Europe's filing its nails while Mario's Draghing his take
September 11, 2024 1:00 AM Subscribe
Former Italian Prime Minister Mario Draghi's long-awaited report [PDF] on Europe's competitiveness has finally seen the light of day - and its first lesson for Europe's slowing growth since the turn of the century is to stop procrastinating. "We have reached the point where, without action, we will have to either compromise our welfare, our environment or our freedom," Draghi warned at the report's launch on Monday.
I heard about this and decided to stop what I was doing and check what people on Metafilter had to say about it.
posted by grahamparks at 3:05 AM on September 11 [2 favorites]
posted by grahamparks at 3:05 AM on September 11 [2 favorites]
Post title ftw.
posted by whatevernot at 3:14 AM on September 11 [10 favorites]
posted by whatevernot at 3:14 AM on September 11 [10 favorites]
A shortage of monocles and top-hats, whatever will we do! Riots in the streets, beating each other with cashmere sweaters!
posted by seanmpuckett at 5:53 AM on September 11 [3 favorites]
posted by seanmpuckett at 5:53 AM on September 11 [3 favorites]
Wolfgang Münchau: Those delighting in the EU's decline should be careful what they wish for (archive link).
posted by TheophileEscargot at 7:14 AM on September 11 [2 favorites]
posted by TheophileEscargot at 7:14 AM on September 11 [2 favorites]
From the Politico link: Less than three hours had passed after Draghi finished his presentation before Germany’s Finance Minister Christian Lindner said that “Germany will not agree" to joint borrowing.
Lindner is head of a single-digit party in a very, very weak coalition with elections a year away.
Opposition to borrowing is strong in Deutschland but people are at least starting to understand how much of a mistake it was not to make big investments a decade ago when money was cheap. If Draghi can convince enough of Europe that his is a viable path forward, maybe it would be possible to overcome that opposition.
I only skimmed the long PDF but a lot of the analysis I skimmed looked right. In terms of solutions, decisive investment sounds agreeable to me.
posted by daveliepmann at 8:46 AM on September 11 [1 favorite]
Lindner is head of a single-digit party in a very, very weak coalition with elections a year away.
Opposition to borrowing is strong in Deutschland but people are at least starting to understand how much of a mistake it was not to make big investments a decade ago when money was cheap. If Draghi can convince enough of Europe that his is a viable path forward, maybe it would be possible to overcome that opposition.
I only skimmed the long PDF but a lot of the analysis I skimmed looked right. In terms of solutions, decisive investment sounds agreeable to me.
posted by daveliepmann at 8:46 AM on September 11 [1 favorite]
I can't figure out whether the repeating motif of "AI and social media" (in both Draghi's report and Münchau's article) is just meant to be illustrative of the EU's tech gap, or if they're meant to specifically be crucial in securing its future.
Because I'm not super convinced about the second option.
posted by entity447b at 8:50 AM on September 11 [1 favorite]
Because I'm not super convinced about the second option.
posted by entity447b at 8:50 AM on September 11 [1 favorite]
I know zero percent about economics, Europe, etc, but I did just hear this take from someone who follows this more closely: Draghi and the European Central Bank are pushing the EU to increase public investment in tech & defense to maintain competitiveness but ten years ago his ilk were insisting on safety net cuts and sell-offs of public property in order to repay the European Central Bank. Is it fair to say that this crowd supports big spending on weapons and tech to bolster the economy while cutting spending on public safety net also supposedly to bolster the economy?
posted by latkes at 8:56 AM on September 11 [5 favorites]
posted by latkes at 8:56 AM on September 11 [5 favorites]
European manufacturers have (at best) a modest and shrinking edge and (at worst) no edge at all in technology and execution over Asian competitors who benefit from costs that are lower by 10%-20% (raw material, energy) to 40-50% (taxes, construction) to 70%+ (labor). If Europe can't sharply cut manufacturing costs, the only hope is tariffs, but that guarantees European manufacturers can only sell internally and to other high-cost markets, and lose out everywhere else.
posted by MattD at 9:04 AM on September 11 [1 favorite]
posted by MattD at 9:04 AM on September 11 [1 favorite]
I have no idea what the other solutions might be, or whether his suggestions are reasonable, but being worried strikes me as correct.
posted by aramaic at 9:23 AM on September 11 [1 favorite]
posted by aramaic at 9:23 AM on September 11 [1 favorite]
I can't figure out whether the repeating motif of "AI and social media" (in both Draghi's report and Münchau's article) is just meant to be illustrative of the EU's tech gap, or if they're meant to specifically be crucial in securing its future.
