European Stagnation Is Real | Hacker News Reader

European Stagnation Is Real

siliconcontinent.com

18 pointsdevitoria32 comments

The whole premise of this rebuttal is wrong in a self serving way.

Purchasing power and income are meaningless without accounting for what needs to be bought.

Americans can make high incomes for decades only to be bank d by medical debt. Having to own a car per household member can add thousands to monthly outgoings and is common in many places. Even schooling, which should be free, isn’t when sports cost thousands per year and parents are required to furnish their kids classrooms with books, pens and paper.

I am a US/European dual citizen. American wealth is an illusion. Average Northern Europeans are much better off in real terms.

How do you disentangle the factors that go into productivity? The US is a net oil exporter, has the global reserve currency, and runs the most important stock exchange, among many other factors. How much heavy lifting is done by oil, by currency, by historical happenstance, versus by deliberate policy?

Productivity in economics is different from the colloquial definition. Productivity in this case means economic output (usually GDP) divided across working population.

As such, variables for productivity can be identified via back-of-the-napkin math, and in America's case is largely due to the rise of the tech and biotech industry along with Obama and Biden era protection for core industrial sectors like automotive, semiconductors, and renewables.

> How much heavy lifting is done by oil, by currency, by historical happenstance, versus by deliberate policy?

The productivity and GDP gap between the EU and US only began after the Great Recession and Eurozone Crisis.

The US decided to invest in subsidizes and simplified financing. Much of the EU decided to concentrate on austerity and reduce financing.

I don't know if back of the napkin maths helps understand exactly what the US is doing right.

You can point to a sector with high GDP, sure. But US tech ascendancy has its roots in DARPA spending around the bay area, which was enabled by US economic and military supremacy, which was in turn driven by the US having a lot of oil and staying out of WW2 and a host of other factors.

I agree with the point that investment vs austerity looks more impactful than the history of DARPA spending, but I just find economic analysis an overwhelming problem to even think about.

The EU and the US had a comparable GDP and population size around 2007. The gap between European and American performance only arose in the 2008-13 period when the GFC and Eurozone Crisis occured.

As such, it is important to dig into how the US and the EU approached these crises, as both took entirely different approaches.

The crux of the EU's laggard performance arose during that period.

You shouldn't worry too much about it. I have confidence that here in the US the people who operate our political system have the values, vision, and competence to put us back on track with Europe in a single administration.

This is very interesting, good points. They don't really say what lead to this. EU and US were neck and neck in GDP growth department until GFC. And it's really not obvious what changed.

I'm not going to outright state it, but here's where you should start: there's a communist holding the position of chairman of Goldman Sachs International (yes, really, I know how it sounds. It's still true). This person made a BIG change to the Euro during the GFC ... and what you're asking was exactly the expected result.

And let's not discuss the recent changes.

both USA and EU are stagnant but you have to go to East or SE Asia to see what it means. Salaries and GDP is not always the best measure of growth.

IMHO, the EU needs to become more proactive when it comes to tech markets. Trying to find new ways to tax US tech megacorps is not going to cut it.

  1. Create competitive low tax regimes for EU based tech companies, both for investors and employees.

  2. Forbid buyouts by US tech companies.

  3. Become more protective of tech markets in general. For example why the fuck does AirBnB or Uber get to operate in Europe? What is there to gain? We have our own alternatives.

  4. Give preferential treatment to EU based tech companies. For example for government related contracts, why the fuck are EU governments depending on Microsoft/Google/Amazon?

  5. Prioritize tech over other lower growth industries. Yes selling petrol cars was good business 30 years ago.

I think it's really clear what europe should do and it's been for a while. Now insert politics and you get governments mostly captured by US influence thanks to propaganda, lobby, deep ties and european upper class invested in US companies.

Any tech focus won't make a dent unless europe gets out of the US grip. And to do that would require huge changes in politics. So far we are seeing turn to far right which is even more tied to US (and US tech) than the current center right heading europe.

