July 5, 2004
TO BE ON TOP, YOU NEED A MISSIONARY:
Europe’s Quiet Leap Forward (Kenneth Rogoff, Foreign Policy, July/Aug 2004)
Europe's economy is far from hopeless. First, the notion that European firms and workers are much less productive than those in the United States is simply uninformed. The main reason why Europe's output per capita stands at only 70 percent of U.S. levels is that Europeans work less than Americans—a lot less. Europeans work fewer hours per week, take longer vacations, and retire earlier. When it comes to leisure, it is the Americans, Japanese, and even the Chinese who have plenty of catching up to do. And as they and others start “consuming” more leisure over the next 50 years, Europe's relative economic size will expand. Second, Europe still has a spectacularly well-educated and versatile work force, even if dubious labor legislation holds it back, particularly in Germany. Third, recent empirical studies have convincingly shown that strong political and legal institutions drive economic growth. Say what you want about Italian politicians and the EU's new draft constitution, but European institutions remain models of honesty and transparency compared to those in Asia, Latin America, and the Middle East.Finally, geography is another important driver of economic destiny and, last I checked, Europe was still situated in a relatively disease-free and temperate locale that offers far better working conditions than large parts of Africa, India, or Latin America....
As the United States develops new technologies, Europe can copy them. Where the United States has to make commitments to certain technologies—such as cellular-phone technology—Europe can leapfrog to the next, more efficient, technology....
And finally, the Europeans might get lucky in a completely unexpected way that boosts their economic prospects. For example, one of Europe's biggest obstacles to deeper integration and economic growth is language. What if all Europeans are one day able to carry around small pocket computers that instantly and flawlessly translate languages? With the language barrier gone, competition and true regional integration would flourish in Europe....
Maybe it will not happen this year or next, but there is every reason to believe that someday, Europe's economy just might be on top. No joke.
So let me see if I have this straight. To imagine Europe on top, we have to assume that:
- The rest of the world will become as listless as Europeans under their egregious tax burden.
- People who never change jobs, holding the same one their whole lives, are spectacularly versatile workers.
- It's enough to be less corrupt than Myanmar, Jordan, or Paraguay.
- Nice weather may be a decisive competitive advantage, especially if people in the tropics don't discover air conditioning.
- It's no barrier to economic success to be incapable of innovation.
- A universal translator like the one on Star Trek may soon be developed.
Comparing this argument to Orrin's thesis that Europe needs re-Christianization to come out on top, I'm wondering: why is Rogoff the one at Harvard?
Posted by Paul Jaminet at July 5, 2004 9:39 AM
..."As the United States develops new technologies, Europe can copy them...Europe can leapfrog to the next, more efficient, technology..."
Aren't these two comments contradictory? You're right Paul, why is Rogoff at Harvard?
Posted by: Bartman at July 5, 2004 10:33 AMWell, they're not exactly contradictory. What he's thinking is that the U.S. may invent both a new technology and a newer 'leapfrog' technology, but be inhibited from adopting the leapfrog technology because people are already invested in the 'new' technology, whereas Europe, which as a laggard did not invest in the 'new' technology, can less expensively adopt the 'leapfrog' technology and get a temporary advantage. The possibility of a laggard country moving ahead in this way is a theoretical possibility that rarely or never happens in the real world.
BTW, I propose Jaminet's Rule: "Any scholarly essay whose concluding sentence is 'No joke' is a joke."
Posted by: pj at July 5, 2004 10:49 AMSo, they just need (read: hope??) an universal language translator.
Or.........everybody could just learn a common language. Like English.
Posted by: ray at July 5, 2004 11:25 AMDid he just make an argument that Europe will prevail via parasitism?
Posted by: Twn at July 5, 2004 12:39 PMBut they sure can cook!
Posted by: at July 5, 2004 1:18 PM..."As the United States develops new technologies, Europe can copy them...Europe can leapfrog to the next, more efficient, technology..."
Wasn't that supposed to be the Japanese way to success and the #1 spot back in the 1980s?
Two comments.
1. Rogoff assumes that the US will continue providing military cover for Old Europe. Wasting all those Euros on defence can be avoided by just continued leeching off Uncle Sap. Rogoff's assumption is soon to be proved wrong.
2. If the US does the technological development heavy lifting and then patents the concepts, designs, products, etc.,Old Europe will not be able to simply walk in and take it. There will be a price to be paid by the EU for it. A stiff price.
Posted by: John J. Coupal at July 5, 2004 5:16 PMWe need to stop chasing away the world's smartest with the overzealous post-911 visa entry requirements. Graduate school enrollments in the US are down 30%.
Posted by: Gideon at July 5, 2004 5:40 PM--but European institutions remain models of honesty and transparency compared to those in Asia, Latin America, and the Middle East.--
That's something to brag about????
How come Africa's not mentioned?
Posted by: Sandy P at July 6, 2004 1:00 AM'..And finally, the Europeans might get lucky in a completely unexpected way that boosts their economic prospects'
yeah, maybe they'll win the PowerBall lottery!
geez, is that lame or what?
When he says that the U.S. and Asians have
"catching up to do" with regard to leisure time
he assumes that the global economy is trending
toward produce more of such leisure time. I
actually think the pendulum in Europe will
eventually swing back to extended work year.
Also, the climate thing can't be ignored. Without
air conditioning we would be far less productive.
It is likely that having to pay for all of the
climate control required to get by in North America is a permanent drag on our overall economic output, but considering that the economic
engine is drifting southwestward, this seems to
be a cost that is bearable.
There are a couple of examples of "leapfrog" technology. In TV, the US had NTSC first; PAL is almost certainly technically superior, because the Europeans had ten years of looking at what the US did with television in order to propose a better standard. GSM was better than the earlier IS-95 TDMA digital cellular phone standards, though it's also superceded in many ways by CDMA, and now both are being superceded by third generation cell phone standards. (CDMA has the advantage of being more easily upgradeable to 3G, though.)
Posted by: John Thacker at July 6, 2004 7:47 PMOf course, in reality it was Europe who made a commitment to GSM, whereas the US refused to mandate a single standard. GSM is very good, and was the best of its time; however, mandating it as the only legal standard held back research while the US steamed ahead.
Posted by: John Thacker at July 6, 2004 7:48 PM