On Europe

Europe is a fascinating study. The cradle of renaissance, the trailblazer for almost all modern business is currently struggling to find its place in the global context. The growth of small nations, the quixotic search for consensus amongst 25 members, the futile attempts to find the middle ground between welfare state and market economies is eating away at EU’s foundations. The ridiculous practice of rotating the EU presidency every 6 months (that is correct, the EU President changes every 6 months) means that every incoming President is largely relegated to ceremonial roles instead of getting things done. Forget about a company, I don’t imagine a local club can run where the President changes every 6 months!

More evidence? The recently released Global Competitiveness Report shows (pdf link) that the biggest economies of Europe have lost ground again. As WSJ writes (sub required),

Western Europe’s slip in competitiveness from the beginning of the decade – though from fairly high levels — reflects the region’s economic development of late. Gross domestic product in the 12-nation euro zone that forms the bulk of the region’s economy is projected to have expanded on average at just 1.3% during the first five years of this decade, compared with more than 2% during the previous decade. The euro zone is forecast to grow just 1.2% this year, behind 3.5% growth in the U.S. and 4.3% growth globally, according to recent forecasts by the International Monetary Fund. The region’s budget deficit has risen to 2.7% of GDP in 2004 from 1.9% of GDP in 2001.

One of the biggest structural problem facing EU is the overemphasis on consensus and safety. According to the Eurobarometer survey of public opinion,

“almost 60 per cent of EU citizens have never considered setting up a business and 50 per cent of Europeans agree that ‘one should not start a business when there is a risk of failure’ (compared with 33 per cent in the US).”

Take a simple example of language. Instead of moving towards a common business language, so much money is wasted on delivering multiple languages for EU meetings that it staggers one’s mind. On the other hand, the member states are so militant about national pride and national language that it would be funny if it weren’t so tragic!
As a small company in EU, we always find it tough to generate significant inter EU business because of the multiple language requirements, channel differences, price differences and market access costs. This unfortunate lack of scale economies means that very few small companies stand the chance to grow fast in a pan-European market. Without such success stories, I do not see how entrepreneuralism, taking risks becomes ok among people and thus contribute to a culture change from safety and consensus to risk taking and enterprising.


One thought on “On Europe

  1. Pingback: A Regular Mantra » Eurozone Economies - Storm clouds ahead

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