Innovation, Globalization, and the Sustainability of the European Model
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Innovation, Globalization, and the Sustainability of the European Model
- 1. Innovation, Globalization, and the Sustainability of the European Model(s) Europe – Latin America economic forum Global change, labour market dynamics and the sectoral structure of production May 20, 2014 Paris Giovanni Dosi Scuola Superiore S.Anna, Pisa Mauro Sylos Labini Università di Pisa
- 2. • Some structural European weakness well before the crisis in research, innovation and production
- 3. 1. A broad look at the patterns of innovation internationally… Gross expenditure on R&D 2012 Japan 11% Korea 5% US 32% EU 15 22% China 17% Others 13% Note: shares are on world total. Source: elaborations on OECD data.
- 4. Gross expenditure on R&D as % of GDP 4.5 4 3.5 3 2.5 2 1.5 1 0.5 Japan Korea United States EU 15 China 1981 1986 1991 1996 2001 2006 2011 Source: elaborations on OECD data.
- 5. Share of patents in the ICT sector (%) 60 50 40 30 20 10 0 Japan United States EU 15 1981 1986 1991 1996 2001 2006 2011 Note: shares are computed on OECD total. Source: elaborations on OECD data.
- 6. Share (%) of patents in the biotech sector 70 60 50 40 30 20 10 0 Japan United States EU 15 1981 1986 1991 1996 2001 2006 2011 Note: shares are computed on OECD total. Source: elaborations o OECD data.
- 7. A broad look at the patterns of innovation… (cont.) • The evidence pinpoints to a continuing US leadership especially in ICT and newer technological paradigms and fast catch-up by Far Eastern countries
- 8. At the roots of the US technological leadership • “The American paranoia on communism and cancer” (K. Pavitt) – The legacy of big mission-oriented programs (military, space,…) – Massive public founded research in life science – Rich variety of industrial policies (without calling them as such!)
- 9. Conversely, at the roots of European weaknesses – Weak mission oriented commitments (after all, the whole Europe lost WWII…) – Half-hearted commitment to catching up policies (… success with Airbus but massive failure in ICT…) – The scourge of “diffusion-oriented”, “market-friendly” policies…
- 10. And also in Science Europe is lagging behind
- 11. Share of Nobel prizes in science (%, by affiliation of the recipient) 100 90 80 70 60 50 40 30 20 10 0 USA EU 15 Japan 1900/10 1910/20 1920/30 1930/40 1940/50 1950/60 1960/70 1970/80 1980/90 1990/00 2000/10 2010/13 Source: elaborations on Nobel Foundation data.
- 12. EU leadership in publications?
- 13. Universities in the “Shanghai ranking” (number of top 100) 60 50 40 30 20 10 0 Japan United States UE 15 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: elaborations on ARWU (Shangai) ranking.
- 14. Innovation (and science) still largely non-globalized, but occurring in highly globalized economies
- 15. 2 Globalization and its consequences • Financial globalization and the weakening of policy setting power of States
- 16. Gross international financial assets of advanced countries 160000000 140000000 120000000 100000000 80000000 60000000 40000000 20000000 0 (millions of current US dollars) DEBT FDI Equity Derivatives Total GDP 1970 1975 1980 1985 1990 1995 2000 2005 Source: updated and extended version of the database developed by Lane and Milesi-Ferretti (2007).
- 17. Globalization and the real economy • Obviously, increasing shares of trade and current accounts on GDP • But also lower “equilibrium” rates of growth consistent with foreign trade balances • The weakening of the manufacturing base in the US and Europe
- 18. Imports and exports in goods and services (% of GDP) 1995 2000 2005 2008 2009 Japan 30 28 31 38 30 United States 21 24 24 28 23 EU 27 21 20 26 33 27 Germany 58 51 70 88 73 France 55 46 59 69 55 United Kingdom 54 51 58 66 53 Italy 44 39 55 66 51 Source: elaborations on OECD data.
