Italy’s Supply Constraint

The OECD estimates the current potential capacity growth rate of the Italian economy at 1.25% a year. Actually I suspect even this very low number is over-optimistic. Growth since 2002 has been as follows: 2003 – 0.1%: 2004 – 0.9%: 2005 – 0.1%. To be sure forecast growth for this year is somewhat higher, at 1.4%, and optimists are expecting this to be more or less repeated next year. But I suspect this outcome is unlikely simply because the global economy now seems to be slowing (and in particular the ever important US economy),so the strongly advantageous situation of 2006 is unlikely to be repeated, while next year the Italian government has promised to introduce an important package of spending reductions which are bound to negatively affect growth, at least in the short term..

But why is potential growth capacity in Italy so low?
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Why reform has become a dirty word.

This anniversary guest post was written by the indispensable Jérôme Guillet, who normally writes for The European Tribune.

Laurence Parisot, the head of MEDEF, the French business
organisation, recently complained that:

There is one word who meaning for the public has changed in the past 25 years: “reform”. It used to be synonymous with progress, and now it means social regression.

One wonders why. Or not. As I’ve written incessantly over the past year at European Tribune (for instance here), “reform” has come to mean only one thing: less regulation of corporations, lower wages, fewer rights for workers, and weaker unions, i.e. the elimination of anything that can impede corporations’ freedom to make profits in the short term.
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State of the World Population

I’ll keep this brief since there are some excellent guest posts just a little bit further on down the page just waiting for you to read and comment on. I’m not sure whether this is more about form or content, but the UN has a supremely interesting and readable report out today, as part of its State of the World Population programme, entitled A Passage to Hope, Women and International Migration, and whatsmore the report is presented in an extremely blog-like format, as I say highly readable and with the content readily available. And as if that wasn’t enough, the ‘traditionalist’ Financial Times (traditionalist in terms of content, not in terms of format) actually has a hyper-link to the report itself inside its article (bravo FT!). People often ask what kind of importance and influence blogs have, well sometimes I feel you only have to cast your eyes around a little bit.

On the substance front the contents of the report are obviously very relevant to our recent debate about Sub-Saharan migration to Spain. Indeed on the SotWP homepage you can find a link to a fascinating first person account by a Burkinan migrant (Adama) of his convoluted 3 year journey up through Mali, Algeria and Morocco, before finally reaching Spain via the Canary Islands. Clearly in migration terms people like Adama are the pioneers (anthropologists tend to call them the ‘heroes’, those who blaze the trail) who struggle against all adversity to find land and establish themselves (and tragically many do not make it all the way). What the arrival of Adama means is that many more will inevitably come behind, following a network logic which I have attempted to describe in the previous post.

But the new UN report isn’t about Adama, it is about the relatively new phenomenon of female-lead migration. Obviously the report highlights the situation of sex workers et al, but I would like to underline the fact, which is absolutely evident here in Spain, that the welfare services in Southern Europe at least simply cannot handle the rapid population ageing which is taking place without the massive arrival of female care-workers from outside the EU. The later economic development of Southern Europe and the comparative underdevelopment (not to say virtual non-existence in many cases) of institutional care make this inevitable.

One last thing while I am here, we have often talked about the economic growth imbalances which comparatively small migratory movements are causing between and within countries. The outward migration of skilled and highly educated workers from Germany is one such case, while the regional tensions which might arise inside Spain is another. Well today Randy McDonald has a timely and very interesting post about how oil revenues and subsequent economic growth differential in Alberta have produced a migration and fertility phenomenon which may well change the face of Canadian politics as a linguistic divide becomes a growth-model and socio-political one. Finally (the last thing after the last) anyone interested in looking into earlier European ties with Senegal (now being renewed) might like to glance at this link that Randy sent me on Senegalese participation in the European revolution of 1848, or read about the fate of one group of Senegalese soldiers who fought on the allied side in WWII, as described by Senegalese director Sembène Ousmane in his film Camp de Thiaroye (my input). And for those who still want to ask what all these Senegalese may have to offer the future Europe we are collectively building, maybe I could recommend the little known but excellent work of the Senegalese group Orchestra Baobab.

Flexicurity – a working model for Europe?

Before moving in to the nitty-gritty of flexicurity; what it is and whether it can work as a universal European labour market model I should take the time to thank the AFOE team for allowing me a spell as a guest-writer here at the blog in the coming two weeks. In terms of presentation my name is Claus Vistesen and I am a Danish student at the BLC program at Copenhagen Business School. For further info I invite you to visit my personal blog Alpha.Sources, which deals with a wide range of topics of my interest.

There is a lot of talk and flurry at the moment about labour market reforms in Europe, notably in France, but also Germany has been struggling with how to reform the labour market and here as well as here.

