productivity has risen strongly in the steel works, paper mills, mines and refineries.

No one ever cares to check the statistics, but at least in this country it's in the industry where producutivity has increased most strongly, far quicker than in the private or public service sectors.

The logical conclusion of this is of course that the politicians do everything to destroy our industry and instead promote the "service" sector.


Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Mar 29th, 2007 at 12:04:01 PM EST
[ Parent ]
The Sweden economy, from a macroeconomic POV, tends to pass benefits of higher productivity to the worker.  In the US the benefits are passed first to management and then to the stockholders.  

Also don't the industries you mentioned, in Sweden, generally produce for speciality and other niche markets where quality is important?    


Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Thu Mar 29th, 2007 at 08:04:48 PM EST
[ Parent ]
When I hear about automation increasing worker productivity, I sometimes think of the productivity of a factory that only needs one worker -- huge, presumably.

In principle, a factory might need no workers at all. Would worker productivity then be infinite, the denominator having become zero?

Words and ideas I offer here may be used freely and without attribution.

by technopolitical on Fri Mar 30th, 2007 at 03:18:16 AM EST
[ Parent ]
Which brings up the question, "What are they producing so much better?"  Smog?  Barbie Dolls?  Incontinent Ordinance?  Cars?  

The business press is full of these gee-whiz, feel-good, statistics.  

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Fri Mar 30th, 2007 at 06:00:03 PM EST
[ Parent ]
I am not sure if you guys and girls have covered this issue, and I know it is off topic Jerome (Forgive me?:), but I just wanted to drop this little tidbit of info over here at the EuroTrib:

American Studios' Secret Plan to Lock Down European TV Devices

EFF Exposes Standards Jeopardizing Innovation and Consumer Rights

San Francisco - An international consortium of television and technology companies is devising draconian anti-consumer restrictions for the next generation of TVs in Europe and beyond, at the behest of American entertainment giants.

The Electronic Frontier Foundation (EFF) is the only public interest group to have gained entrance into the secretive meetings of the Digital Video Broadcasting Project (DVB), a group that creates the television and video specifications used in Europe, Australia, and much of Asia and Africa. In a report released today, EFF shows how U.S. movie and television companies have convinced DVB to create new technical specifications that would build digital rights management technologies into televisions. These specifications are likely to take away consumers' rights, which will subsequently be sold back to them piecemeal -- so entertainment fans will have to pay again and again for legitimate uses of lawfully acquired digital television content.


I thought this might be of interest to you fine people.  Certainly, it is a topic worth visiting, if your members have not already?

Guaranteed to be plastered all over the Internet Drinking Liberally in New Milford
by Connecticut Man1 (connecticutman1 AT gmail dot com) on Thu Mar 29th, 2007 at 12:03:28 PM EST
Well, I think a big chunk of the difference between EU and US in the graph comes from the EU enlargement: between 2001 and 2006, we added the GDP of 10 countries... That's the reason why it is titled "market expansion" and not growth.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Thu Mar 29th, 2007 at 12:09:59 PM EST
They need EU15, EU25 and EU27 figures.

Also, the values are in dollars, so the exchange rate matters. I'd be happier with PPP figures.

"It's the statue, man, The Statue."

by Migeru (migeru at eurotrib dot com) on Thu Mar 29th, 2007 at 12:12:59 PM EST
[ Parent ]
This is EU-25 to EU-25.
PPP numbers are available as well in that study.

(what has played a role is the euro/dollar rate, but hey, that table show a true, if different, outlook)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Mar 29th, 2007 at 01:01:41 PM EST
[ Parent ]
From the document,
International comparisons of economic growth also rely on exchange rates.
In the last 5 years, Europe was not the growth-centre of the world and the
strength of the euro probably depressed some European exports. But the
EU market nevertheless added nearly €1.5 trillion to its value between 2001
and 2006. Because the euro increased in value, this expansion amounts to
US$6 trillion. In comparison, the USA added US$3 trillion, China and India
together added US$2 trillion and Japan added less than US$0.3 trillion over
the same period.
Both Asia and the US grew faster than the EU.  I think the article is correct that one factor was the strenghtening of the Euro over this period, making EU products more expensive on the global markets.  And I also think Europe is doing just fine.  My biggest concern for Europe is the same concern I have for the US--the demographic impact of an aging population, and the resulting impact on consumer spending, a major component of demand.  

I think this is a useful document. But let's remember that it is intended as a marketing piece to promote direct investment in Europe.  It's going to present that case in the best light.  I would sure do that if I was writing it, and if you pull out a similar document from the US Department of Commerce, they will of course do the same thing.  There is nothing wrong with presenting data in a positive light.  But your comment Jerome goes beyond what the people presenting the data in the most positive light would say.

by wchurchill on Thu Mar 29th, 2007 at 05:14:08 PM EST
[ Parent ]

 But let's remember that it is intended as a marketing piece to promote direct investment in Europe.  It's going to present that case in the best light.

I fully agree. The fact is that this presentation is no less true than the one e endlessly get in the media all over the place, i.e. that the US "free-market" economy is superior to Europe's sclerotic version. THAT's also a "marketing piece". That's the point I'm trying to make. The reality we're being sold is just marketing ans has only a tenuous link to reality.

Thus my version provides balance and perspective, and it's even technically true.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Mar 29th, 2007 at 05:20:29 PM EST
[ Parent ]
Well, I empathize with your view, in the sense of MSM.  The lack of insight and intelligence on their part, coupled with their tendency to take a point of view and just pound on it is very frustrating.  I feel the same way when they pound away on US healthcare, and frankly many other issues.  There's normally a grain of truth, but then where they go is ridiculous.

