These days this blog is becoming a little bit more personalised and idiosynchratic in terms of the posts which appear. This, I suppose, is how I want it to be. If you want good macroeconomic assessment of just what is happening right now you could do a lot worse than follow young Claus Vistesen.
I am also doing plenty of economic posting, but most of it doesn't appear on this blog. At present I am trying to follow the Indian and the Italian economies, for reasons which I explain here. At present the Italian Economy Blog has livened-up considerably, and this week there have been posts about ageing, about pensions, about the budget and about industrial output and Fiat.
Also I am working with a group of very interesting economists on the Indian Economy blog, and these two posts (and this) I think are very interesting for anyone who wants to understand what is actually happening in India.
Also there is the demography matters blog, and Claus recently had a post related to the sustainability of pensions in the EU, while I had a piece this morning about a new proposal in the US to fully account for the liabilities incurred by the state in the future in terms of pensions, health and social security.
Anyway, while I am here, the FT this morning has an interesting article about the recent apparent improvement in EU productivity. At this point I will not venture very far into what I actually think, since in part I have not really decided. The problem is that the methodological and measurement issues are, in and of themselves, substantial in connection with this topic, and when you then add to this the politically contentious nature of the subject matter, well, what you normally end up with is a total mess, and one which spreads more confusion than light. Still, for what it is worth here is the opinion of the ECB:
Since the mid-1990s the eurozone has fallen significantly behind the US in labour productivity growth, helping explain its lacklustre overall economic performance. But ECB figures this month showed a significant improvement this year, with labour productivity growth reaching a six-year high in the second quarter.
The European Commission has cited the rise in productivity growth as evidence of a eurozone recovery, and suggested that its long-term growth prospects have been lifted. Joaquín Almunia, the EU monetary affairs commissioner, told the FT last month: “I have a feeling some improvements are taking place.” Eurozone economic growth overtook that of the US in the second quarter of this year, and is thought to have remained strong in the third quarter.
However, an ECB research paper concludes that the recent improvement in labour productivity growth “may be to a large extent a cyclical phenomenon” and warns that it may be some years before a “proper assessment” can be made.
Although the ECB says its research papers do not necessarily reflect the bank’s thinking, Jean-Claude Trichet, its president, highlighted the eurozone’s productivity deficit in a speech in Berlin last week.
The detailed ECB paper is generally scathing of eurozone productivity performance, highlighting in particular the failure of the eurozone – compared with the US – to harness the productivity benefits allowed by new technologies. It acknowledges growth prospects have been enhanced by measures that have increased the utilisation of labour, by reducing unemployment for instance. But it argues that the positive impact of such measures on the eurozone since the mid-1990s “was smaller than that of rising productivity growth in the US”.
The paper argues that a decline in labour productivity growth is spread across most of the 12 eurozone countries and is apparent whether measured per person or per hour worked – undermining arguments that Europe’s weaker economic performance results from its citizens’ preference for working fewer hours.
It says eurozone labour productivity (measured as real gross domestic product per hour worked) declined from an average annual growth rate of 2.1 per cent between 1990-1995 to just 1.2 per cent between 1996 and 2005. Over the same period, US labour productivity growth rose strongly, from 1.3 per cent to 2.1 per cent.
Incidentally, I myself had some pretty scathing remarks to make about Joaquim Almunia in this post, and I am not really surprsied to find him indulging his opinions in this thoroughly trivial and superficial fashion. Would that he knew something of what he was talking about. And would that we had Pedro Solbes back in Brussels, as I say at the end of the post: Of course Europe's loss is Spain's benefit, but that hardly seems to be the important point given the gravity of the issues involved.
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