If you squint hard enough, Yanis Varoufakis makes essentially the same point from a left perspective when explaining Technofeudalism: What Killed Capitalism:
posted by daveliepmann at 11:59 AM on September 11 [4 favorites]
If you squint hard enough, Yanis Varoufakis makes essentially the same point from a left perspective when explaining Technofeudalism: What Killed Capitalism:
Capital was so successful, like a very toxic virus that kills off its host and therefore it cannot propagate itself... capital developed a mutation of itself which I call "cloud capital", a particular form of capital, which has killed off capital.The cloud capitalists being the rentier FAANG companies which can charge obscene rents because they own the platforms through which one must operate. They make up a big share of the economic gap between US and EU.
posted by daveliepmann at 11:59 AM on September 11 [4 favorites]
We'll definitely compromise our welfare, our environment, and our freedom, like everyone else on this planet, but at least in theory we could only compromise by limiting our consumption and limiting our population instead.
We've become too car and plane dependent though, and Europe has oil only in Norway 0.31%, Scotland 0.17%, and Russia 4.8%. We're thus dependent upon trade for fuel, not merely to drive essential delivery tricks, farm equipment, etc, but also for all these idiots moving luxury boxes.
As an industry, artificial intelligence is ultimately driven by an invester fraud, so fuck them. I think social media fits this too but at least they do have some advertising revenue. I'd suggest the EU make ad blockers mandatory in new browser installs, which'll lessen how much revenue those US parasites drain from EU companies.
As software tech, we should ditch copaganda like chat control and push open source social media applications that run over end-to-end encrypted messangers, which at least limit what US and China knows about EU citizens, and limits the ad surface.
As industries, we need complete supply chains for agricultural tech, biotech, medicine, integrated circuits of all scales, and renewables. Agrivoltaics shall become especially important in southern Europe. We need all these ourselves even if we lose money on them.
As I understand it, nobody makes lithography machines for 12V circuits anymore, because so many exist, but you must make new lithography machines sometimes, even if you only sell them rarely, especially since China bought all the old ones. That requires government owned lithography machine makers.
We do not need dominance in the world supply chain, but we need enough so that our own tech survives once China descides they'll only export for food.
posted by jeffburdges at 12:23 PM on September 11 [2 favorites]
We've become too car and plane dependent though, and Europe has oil only in Norway 0.31%, Scotland 0.17%, and Russia 4.8%. We're thus dependent upon trade for fuel, not merely to drive essential delivery tricks, farm equipment, etc, but also for all these idiots moving luxury boxes.
As an industry, artificial intelligence is ultimately driven by an invester fraud, so fuck them. I think social media fits this too but at least they do have some advertising revenue. I'd suggest the EU make ad blockers mandatory in new browser installs, which'll lessen how much revenue those US parasites drain from EU companies.
As software tech, we should ditch copaganda like chat control and push open source social media applications that run over end-to-end encrypted messangers, which at least limit what US and China knows about EU citizens, and limits the ad surface.
As industries, we need complete supply chains for agricultural tech, biotech, medicine, integrated circuits of all scales, and renewables. Agrivoltaics shall become especially important in southern Europe. We need all these ourselves even if we lose money on them.
As I understand it, nobody makes lithography machines for 12V circuits anymore, because so many exist, but you must make new lithography machines sometimes, even if you only sell them rarely, especially since China bought all the old ones. That requires government owned lithography machine makers.
We do not need dominance in the world supply chain, but we need enough so that our own tech survives once China descides they'll only export for food.
posted by jeffburdges at 12:23 PM on September 11 [2 favorites]
Foreign Policy’s Adam Tooze weighs in on his Substack (it’s ok he’s not one of those Substack weirdos, he’s a real economist with a wide purview who does a good podcast for FP magazine). Tooze roughly points out that the America research is led by VC.
posted by The River Ivel at 12:55 PM on September 11 [4 favorites]
posted by The River Ivel at 12:55 PM on September 11 [4 favorites]
> "real disposable income has grown almost twice as much in the US as in the EU since 2000"
I suppose this count total, but an extremely interesting number would be median disposable income. Are people buying new iPhone or sacrificing priorities?
