Sunday, March 13, 2005

Europe - risks and opportunities 

An interesting survey, with a lot of interesting implications:
"The US economy is 20 years ahead of that of the EU and it will take decades for Europe to catch up, according to an explosive new study... The survey, unveiled by pan-EU small business organisation Eurochambres, is intended as a sharp 'wake-up call' for EU leaders as they gather on 22 March for a summit on how to boost growth and jobs in the EU economy.

"The EU's current performance in terms of employment was achieved in the US in 1978 and it will take until 2023 for Europe to catch up, the report shows.

"The situation is scarcely better when it comes to income per person. The US attained the current EU performance in 1985 and Europe is expected to close the gap in 2072.

"But the bleakest picture comes when comparing the two economic blocs in terms of research and development. Europe is expected to catch up with the US in 2123 and then only if the EU outstrips America by 0.5 percent per year in terms of R&D investment."
(hat tip: Tim Blair, who's having disco ball flashbacks) I don't expect that this survey will get a lot of publicity in Europe or elsewhere, and if it does, it will elicit the usual responses: it's wrong (as I haven't read the actual survey I'm not sure what assumption were made about the future trends, but there's always somebody who'll say they are too optimistic/pessimistic), the methodology is flawed ("The survey was conducted using a method called the 'time distance measure', pioneered by Professor Pavle Sicherl at Ljubljana University" - so it's probably some New Europe plot, anyway), and in any case, we Europeans have a better life, better lifestyle and better overall socio-economic system than the Yanks. Still, if the study is at least broadly correct, it puts a little dampener on the EU's economic and military superpowerdom ambitions.

One other interesting aside: " 'Data clearly suggest that including the 10 new member countries in the comparison would further deteriorate Europe's position compared to the US for all four major indicators', says the report." Who would have known that the EU expansion to encompass New Europe was a clever Karl Rove conspiracy not only to handicap the Union politically, but also to throw a spanner into Europe's economic engine? "New Europe: America's Trojan Horses inside the European Union"; I'm sure somebody in Brussels is currently working on that book.

Speaking of Central and Eastern Europe, another recent report suggests that American businesses, suckered by perceived opportunities in Asia, are missing out on a potential goldmine in New Europe (hat tip: Dan Foty):
"A report released by Boston Consulting Group examined the issue of sourcing and manufacturing in rapidly developing economics and found that markets in Central and Eastern Europe were being largely ignored by U.S. companies, even though they offer a wealth of opportunities for investors.

"BCG found that compared to countries in Asia, such as China, Central and Eastern European countries offered cost competitiveness, growing market opportunities and a favorable business climate.

"According to the U.S. Chamber of Commerce, Bureau of Economic Analysis, in 2003 the U.S. direct investment in Eastern Europe, which includes the European Union's 10 newest members, amounted to roughly $20 billion. While in Western Europe, the United States invested roughly $963 billion."
Eastern and Central Europe offers labor costs 4 to 10 times lower than in Western Europe (the advantage likely to be sustained in the foreseeable future, although I would think not to such huge extent), well educated technical workforce, and a "significantly lower regulatory, political and legal risk" compared to countries such as China.

So, American businesses, invest ethically - in countries which not only are good allies, but which also offer great commercial opportunities.


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