Emerging South

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1. Oct 5 2008

   Belgian strikes and European productivity gains

   By John Baeyens | Share This | 0 Comments

   For decades, Germany was well known as a country with a relatively high productivity growth.
   But the picture has changed: Germany’s productivity growth fell from 1,9% in 1995-2000 tot 1,4% for the period 2001-2006, the latter is slightly above the average of the overall performance of the Eurozone.
   I don’t have the productivity rates of Belgium for those two periods, if anyone has them, please send them to me. Yet, I’m quite convinced the trend will be in the same line.
   The German productivity growth trend is opposite to the Brazilian one. Brazil’s productivity growth went up from 1,5% in the 80s to 2,5% currently. That last figure has remained relatively stable for the last 2 decades.
   
   The German productivity slowdown is, however, not only pronounced in an international perspective but also in historical perspective. Productivity growth was at rates of 2.5 per cent on average over 1985-1990 and on 2.9 per cent over 1990-1995. Of course, the German re-unification in itself boosted the growth rates. The decline from 2.5 to 1.4 per cent over 15 years, however, is alarming. The last years the superficial European financial newssources have been blinding us with the extraordinary German export performance. However, their competitiveness was mainly driven by massive wage restraints and is not at all due to productivity gains. The picture below is a little bit older but nevertheless intuitive. The bold pink magenta line is Germany...
   To all the people going on strike tomorrow in Belgium: look at the above charts and ask yourselves the question: how can Belgium as a country remain competitive? Most of the Belgian policies for expanding new sectors and stimulating innovation haven’t really delivered substantial results. Personally I don’t believe Europe will ever have longterm productivity gains above 2% again, in fact, I believe we might be in for decades of productivity gains well below 1,5%. This means that, just like Germany did, the only way for Belgium to remain competitive is massive wage restraints.

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