> 'The gap between European and US labour productivity is not a new phenomenon'
I think "labour productivity" typically means supplanting human labor with energy, used by machenes, or trade that outsources the labor. You. change this if you want qualify food, semi-protected labor market, etc.
posted by jeffburdges at 1:43 PM on September 11 [1 favorite]
I suppose this count total, but an extremely interesting number would be median disposable income. Are people buying new iPhone or sacrificing priorities?
> 'The gap between European and US labour productivity is not a new phenomenon'
I think "labour productivity" typically means supplanting human labor with energy, used by machenes, or trade that outsources the labor. You. change this if you want qualify food, semi-protected labor market, etc.
posted by jeffburdges at 1:43 PM on September 11 [1 favorite]
I continue to encounter these questions since the end of the 1970s...the system has been working with growing effectiveness towards the destruction of the foundations of its survival
posted by Reasonably Everything Happens at 5:07 PM on September 11 [2 favorites]
posted by Reasonably Everything Happens at 5:07 PM on September 11 [2 favorites]
Europe, and to some extent the US too, were slow to realize that they were the losers of the Cold War. Politicians like Mario Draghi with their limited mandate may propose fiscal balms that dull the pain of defeat, but it takes statecraft and creativity to even imagine what victory may look like.
China "works" by viciously suppressing household income, welfare, and their share of "soft" or social capital (things like rights, equality, rule of law, access to opportunities and social mobility, etc.) -- hence domestic consumption. This is what lies behind the huge trade surpluses -- the excess produces that the Chinese are unable to productively absorb. The other side of the surpluses is the excess capital it can (and must) export abroad to snap up assets all along the value chains -- mines, materials, ports, technologies, politicians, control over international bodies, fawning citizens and billionaires, etc.
The root cause is the so-called "adverse selection". Namely, the lower and middle-class Chinese, on the whole, put up with their end of the bargain which is a very bad deal, willingly or not, against their own interests. That's why the top priority of China is total control over information.
The EU's position has been to form a codependent relation with China. I'd call this the "German Model" (which, by the way, is unravelling, accelerated by Putin's war). And in this unhealthy relation the EU's defeat became all but guaranteed the moment it decided that it was winning.
A much more eloquent, balanced, and substantial review of the situation can be found in Qin Hui's essay that is nominally a critique of Piketty. It's very long but certainly I feel if one feels like going over the 400-page Draghi report, they could benefit from a read of Qin's arguments that takes less time.
posted by runcifex at 9:16 PM on September 11 [3 favorites]
China "works" by viciously suppressing household income, welfare, and their share of "soft" or social capital (things like rights, equality, rule of law, access to opportunities and social mobility, etc.) -- hence domestic consumption. This is what lies behind the huge trade surpluses -- the excess produces that the Chinese are unable to productively absorb. The other side of the surpluses is the excess capital it can (and must) export abroad to snap up assets all along the value chains -- mines, materials, ports, technologies, politicians, control over international bodies, fawning citizens and billionaires, etc.
The root cause is the so-called "adverse selection". Namely, the lower and middle-class Chinese, on the whole, put up with their end of the bargain which is a very bad deal, willingly or not, against their own interests. That's why the top priority of China is total control over information.
The EU's position has been to form a codependent relation with China. I'd call this the "German Model" (which, by the way, is unravelling, accelerated by Putin's war). And in this unhealthy relation the EU's defeat became all but guaranteed the moment it decided that it was winning.
A much more eloquent, balanced, and substantial review of the situation can be found in Qin Hui's essay that is nominally a critique of Piketty. It's very long but certainly I feel if one feels like going over the 400-page Draghi report, they could benefit from a read of Qin's arguments that takes less time.
posted by runcifex at 9:16 PM on September 11 [3 favorites]
In general, a willingness to recognize the role government has in the economy and that we determine what that role is via political decisions is for the good. Instead of pretending that we have no say because it's all just the invisible hand of the free market (or a temporary stage before the inevitable rise of the proletariat, for that matter). I have no idea if this will move the needle; it doesn't seem from my distance that the EU really has the capacity to act on this sort of centralized scale.
Somewhat related: Brad DeLong making the case for more active industrial policy in the US.
Foreign Policy’s Adam Tooze weighs in on his Substack
Thanks, that was an interesting read and helped put the Draghi report in perspective. (And I can vouch for Tooze, a leading economic historian.)
posted by mark k at 9:48 PM on September 11 [2 favorites]
Somewhat related: Brad DeLong making the case for more active industrial policy in the US.
