Wednesday, January 18, 2006

Unless You’re Lead Dog, the View Never Changes:

Over the last couple of weeks I have spoken how America’s economy is much more resilient than its European counterparts. I pointed out how on average America’s developed economy has outpaced Europe continually in all categories from higher GDP growth to lower unemployment. If you recall one of the reasons I gave was because of the efficiency of our work force and the flexibility our government gives business to react quickly to a changing business environment. I said how Europe continues to struggle because business won’t take the risk in highering more employees when times improve because Europe’s labor laws have created a culture of inefficiency.

Today new economic data continue to prove this point. A global business organization, the Conference Board, reported figures for 2005 that showed the U.S. leading Europe when it comes to productivity growth. The report showed the U.S. had a 1.8% productivity growth rate compared to 0.5% in Europe. More startling is that over the last decade the U.S. has averaged 2.4% versus 1.4% in Europe.

One has to wonder at what point does European governments finally throw in the towel on their labor model and admit the U.S. has it right. Currently there are signs that they are trying like certain attempts to overturn the 35-hour workweek. Despite some voices of reason in their governments the socialist labor movement is still strong with a recent example being yesterdays protests against a move to try and liberalize European docks that would make them more productive. The protest, which turned violent, ended up costing hundreds of thousands of dollars in damages and now looks to be defeated.

Finally if you don’t believe what I have been saying about the benefits of a flexible labor force, just read what the Conference Board stated in their report:

"If Europe can stage an expected economic rebound, it might experience some acceleration in productivity growth. But in the longer run, productivity growth depends more strongly on the structural characteristics of the economy. These include the flexibility of labor and product markets, which foster the reallocation of labor and capital from less to more productive economic activities."

If I didn’t know better I would say the Conference Board has been reading this blog. :)

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