Tuesday, July 27, 2004

It sucks to be at the bottom of the barrel

This article points out something that I realized a few weeks ago, but never really wrote down.

However, the post-war economic systems of France, Germany and Italy have always been more restricted by regulations and high tax burdens than America’s. Still, in the first decades after World War II, this did not stymie economic growth in continental Europe. The prosperity gap (search) between America and Europe’s Big Three shrank. Then, starting in the early 1980s, the gap slowly but relatively steadily widened again. The result is that in recent years the prosperity gap between France and Western Germany on the one hand and the U.S. on the other was as big as it has been since the late 1960s.   In other words, for quite a while European-style “comfy capitalism” seemed to work as good as U.S.-style “cowboy capitalism”.
 But that is no longer true. What happened? First, there was a time in which economic policy mistakes had little impact, if only because there were many other governments that made far more basic mistakes—remember communism? After all, it’s easier to compete with countries whose governments systematically destroy their economies’ dynamism. But today, according to the Economic Freedom report, Estonia has a freer economy than Germany has; Hungary is ahead of Italy; and Latvia and the Czech Republic do better than France.  
I was thinking about the number of major tech companies that started up during the tech boom, and I could not think of a European company at all.  This article found the one exception,  "Thus, while America has witnessed the rise of IT producers such as Cisco, Dell, Hewlett-Packard, Intel, Microsoft, Oracle, and Sun Microsystems, no German IT start-up ever went on to become a global player; the only exception is SAP, a software company." 
I was thinking pure chance couldn’t account for Europe not having a single major IT player.  Not all of the companies that I thought of were hardware based; some were software, which can be name anywhere.  There must be a reason why these companies started here, this article points out a few reasons why.  In the big picture of things, I think the article missed a point though. 

From what I know getting a college education is quicker in the US is than Europe, and the colleges adjusted to the need for tech workers quickly.  At my office the average age of a programmer is probably 23.  I think that the reason I pointed out is small compared to the reason the article points out, but it is a very important piece of the puzzle. 

The only other reason I could think of was the fact that America was friendlier toward business than Europe, just as the article said.

I think we are seeing a trend where Europe and the US are going to be on different ends of the political, social, and money spectrums.  If all that separated us from Europe was water, language, political background, and social norms, I think that the world would be fine, but Europe will become the area of the-have-much-less-than-we-used-to, because of failure to move to an information economy.  (In France recently, workers were fighting for factory jobs, and won by agreeing to work an extra hour a week for the same pay.)

If technology moves exponentially, where will an information economy move based on that technology? 

Their own inability to produce their own wealth will drive them to hate us.  From that hate and distrust, policies will be developed that will drive a wedge against America and Europe.


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