- 19. Balance of trade (% of GDP) 1995 2000 2005 2008 2009 Japan 3 2 2 0 0 United States -1 -4 -6 -5 -3 EU 27 2 0 1 0 1 Germany 1 0 6 7 6 France 2 1 -1 -3 -2 United Kingdom 0 -2 -4 -3 -2 Italy 4 1 0 -1 0 Source: elaboration on OECD data.
- 20. Current account balance 6 4 2 0 -2 -4 -6 -8 (% on GDP) Japan United States EU 27 1980 1985 1990 1995 2000 2005 2010 Source: IMF
- 21. The balance of payment (consistent with) equilibrium growth rate • Assume X=M • In a growing economy gx=gm • If (among other things) import demand is a function of domestic income M=푌ᴨ(where ᴨisthe income elasticity of demand for imports) • The «balanced» rate of growth becomes – gy=gx/ᴨ
- 22. GDP growth and “feasible” growth rates from the Harrod Trade Multiplier, 1979=100 United States 240 220 200 180 160 140 120 100 80 GDP "balanced" 1979 1984 1989 1994 1999 2004 2009 Source: authors’ calculations on IMF data.
- 23. Germany 280 260 240 220 200 180 160 140 120 100 80 GDP "balanced" 1979 1984 1989 1994 1999 2004 2009 Source: authors’ calculation on IMF data.
- 24. France 200 180 160 140 120 100 80 GDP "balanced" 1979 1984 1989 1994 1999 2004 2009 Source: authors’ calculations on IMF data.
- 25. United Kingdom Source: authors’ calculations on IMF data. 80 100 120 140 160 180 200 220 240 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 GDP "balanced"
- 26. Italy 170 160 150 140 130 120 110 100 90 80 GDP "balanced" 1979 1984 1989 1994 1999 2004 2009 Source: authors’ calculations on IMF data.
- 27. Japan 330 280 230 180 130 80 GDP "balanced" 1979 1984 1989 1994 1999 2004 2009 Source: authors’ calculations on IMF data.
- 28. Manufacturing value added 35 30 25 20 15 10 5 0 (% of world v.a. in manufacturing) EU 27 China United States Japan 1980 1985 1990 1995 2000 2005 2010 Source: elaboration on UN data.
- 29. Manufacturing Value added (% growth rates, constant 2005 prices in US $) 2011 1970's 1980's 1990's 2000's annual averages cumulate annual averages cumulate annual averag es cumulate annual averages cumulate China 9,5 143,3 9,7 149,1 14,0 266,8 12,8 231,3 9,7 WORLD 3,5 40,7 2,9 32,8 2,8 32,1 3,2 35,4 3,8 United States 1,8 18,0 2,6 28,0 3,9 45,5 2,0 19,7 2,2 Japan 4,4 52,5 4,8 59,9 0,9 8,6 1,7 13,8 -4,1 Germany 1,8 18,3 1,7 18,3 0,8 7,5 1,6 11,3 8,3 EU 27 3,1 35,0 2,0 21,1 1,7 17,8 1,0 8,2 4,6 France 3,4 39,4 1,1 11,6 2,2 23,5 0,1 0,7 0,8 Spain 4,8 58,4 2,2 23,9 2,4 25,8 -0,5 -6,0 2,9 United Kingdom 1,3 12,5 2,0 20,7 0,9 9,3 -0,8 -8,3 2,1 Italy 6,3 81,6 2,2 24,3 1,3 13,7 -0,7 -8,9 1,2 Source: United Nations.
