Monday, March 27, 2006

Prosperous like the U.S.

As I look for signs and causes of economic growth I repeatedly find the contrast of what doesn't work - economies that stagnate and don't grow. Europe has consistently been left behind by the U.S. So have the European nations noticed? What do they think and say about this fact? Behind closed doors they desperately want the same results, but what are they willing to do? In the light they brag that they are superior to the U.S. The Wall Street Journal today has a column on the latest EU get together. First the hard reality:
According to last year's study by the Association of European Chambers of Commerce and Industry (Eurochambers), the U.S. economy is at least 20 years ahead of the EU in almost every key economic indicator. The current EU levels in income per capita, productivity, R&D spending and employment were reached by the U.S. already in the late '70s and early '80s. Eurochambers believes it will take decades for the Continent to narrow that gap -- and even then only if governments quickly introduce reforms. The International Monetary Fund estimates that if Europe were to raise its competitive level to the top position in the Western world, it could increase its prosperity by more than 10%.
Do they want to be like the US? They talk... In the past economic and political leaders have vowed to loosen regulations to encourage growth and to allow more free movement of workers. But when they go to implement their intentions. They don't, indeed, they can't.
Despite the leaders' promises, the freedom to provide services throughout the EU will remain restricted out of an irrational fear that older member states would be swamped by cheap labor from East Europe. The same populist fears have also led most of "Old Europe" to prolong a general ban on the free movement of workers from the East European newcomers. ... And the promise to boost employment among young and old people through guaranteed apprenticeships and active-aging policies would address Europe's looming pension crisis -- if member states could implement the necessary measures. But recent protests in France and opposition to structural reforms in Italy and Germany suggest there will be serious domestic backlashes.
I truly wish them well. I like good, clean competition. Come on, Europe, let's race!
The problem is that some on the Continent are just now waking up to the reality of globalization, a reality not always in the best interests of Europe's traditional producers. But this is not a bad thing in itself. Globalization inevitably means more competition, which leads to better and cheaper products, a more productive allocation of resources and higher economic growth. But our societies and enterprises have to face this challenge if Europe is not to lose, much less improve, its standing in the global economy.

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