Looking to the north we find the Nordic countries who seemingly have the best of two worlds; low uemployment coupled with a high degree of security but what is it exactly that the Nordic countries are doing, and could others potentially follow their example?
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Open borders and bottleneck jobs

I have learned via the unlinkable newsfeed site NOS Teletekst that The Netherlands will be opening its borders to East European workers coming from the new EU member states, starting January 1st 2007. Dutch Parliament pushed back the original entry date, May 1st 2006, that was proposed by employers. The big fear is abuse of social security.

In Great Britain, Ireland and Sweden the borders are already open. Portugal, Spain and Finland will follow suit on May 1st while Germany and Austria keep their borders closed for the time being.

In Belgium there was some debate about allowing workers for so-called bottleneck jobs, jobs for which there are hardly any qualified candidates in Belgium.
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French protests : it’s the politics, stupid!

There are some offers you can’t refuse. An invitation to join the permanent roster of Afoe is one of them. Let me first say, then, that I was initially happy and thrilled and grateful to be part of this wonderful blog. All the more so since it means that I’ll be ineligible for the Afoe Awards next year, and thus spared the humiliation of a third crushing defeat in a row. (For those of you who are scratching their head and wondering “who the hell is this guy?”, check this post)

If is say “initially”, it’s because, as the French guy of the team, I now have the daunting task of trying to explain clearly our current social row over the Contrat première embauche (First job contract) to a mainly non-native readership. As it happens, the BBC has already done a quite decent Q&A on the topic. So go read it to get the basics. And then come back here if you want my long and -I hope- not too muddled thoughts on what it all means.
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Hot Labour Anyone?

This post has one sovereign virtue: apart from in the current sentence it will not refer, either directly or indirectly, to the Catalan Statute. The topic it does deal with however is probably equally vital for the future of Spain. The issue is Spain’s housing boom, and the role of immigration in fuelling it. Two facts above all others stand out: Spain is currently ‘enjoying’ the longest and deepest housing boom (in the current round) among all the world’s developed economies (see this useful article from the Economist, or this one from Business Week), and Spain is also enjoying sustained rates of immigration which – at around 2% of the population per annum, may well be the most intense ever experienced in a developed economy. For purposes of comparison I could point out that Spain’s net migration rate of 17.6 per thousand in 2003 contrasts sharply with that recorded for the old European Union 15 for the same year – 5.4 per thousand – and is even well above the level recorded by Germany in the early 1990s – a maximum of 9.6 per thousand in 1992 – or by France in the early 1970s. So there is a housing boom, and there is immigration, the question is, what is the connection?
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Polish Plumbers Arrive In Denmark

The EU Observer has a piece on a row which has blown up in Denmark over some ‘new arrivals’ from Poland. The issue is itself interesting since there has been a good deal of talk in recent weeks about flexibility in the Danish labour market and the idea of ‘flexicurity’:

Danish trade unions have accused the Polish embassy in Copenhagen of encouraging Polish construction workers to ignore the collective agreements that regulate the Danish labour market….

They argue that the Danish labour model is being undermined but their opponents believe that the Danish trade union model itself undermines the EU principle of freedom of movement.

The Polish embassy website had informed Polish workers interested in coming to Denmark that they should comply with regional and national agreements on salaries and working conditions, but also points out they are not under legal obligation to do so.

This would mean that Polish workers could technically work for under the agreed minimum wage – making them more attractive than Danish workers.

Europe’s ‘Tiger’

Last Friday Eurostat released the 2004 data on comparative per capita PPP’s (purchasing power parities) across the EU. Perhaps the most surprising fact which emerges is that Ireland is now in second place (after Luzembourg) with a PPP 40% above the EU average. For a country that not so long ago was considered one of the ‘poorer’ EU members this is truly stunning.

It is generally well known that Ireland had (and continues to have) one of the highest fertility and population growth rates in the EU, but this has not been regarded as especially important since conventional neo-clasical growth theory (and the new ‘super-duper’endogenous growth theory for that matter) argue that increased population means a bigger economy, but not necessarily an increase in per capita income. However, as I said yesterday, it’s all about population structure. What we are now understanding is that the right age structure can produce very rapid increases in per capita income, and Ireland is, of course, a good case in point.

In the case of the ‘Celtic Tiger’, New Economic Paradigm theorists David Bloom and David Canning, who have made a specific study of the Irish case, reached the following conclusions:
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Human Capital And Trade Deficits

Michael Mandel had an interesting take on the US trade deficit in Business Week earlier this month (btw: he also has a weblog).

His opinion is that the US trade deficit isn’t as big a deal as people often think. One of the reasons: that the ongoing import of human capital into the US (which of course isn’t measured in the trading accounts ledger) more than compensates for the deficit:

But get with the 21st century, folks. The trade in goods and services represents only one part of America’s connection with the rest of the world. What’s equally important — and what the trade numbers miss completely — is the incredible flow of people into the country. Each year, the U.S. receives about 700,000 legal immigrants, as well as a host of temporary skilled workers and undocumented immigrants.

Now I wouldn’t go down the same road as Mandel with the deficit question per se, but he obviously raises an interesting point here – and one, of course, that immediately strikes a chord with me.
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