Monday, October 16, 2006

Productivity In Europe

As was to be expected the rate of productivity increase in the US now seems to be slowing somewhat. Maintaining the rate of increase means maintaning the pace of a technological and organisational revolution, and it isn't immediately obvious that this is always possible (hence all those arguments about whether the cruising speed of the US economy had been raised in the long term or not).

On the other hand Europe is now catching up somewhat in the productivity game:

``Labor productivity, the holy grail of economic welfare and stock-market performance, has significantly accelerated,'' says Eric Chaney, Morgan Stanley's chief European economist in London and a former forecaster at the French Ministry of Finance.

Morgan Stanley economists calculate that productivity increased in the dozen euro nations at an annual rate of 2.6 percent in the first half of 2006, double the pace of the prior six years.

So while tyhere is obviously a first mover advantage with new technology, there is also a second mover 'catch-up' advantage if the pioneer doesn't keep moving forward. This is what we may now be seeing. Over a longer period of time there is absolutely no reason whatsoever that the EU economies cannot find ways to leverage ICT just like in the US, who have, at the end of the day, shown the others the way.

What the macro economic implications of this will be is another matter altogether. Here I don't go with the Bloomberg reading at all, but this is for another post.

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