A European Productivity Surge?

Here, we have a Morgan Stanley research digest (like a blog, but they pay you 70,000 € a year for writing them) concerning the European economy. They hold that a rapid build-up in European companies' investment in IT may herald a surge in labour productivity similar to that seen in the US in the 1990s.

"Among the factors that could explain the productivity revival we have detected in Europe (see “Productivity Revival,” 18 August 2004), massive investment in information and communications technology (ICT) equipment and software by European companies over the last ten years is the one that clearly stands out, I believe. Why would companies under permanent pressure from shareholders spend so much and with such persistence over time if technology did not deliver what it is made for, i.e., productivity? Unfortunately, disparate and often old-fashioned statistical systems do not give a clear picture of this effort that otherwise would draw considerable attention, in my view. This is why I was intrigued by a report coming from one of my Asian colleagues, Denise Yam, while I was on a West Coast trip, trying to persuade investors that Europe was at a turning point.

This year, or at least up to September, Europe has generated the fastest export orders to Taiwan, beating China and leaving the US and Japan far behind. Last year, Europe was second only to China. The numbers are impressive: European export orders expressed in US dollars have increased 32.3% so far this year, to be compared to 29.4% for Chinese orders, 25% for the US, and 14% for Japan. Over 2003-2004, European orders have grown 50%. Assuming that prices went down 30% over that period, volumes have probably doubled in less than two years."

Mind you, Edward over at Bonobo Land disagrees, on the basis of his long-standing concerns about demographics. Personally, I'm agnostic about this - I usually find the numbers concerning the ageing population surprisingly low in absolute terms - but he covers it more intensely than me, both on his own blog and at Fistful. Read, mark, learn and, of course, inwardly digest.