- 30. What is so special about manufacturing? • Innovation opportunities • Dynamic increasing returns • Large base of decent jobs and the relatively egalitarian and inclusive society • Crucial contribution to foreign accounts
- 31. Most R&D activity is in manufacturing % R&D manufacturing (2009) % VA manifacturing R&D intesity manufacturing Germany 89 23 8 Japan 87 18 11 Italy 70 16 3 United States 70 13 11 France 59 12 10 Spain 44 13 3 United Kingdom 39 12 7 Source: OECD
- 32. The Wal-Mart archetype De-location of production to (e.g.) China Destruction of good jobs in the US Creation of «cheap» jobs in China Increase US Imports Lower prices for US consumers (who, however, have less income) Higher Wal- Mart profits
- 33. The Wal-Mart archetype • 1.3 mln employees (largest retailer in the US) • over 15% of U.S. imports of consumer goods from China • political involvement to reduce trade barriers • each Wal-Mart worker replaces 1.4 retail workers (-2.7% reduction in retail employment) • Wal-Mart store openings lead to declines in county-level retail earnings of about 1.5% • NB: all this, net of the effects on US manufacturing employment
- 34. One of the consequences of the patterns of technical change, globalization, de-industrialization, and financialization: • Growing inequalities
- 35. Growing unequal (Gini coefficient, total population after taxes and transfers) 0.4 0.35 0.3 0.25 0.2 0.15 France Germany Japan United Kingdom United States OECD Total mid-70s mid-80s around 1990 mid-90s around 2000 mid-2000s late-2000s Source: OECD
- 36. Globalization and inequality in the US • The ratio of redistribution-to-efficiency gains (calculations based on standard economic assumptions!): a move to (complete) free trade would reshuffle more than $50 of income among different groups for every $1 of net gain (Rodrik, 2012) • A ten percent increase in occupational exposure to import competition is associated with nearly a 3 percent decline in real wages for workers who perform routine tasks (Ebenstein et al. 2013) • Rising Chinese import competition between 1990 and 2007 explains one-quarter of the contemporaneous aggregate decline in U.S. manufacturing employment (Autor and Dorn, 2012)
- 37. Scenarios and policy options • (a) Business as usual – Further weakening of the manufacturing base – Low rate of growth – Increasing inequalities • at best a 2/3 Vs 1/3 society
- 38. Scenarios and policy options • (b) Managing globalization – Science policy – Industrial policy • Mission oriented programs (equivalent to Apollo/ military space programs) • Pragmatic use of competition policy • Strengthening European ventures such as EADS/Airbus (…Eurofighter Vs F35…) – Heavy taxation on financial rents (including, but not only Tobin tax) – Heavy progressive taxation in general – Stop a race-to-the-bottom in European fiscal polices • Examples: FIAT in London!
- 39. (US)
- 42. Scenarios and policy options • (c) Shielding Europe from wild globalization – (b) plus – Managed trade • Pragmatic use of tariffs and quotas – It would also help the expansion of Chinese internal market and Chinese wages… • A pollution-related tax • Tariffs modulated on differential union protection of workers
- 43. And things to avoid al all costs • The Transatlantic Trade & Investment Partnership (TTIP). …With its dominance of the interests of private investors over any political and social concerns (e.g. the right to a healthy life and protection of the environment…)
Editor's Notes
- tabelle
- Very short literature review on Wal-Martnomics Basker JEP (2007). At the beginning of 2007 Wal-Mart is the largest private employer in the United States, with 1.3 million employees, and the largest retailer in the United States. Wal-Mart also accounts for over 15 percent of U.S. imports of consumer goods from China. Sorting out cause and effect in these studies can be tricky because the location of Wal-Mart stores is an endogenous choice. If Wal-Mart opens stores during temporary periods of growth, a naïve “before-and-after” look would conclude that Wal-Mart has had a more positive effect than it actually does. Wal-Mart’s PAC was the twentieth-largest contributor in the 2004 election cycle and the ninth largest contributor to the Republican Party and Republican candidates. A major objective of Wal-Mart’s political involvement at the federal level is to reduce U.S. trade barriers against countries from which Wal-Mart would like to import more. However, while much is known about Wal-Mart, many of its economic effects remain unquantified. Wal-Mart’s effect on jobs is modest (and likely to be positive), but its effect on wages—controlling for workers’ characteristics—requires further investigation. Neumark et al. JUE (2008). Assuming a systematic pattern in the openings of Wal-Mart stores, the employment results indicate that a Wal-Mart store opening reduces county-level retail employment by about 150 workers, implying that each Wal-Mart worker replaces approximately 1.4 retail workers. This represents a 2.7 percent reduction in average retail employment. The payroll results indicate that Wal-Mart store openings lead to declines in county-level retail earnings of about $1.4 million, or 1.5 percent.
- Mandare refernces