Attendees of the ICA Institute’s event at Kennesaw State University Jan. 15 expecting World Bank economist Indermit Gill to provide a requiem for Europe were in for a surprise.
Armed with an extensive array of bar charts projected on an overhead screen, the bank’s chief economist for Europe and Central Asia informed the 500 or so attendees that he thought Europe deserved an overall grade of “B”.
Besides the invited guests of the institute, which is located at the university’s Coles College of Business, most of the attendees were students and a B probably sounded pretty good.
Annabelle Malins, the British consul general for the Southeast who is based in Atlanta, set the stage for Dr. Gill’s presentation. She reminded the audience that 50 percent of the world’s gross domestic product is generated by the United States and the European Union.
Trade between the U.S. and EU, she added, accounted for 30 percent of all the world’s trade. EU investment in the U.S. also is responsible for 1 million jobs here and 30,000 in Georgia alone, she said.
But the consul general didn’t neglect Europe’s or the U.K.’s current economic problems, saying that tough austerity measures have had to be put in place.
For these reasons, her new year’s resolution, she said, is for the U.S. and the EU to begin negotiating a free trade agreement that would provide a boost to economies on both sides of the Atlantic Ocean.
To put Europe’s economic accomplishments in perspective, Dr. Gill dismissed “a lot of the noisy development in Asia, especially China,” and called Europe’s long-term accomplishment over the past 60 years “tremendous.”
That being said, he explained his grading system, which he divided into six parts: trade, finance, enterprise, innovation, labor and government.
He then determined a grade for each part as follows: trade, A/A-; finance, B+; enterprise, B; innovation, B-; labor, C and government, C-, the result being an overall grade of B.
The EU, he said, has excelled at transforming countries from middle income to high income through what he called “the convergence machine” whereby investments by Europe’s richest countries enabled its less well off to benefit from membership in the union.
He repeatedly cited Croatia, Cyprus, the Czech Republic, Estonia, Greece, Hungary, Latvia, Malta, Poland, Portugal, the Slovak Republic and Slovenia as examples.
Countries such as Greece, Spain, Portugal and Italy, which claim newspaper headlines these days, unarguably have slipped, he added, but not to the levels of many other poor nations. He said Greece was at gross domestic product levels it experienced in 2006; Portugal in 2007; and Spain and Italy in 2008.
Besides extolling the convergence machine, Europe has been able to develop a global brand based on its strengths in engineering and innovation. As an example, he cited the iPhone as being dependent on some of Europe’s propensity for design as described in Walter Isaacson’s biography of deceased Apple Inc. CEO Steve Jobs.
Europe also has developed agreeable qualities of life, which is admired by tourists from around the world who admire its cultural heritage and lifestyle.
But despite his positive talk, he forecast immense changes for Europe ahead with the accomplishments of what he called the “European model” having been upended by 1 billion Asian workers entering the world stage and by the information technology revolution.
He described Finland, Sweden, the Czech Republic and Denmark as countries that have figured out how to combine the financing of research and development, enterprise and university cooperation to build equity and wealth.
Surprisingly, the dominant economies such as Germany and France, he said would become more dependent on the poorer ones and cited the success of Volkswagen AG because its factories around the world were able to manufacture high-end goods.
In sharp contrast to these economies, however, the southern Europeans built debt while their northern and eastern neighbors were building equity.
While he had no one size fits all formula for the EU’s members, he made it clear that European workers would have to extend their work lives if not work more hours during a year.
Many of its social policies also would have to be changed because while they could be financed in the past, greater competition from abroad and big demographic shifts at home would demand new policies.
But as he described these changes he certainly wasn’t pessimistic and indicated that the changes would be made as natural outcomes of measures that in time would be put in place to deepen the single market.
Dr. Gill’s research spanned two years and has been published by the World Bank in its report “Golden Growth: Restoring the luster of the European economic model.”
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