Foreign Policy’s Adam Tooze weighs in on his Substack
Thanks, that was an interesting read and helped put the Draghi report in perspective. (And I can vouch for Tooze, a leading economic historian.)
posted by mark k at 9:48 PM on September 11 [2 favorites]
I live in the Netherlands. One of the very best things about the place is that we are not slaves of the market, that we are not obsessed with 'productivity' (an obsession which comes typically without consideration of that which is produced ), that we believe the market must be regulated, kept in check, held at bay, that quality of life, me time, down time, time to recover, time to enjoy, time to be with family, to exercise and a million other wonderful things remains of paramount importance. If this is decline - I'll take it. Happily.
posted by dutchrick at 3:54 AM on September 12 [4 favorites]
posted by dutchrick at 3:54 AM on September 12 [4 favorites]
me time, down time, time to recover, time to enjoy, time to be with family, to exercise and a million other wonderful things remains of paramount importance.
It sounds like you really value this time.
If only you could get even more of that time, while still producing the same amount of goods/services at your job.
That would be called: increasing productivity.
posted by TheophileEscargot at 6:12 AM on September 12 [4 favorites]
It sounds like you really value this time.
If only you could get even more of that time, while still producing the same amount of goods/services at your job.
That would be called: increasing productivity.
posted by TheophileEscargot at 6:12 AM on September 12 [4 favorites]
If only you could get even more of that time, while still producing the same amount of goods/services at your job.
That would be called: increasing productivity.
Often it seems to be either/or.
I struggle with the idea of 'productivity' as a value in itself regardless of what is produced.
posted by dutchrick at 6:46 AM on September 12 [1 favorite]
That would be called: increasing productivity.
Often it seems to be either/or.
I struggle with the idea of 'productivity' as a value in itself regardless of what is produced.
posted by dutchrick at 6:46 AM on September 12 [1 favorite]
I struggle with the idea of 'productivity' as a value in itself regardless of what is produced.
There's a reason they're called "goods" and not "bads."
posted by pwnguin at 8:36 AM on September 12 [1 favorite]
There's a reason they're called "goods" and not "bads."
posted by pwnguin at 8:36 AM on September 12 [1 favorite]
> That would be called: increasing productivity.
No. Increased productivity means more output by the company, so the company uses more input resource, more energy, and often more employee labor.
There is usually some trade off between energy vs labor though, or vs labor costs, meaning you save employees time by using energy less efficently, either by outsourcing employees via trade, or by using machines that suplement labor.
We love suplementing labor by machines of course, but we hit Jevons paradox hard there, so even there this typically results in more products, not less labor.
Yes, some employees can finagle work situations where they work less but recieve the same pay, often by monopolizing something, perhaps unintentionally or perhaps because other employees wind up much less useful.
posted by jeffburdges at 8:47 AM on September 12 [1 favorite]
No. Increased productivity means more output by the company, so the company uses more input resource, more energy, and often more employee labor.
There is usually some trade off between energy vs labor though, or vs labor costs, meaning you save employees time by using energy less efficently, either by outsourcing employees via trade, or by using machines that suplement labor.
We love suplementing labor by machines of course, but we hit Jevons paradox hard there, so even there this typically results in more products, not less labor.
Yes, some employees can finagle work situations where they work less but recieve the same pay, often by monopolizing something, perhaps unintentionally or perhaps because other employees wind up much less useful.
posted by jeffburdges at 8:47 AM on September 12 [1 favorite]
There's a reason they're called "goods" and not "bads."
Haha. Too often a chronic misnomer as far as I am concerned.
posted by dutchrick at 9:09 AM on September 12 [3 favorites]
Haha. Too often a chronic misnomer as far as I am concerned.
posted by dutchrick at 9:09 AM on September 12 [3 favorites]
Since GDP includes rents, it must also calculate imputed rents that homeowners would have paid to rent the home they live in so as to not have renting/owning ratios distort the GDP result.
Which means that all one needs to do to have infinite productivity is to own a home and work zero hours.
Problem solved!
posted by Zalzidrax at 10:22 AM on September 12 [1 favorite]
Which means that all one needs to do to have infinite productivity is to own a home and work zero hours.
Problem solved!
posted by Zalzidrax at 10:22 AM on September 12 [1 favorite]
No. Increased productivity means more output by the company, so the company uses more input resource, more energy, and often more employee labor.
What? You're confusing production and productivity.
Productivity is output for a fixed set of inputs. Technically it can be any type of input, but in the context of macroeconomic discussions the most common input is "one hour of labor." A trip to the BLS can confirm this claim for you (And you can also see the multi-input measurements that do take into account energy use as an input.)
