Europe vs. the US - how sclerotic is Europe?

The ongoing narrative, supported by the global English-speaking media, is that there is something fundamentally wrong with Europe, which is "not competitive, can't create jobs and can't grow". It compares the sclerotic, lazy and quickly aging old continent the with the young, dynamic and attractive USA (with all these supposedly great facebooks etc). Sounds familiar?

Except that it is not true.

I have just looked at the official IMF numbers from the World Economic Outlook and compared Europe's GDP per capita growth (PPP), both for the euro zone and EU-27, with the US.

The conclusion: since 1993, the economic performance of EU-27 was better than in the US. The euro zone's level of GDP per capita (data available only from 1993, so I am not manipulating with time periods here) in 2011 was only 5% lower than in the US relative to the starting level in 1993, but at exactly the same level relative to 2000! Sweden has grown much faster than the US in the whole period (and of course Poland was better than all of them).

So, how sclerotic is Europe?

Figure: GDP (PPP) per capita, 2011/1993 (1993=1) and 2011/2000 (2000=1)

	2011/1993		2011/2000
Sweden	2,17	Sweden	1,52
EU-27	1,96	Germany	1,46
USA	1,89	EU-27	1,45
Germany	1,87	USA	1,37
Euro area	1,83	Euro area	1,37
France	1,77	France	1,35

Source: IMF World Economic Outlook

My paper on PKO BP's anti-cyclical role during the global crisis

The World Bank has just published its first edition of the "Global Financial Development Report".

It includes my box on PKO BP's very positive role during the 2008-2011 global crisis (Chapter 4) based on a background paper.

In a nutshell, I argue the following:

The case of Poland’s PKO BP suggests that domestically owned banks can play a useful counter-cyclical role during crises by supporting lending to the economy, becoming de facto “creditors of last resort”. This is largely because they are less subject to exogenous shocks, are more often funded in the domestic markets, and are more inclined to react to changing credit market conditions based on domestic fundamentals alone. They are also insulated from exogenous decisions of foreign parent banks affecting lending policies of their domestic subsidiaries.


State ownership has further enhanced PKO BP’s ability to withstand the crisis by imposing on the bank a conservative lending and funding culture, enhancing the bank’s ability to attract deposits during the crisis thanks to the implicit State guarantee, and by participating in the crucial capital increase.

PKO BP story also highlights the benefits of Poland’s diversified bank ownership structure, with foreign banks playing a very positive role in supporting financial deepening (World Bank, 2009), especially during good times, and domestically owned and state-controlled banks taking the lead on lending during times of external turbulence.

However, the case of PKO BP suggests that for the state-controlled banks to be successful, they need to be commercially-oriented, open to free market competition, and focused on “utility banking”. They also need to be transparent, professionally managed, ideally by managers chosen through a meritocratic selection process, and subject to hard budget constraints.

All of these keys conditions can be at least partly achieved by taking state banks public and listing them on a stock exchange. This not only forces these banks to adopt international accounting and reporting standards, but—thanks to a watchful eye of domestic and international shareholders—also helps impose market discipline, ensure compliance with best global practices of corporate governance, strengthen commercial orientation and sustain high quality of lending, including by mitigating political pressures. Without such market pressures, the key conditions for success are not always easy for state-owned banks to adhere to. A well embedded culture of transparency, accountability and strong business ethics is also useful, although policy recommendations on how to achieve it are not straightforward.

Education for free and for all!

I have just signed up for www.coursera.org, a website with "the world's best courses, online, for free".

It offers plenty of interesting courses, including in economics (such as Principles of Economics for Scientists from Caltech, which would be a great complement to students of macroeconomics at Kozminski!) and in history (such as The Modern World: Global History since 1760, even though--in line with the biased Western tradition--it tends to almost totally ignore New Europe, as if it was a different continent!). No grades and credits for courses, but completion certificates are already available for some (which, I predict, will soon start to appear on people's CVs...)

This is an utopian dream close to coming true: a top-notch quality of education for everyone in the world with an internet connection and an ability to read and write in English.

Where is it going? In no time, these online courses will transform into full blown online universities, which will rival the established modes of off-line learning. Completion certificates from the online courses will compete with the standard course grades. Traditional universities should beware - they'd better seize on this new mode of learning or gradually lose the fight if not eventually perish (there will also be a need for a place to get young people together to benefit from the joys of the youth and find spouses...).