But my comment was addressed at true marketing, not the idiots in MSM.  There is nothing wrong with the US Dept of Commerce or the French and German equivalents presenting things in the best light.  But we should do our best to stay factual and objective.

Personally, as I've said before, I like both the US and European models.  It's an incredible opportunity, imo, for us to have both models, so you get a chance to pick and choose--in some cases combine--the models, evolving toward something that is better than both.  For example, there are elements of the French healthcare approach that I think would be very instructive for the US.  Not in the sense of just adopting it wholesale.  But rather in the sense of taking some elements, that if I understand it right, really make sense for the US, and combining with existing aspects of the US system.

The EU is doing more than fine in growth.  The EU is certainly not declining nor stagnating.  But they're just not the economic locomotive of the world, at least not yet--"and it's even technically true",,,,well, not really.

by wchurchill on Thu Mar 29th, 2007 at 06:04:12 PM EST
[ Parent ]
The version you posted is not biased. The fact the Euro appreciated shows the markets think that european are producing more value. Who is to criticize the perfect allocation of funds by The Market TM ? Socialist government statistical agencies? Nah.

Un roi sans divertissement est un homme plein de misères
by linca (antonin POINT lucas AROBASE gmail.com) on Fri Mar 30th, 2007 at 09:27:10 PM EST
[ Parent ]
You might give it a different, more Amerocentric skew -- something like "BREAKING! Bush'S USA Left Behind by European Dynamo" -- but I think this would be very instructive for Kossacks, many of whom still seem to think that the U.S. is the only viable country in the world.
by Matt in NYC on Thu Mar 29th, 2007 at 02:13:59 PM EST
So.. this basically means that the GDp iN Europe is much gher thatn in the US .. so a 2% growth in Europe means much more than 2% GDP growth in the USA?

At least for China and India this is the explanation.

Yes.. we could do propaganda if we ever wanted to... but my point is that propaganda is not the best way. narratives is the best.

And I am glad that T.G. Ash in the guardian followed this idea.. we need a common narrative theeater in europe.. we need to talk about European pioolitics in our every day life (and not Blair or Zapatero)... that will make the difference... from there we can construct a complete narrative.

now we are overwhelemd ... we need a Euroepan network.. with local nodes and a general European sphere where new narratives will flow more easily.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Fri Mar 30th, 2007 at 07:55:57 AM EST
I think you are pointing out the fallacy, in a very nice way, of presenting the numbers they way they did, and Jerome jumped on the bandwagon.
by wchurchill on Fri Mar 30th, 2007 at 01:25:29 PM EST
[ Parent ]
I was wondering ... but it is just as true as other propgaganda issues.

Like unemployment in the US and Eruope..both give numbers right... but they are computed completely different. The differences is very small

So it all depends how you use it...and still 4 % growth know in Spain is much more impressive than thee 10% in China.. I can test it.

In any case I prefer living in europe than in the US .. so I am biased :)

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Fri Mar 30th, 2007 at 02:37:17 PM EST
[ Parent ]
actually I love living in both.  I could easily move to London or Paris tomorrow and be very happy.  But I'm also very happy right here.  I feel I'm truely not biased.  In fact I think it's a unique situation having two places that have so many similarities, yet at the same time political and econcomic differences.  It provides a chance to try to look at each, and learn.  I do not think that one approach is clearly better than the other--instead I see features in each that I like better.  If I were King I would meld the two approaches, and I think come out with a system that was better than both.

but my criticism of Jerome, and occassional comments by others on this site, is that I don't think we should be presenting a distorted view on this site intentionally.  Remember here is what Jerome said,

But that'(s exactly my point .

<snip>

 The fact is that this presentation is no less true than the one e endlessly get in the media all over the place, i.e. that the US "free-market" economy is superior to Europe's sclerotic version. THAT's also a "marketing piece". That's the point I'm trying to make. The reality we're being sold is just marketing ans has only a tenuous link to reality.

Thus my version provides balance and perspective, and it's even technically true.

I don't feel a need to market to others on this site,,,or present a point of view that counterbalances propoganda.  I would rather that very bright people like Jerome argue their position.  That's really the main reason I come to this site--a very bright and very diverse group of people.  and I'm not an idealogue--I have things that I have learned and opinions that I happily present.  But I've learned things here, and more generally in life, that have changed my views in many, many areas.

We are each going to be wrong about some things we argue, and that is fine.  But if you add on top of that an intentional presentation of a biased view to counterbalance MSM or right wing nuts or whomever--it's just not what I would like to see in our discussions.

by wchurchill on Fri Mar 30th, 2007 at 02:57:02 PM EST
[ Parent ]
Yes a  I see.. but I think Jerome is also fair in saying that you could do the same thing than the WSJ does.

Actually in itself it is not a distorted picture.. just as it would not be a distorted picture if the unemployment numbers were presented properly...prolem is that they are not presented properly.

In any case, once you have settled with an opinion is generaly very difficult to change...facts notwithsstading(plus in most cases the sicentific narrative has no clear-cut naswer or even sn answer at all). BUt here most people do not make their minds easilo and they like the scientific and factual narrative more than others...it's great.

I do not expect more from this site :)

take care wc

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Fri Mar 30th, 2007 at 03:40:00 PM EST
[ Parent ]
The thing is - I know that my version is biased, just like I am able to know that the opposite version is biased. All I'm saying is that having bias going always the same direction is noxious, and thus a different bias is useful, as a way to restore some balance in perceptions, even if it's no more "true". he cnfrontation of several versions gets you closer to some form of truth. A one sided reality does not.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Mar 30th, 2007 at 04:07:15 PM EST
[ Parent ]
And what have you been smoking?

You can't be me, I'm taken
by Sven Triloqvist on Fri Mar 30th, 2007 at 05:23:31 PM EST
[ Parent ]


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