Understanding this is key to following the discussion when someone like Draghi issues a report. Orthodox economists consider productivity growth the only way to increase quality of life long term; everything else is some variation on "work harder, if you want more stuff."
It's true you can find individual companies that might think of "productivity" on the employee level, so that getting everyone to work longer hours might lead them to say their employees are more productive. In some cases it even makes sense, for them. But imagining that applies to national accounts is like thinking about the federal debt in terms of a credit card balance, it's just a different thing.
posted by mark k at 7:07 PM on September 12 [2 favorites]
What? You're confusing production and productivity.
Productivity is output for a fixed set of inputs. Technically it can be any type of input, but in the context of macroeconomic discussions the most common input is "one hour of labor." A trip to the BLS can confirm this claim for you (And you can also see the multi-input measurements that do take into account energy use as an input.)
Understanding this is key to following the discussion when someone like Draghi issues a report. Orthodox economists consider productivity growth the only way to increase quality of life long term; everything else is some variation on "work harder, if you want more stuff."
It's true you can find individual companies that might think of "productivity" on the employee level, so that getting everyone to work longer hours might lead them to say their employees are more productive. In some cases it even makes sense, for them. But imagining that applies to national accounts is like thinking about the federal debt in terms of a credit card balance, it's just a different thing.
posted by mark k at 7:07 PM on September 12 [2 favorites]
I haven't seen discussion of one key point of the report. Thankfully Kyla Scanlon addressed it with a one-minute video, summarizing the PDF as saying Europe is reliant on US and China because Europe's R&D over the last 50 years has been CARS! CARS! CARS! while the US invested in pharma and tech too. "Europe's top companies are the same ones as they were 50 years ago. That's not really a good sign for innovation." Rx? More € for defense and innovation, coordinate, and we need a more unified market.
The report isn't saying "dismantle the good European lifestyle". It's literally saying "the good European lifestyle is at risk because we can't cooperate to do anything but sell internal combustion engine cars; let's fix this with massive state/EU investment".
posted by daveliepmann at 11:50 PM on September 12 [1 favorite]
The report isn't saying "dismantle the good European lifestyle". It's literally saying "the good European lifestyle is at risk because we can't cooperate to do anything but sell internal combustion engine cars; let's fix this with massive state/EU investment".
posted by daveliepmann at 11:50 PM on September 12 [1 favorite]
Any choice anti-car quotes from the report?
posted by jeffburdges at 10:03 AM on September 13
posted by jeffburdges at 10:03 AM on September 13
> because Europe's R&D over the last 50 years has been CARS! CARS! CARS!culminating in the Dieselgate.
posted by runcifex at 10:24 AM on September 13 [1 favorite]
the US invested in pharma and tech too.
Although Germany did get a bit lucky with BioNTech's mRNA COVID vaccine, so at least some parties are making investments.
I think the main point though is that there's no venture capital investing in EU, it's all state investment and central banks. Pharma and tech often have a huge risk component: you spend a lot of time and money up front, and start making sales a few years later. In pharma it's drug trials that take time which might not pan out, and while tech has kind of adopted a "fail fast" approach, the darlings of today are ML models that require billions in compute time to produce. And I guess chip fabs which take billions of dollars as well (but state subsidies muddy the economic analysis there).
I guess the mystery for me is why Draghi publishes a report whose conclusion is the EU shall become a tax and spending power like the US? Is he running to become president of the United States of Eurasia?
posted by pwnguin at 2:51 PM on September 13
Although Germany did get a bit lucky with BioNTech's mRNA COVID vaccine, so at least some parties are making investments.
I think the main point though is that there's no venture capital investing in EU, it's all state investment and central banks. Pharma and tech often have a huge risk component: you spend a lot of time and money up front, and start making sales a few years later. In pharma it's drug trials that take time which might not pan out, and while tech has kind of adopted a "fail fast" approach, the darlings of today are ML models that require billions in compute time to produce. And I guess chip fabs which take billions of dollars as well (but state subsidies muddy the economic analysis there).
I guess the mystery for me is why Draghi publishes a report whose conclusion is the EU shall become a tax and spending power like the US? Is he running to become president of the United States of Eurasia?
posted by pwnguin at 2:51 PM on September 13
But is it true he just wants to spend on tech and 'defense'?
posted by latkes at 10:04 PM on September 13
posted by latkes at 10:04 PM on September 13
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posted by The River Ivel at 2:47 AM on September 11 [13 favorites]