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What’s wrong with Europe’s Economy?

What’s wrong with Europe’s Economy?. Queen’s Prize lecture Adair Turner 5th February 2003. Real GDP Growth Per Annum: %. Real GDP Growth Per Capita Per Annum: %. US and EU Growth Compared. Source: OECD Historical Statistics, OECD Economic Outlook.

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What’s wrong with Europe’s Economy?

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  1. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt What’s wrong with Europe’s Economy? Queen’s Prize lecture Adair Turner 5th February 2003

  2. Real GDP Growth Per Annum: % Real GDP Growth Per Capita Per Annum: % R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt US and EU Growth Compared Source: OECD Historical Statistics, OECD Economic Outlook

  3. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Labour Productivity per Hour Worked% Per Annum Growth Source: van Ark, Inklaar and McGuckin (2002)

  4. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Unemployment Rates 1973-2000 Source: OECD Historical Statistics (1973-2000)

  5. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Real GDP per Capita Growth 1993 - 2000% Per Annum Source: OECD Historical Statistics (1973-2000)

  6. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Employment Rates - 2000% of Population aged 15-64 Norway 78 Denmark 76 US 75 Sweden 73 Netherlands 72 Portugal 72 UK 71 Austria 69 Finland 68 Germany 67 Ireland 66 France 62 Belgium 60 Spain 57 Italy 55 Greece 55

  7. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Productivity, Labour Input and Prosperity:France and US 1999France = 100 GDP per Hour Worked GDP per Employee US 102 France 100 US 121 France 100 GDP per Capita US 140 France 100 Hours Worked per Employee Employees per Head of Population US 118 France 100 US 115 France 100 Source: O’Mahony and De Boer (2002), OECD Labour Force Statistics 1981-2001

  8. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Hours Worked per Person in Employment Source: OECD Employment Outlook: July 2002

  9. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Labour productivity per hour worked US 1996 = 100 Source: O’Mahony and De Boer (2002)

  10. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Relative Output Per Hour Worked By Sector: 1999UK = 100 Manufacturing Distributive Trades Transport & Communications * Note: German figures are for all Germany. Separate West German figures are unavailable on a comparative basis after about 1996, but would show a significantly higher productivity Source: O’Mahony and De Boer 2002

  11. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Labour Productivity Per Hour Worked% Per Annum Growth * West Germany prior to 1989. Note that high German productivity growth in the 1990s is strongly driven by rapid increases in East German productivity from very low levels. Source: O’Mahony and De Boer (2002)

  12. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt US Productivity Per Hour: 1973 - 2002Index 1992 = 100 Source: Bureau of Labor Statistics. Index on logarithmic scale

  13. U.S.A versus UK U.S.A versus Germany R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Industry Contribution to Labour Productivity Gap% Points of Difference * Transport, Communication + Personal Services Source: O’Mahony and De Boer (2002)

  14. Sector drivers of growth differential Retailing: 55% Wholesaling: 26% Securities Trading: 20% Other sectors: NIL R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Labour Productivity by Type of Industry:% P.A. Growth Rates Source: van Ark, Inklaar and McGuckin (2002)

  15. U.S.A. France US – France R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Labour Productivity Growth by Sector 1995 ­ 1999% Per Annum Utilities Manufacturing Transport and Communications Distributive Trades Financial and Business Services Non-Market Services Source: O’Mahony and De Boer, 2002

  16. Strengthening European Networks Liberalising Electricity and Gas Markets Financial Market Liberalisation Reforming European Labour Markets A Europe of Education, Knowledge and Research R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt The Barcelona Reform Agenda  Open skies in Airlines  Electricity Interconnection Specific Commission Proposals General Principles and Guidelines

  17. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Energy Liberalisation at Barcelona “If the summit fails, the markets will reflect the lack of will in Barcelona” [Loyola de Palacio, EU Energy Commissioner] “France blocked a proposal that would have guaranteed for households a choice of electricity suppliers. The decision cast doubt on the ambitious plans of the EU to become more competitive”

  18. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Employment Rates - 2000% of Population aged 15-64 Norway 78 Denmark 76 US 75 Sweden 73 Netherlands 72 Portugal 72 UK 71 Austria 69 Finland 68 Germany 67 Ireland 66 France 62 Belgium 60 Spain 57 Italy 55 Greece 55

  19. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Average Hourly Wage Costs: 2000Euros Employer’s Social Security Wages 28.5 25.5 *Plus other unavoidable costs of employing Source: Eurostat Yearbook 2002, Page 213

  20. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt General Government Total Outlays as % of GDP: 2001 Source: OECD Economic Outlook, June 2002

  21. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt GDP per capita growth and Public Expenditure(1960-1995) Japan GDP per capita % growth Public Expenditure (% GDP) Source: OECD Historical Statistics

  22. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt GDP per capita growth and Public Expenditure(1960-1995)Without Japan GDP per capita % growth Public Expenditure (% GDP) y = 0.0141x + 1.9064 R2 = 0.0369 Source: OECD Historical Statistics

  23. 20 15 10 5 0 -5 -10 -15 5 4 3 2 1 0 -1 -2 Exports, % YoY Eurozone: Contribution of Domestic Demand and Net Exports to GDP Eurozone GDP Growth Domestic demand contribution UK Net exports contribution US 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Exports Have Sustained Eurozone Growth Source: Merrill Lynch, European Economics, January 2003

  24. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Consumer Expenditure, % Change Year on Year 6 5 4 3 2 1 0 -1 -2 2000 2001 2002 Source: DATASTREAM UK US Germany France Source: Datastream

  25. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Italian Gross Government Debt as % of GDP Maastricht Criterion Source: OECD Historical Statistics (1973-2000)

  26. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt General Government Structural Balances: 2000% of GDP Source: OECD Economical Outlook (June 2002)

  27. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt The Ageing PopulationPopulation aged 65+ as % of those aged 15-64 Source: World Population ageing 1950 - 2050, United Nations, 2001

  28. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Public Pension Expenditure 2000 - 2050% of GDP Source: European Economy – Public Finance in EMU 2001, Pension Green Paper (2002) for UK

  29. R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Europe’s Priorities Declining Importance

  30. 500 400 300 200 0 R:\Live Files\IBK Management\Inbox\LN0006UI\LSE0502_V2.ppt Population Growth and ProspectsMillion U.S.A European Union FORECASTS

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