We will see. The digital tech moat US might be quite shallow. Maybe in hardware but software in europe is pretty great and most of the moat are network effects. Network effects can be dissolved much easier and faster than hard tech. But it's never been a fair fight.

Yes, unfortunately it's very easy to buy our bureaucrats both at national and EU level. Heck most of them style themselves to be Americans! You make very good points.

And individual debt in America versus Europe?

Household debt rates in America are better than most of Western Europe and comparable to Germany [0].

FYI the Nordic states and Netherlands tend to have the highest household debt rates amongst European OECD states [0].

[0] - https://www.oecd.org/en/data/indicators/household-debt.html

they also have generous social protections that allow them to handle the associated risk.

easy to take on a lil more debt if you know you have healthcare and employment protections.

If so South Korea, Portugal, and Canada wouldn't have Nordic level household debt rates despite have significantly less permissive (and in SK's case functionally non-existent) social safety nets compared to Nordics.

Swedish 5y mortgage rates are at about 3.1%. US is at twice that.

Honestly, the world could use more stagnation.

We've had a lot of change in the past hundred years, and we've reached a point where we can clothe, feed, and house everyone in the world. Once that's done, moving forward more thoughtfully makes a lot of sense.

Who cares if we reach Mars in 2100 or 2200?

On the other hand, I care a lot about avoiding the nuclear / bio / chemical / environmental / and now AI apocalypse.

“we”? i think it’s damn obvious that it’s not “we”. the world doesn’t get to move together until all differences are resolved, is that the progress you think we’ve made in the last 100 years? I don’t understand how talk like this goes unchallenged so often. it’s fine aspirationally but come on! I look at a growing economy like a bicycle, the slower it goes the less stable it is. in other words, you can’t just stop unless you want mass death or you want to transition to a stabilizing mechanism the world is yet unaware of. I would also suggest we don’t foolishly bully human nature with policy- there is a certain and deep injustice to that.

Life’s motto is to grow. asking it to not grow or to greatly hamper it? its outrageous really, especially without a genius respectable path to get there. i don’t mind aspiration because dreaming is good but this one is a bit tired and uncontested. and just so i’m not just complaining, i’ll suggest that people stop trying to be dubious global citizens in problem space that outstrips their capabilities and work to be better stewards of one’s self, family, friends. support /relatively/ steady growth.

Growing the economy is not "like a bicycle, the slower it goes the less stable it is."

See everything from ancient Egypt to Soviet-style Communism. Periods of time in Ancient Rome would fit in too. The problem with those -- except for a repressive political system -- was that we could not produce enough to satisfy everyone's basic needs.

Today, we can.

Much of the US-style growth is driven precisely by instability. The system feeds on debt. That forces stress. That forces growth. That also means one cannot be "better stewards of one’s self, family, friends."

And so far, no one has explained how "we don’t foolishly bully human nature with policy." Legal and economic frameworks guide what humans do; that's either something we think through and engineer, or it gets engineered for us by market forces, but it's there anyway.

The most freedom-preserving policy isn't a command system, but it's not a pure market system either. And for stability, we can contrast stable economies to boom-and-bust cycles and successful democracies to the very many failed market-economy democracies across e.g. Africa and South America.

Before salty Europeans downvote and ignore this substack, the author (Luis Garicano) was an MEP who was the vice-chair of the RenewEurope [0] coalition who also helped create CBAM to both mitigate climate impact as well as protect European industry and is a member of the pro-EU think tanks CEPR [1] and Bruegel [2].

If there is an academic you want to listen to in order to understand how to better reform the EU's institutions, it's definitely Luis.

Anecdotally, the (EU+UK)-to-America pipeline of founders remains red hot, and that brain drain hasn't reduced in spite of Trump.

The EU can remediate this, but the window is increasingly closing as a number of traditional industries that EU states dominated such as automotive, steel, instrumentation, etc are increasingly being pressured by competition from China, Japan, South Korea, and others which pushes early stage capital out of Europe to other markets.

> Europe looks great to Americans because Europe is great for people with American incomes to buy the nicest it has to offer. But the nicest it has to offer is not available to (young) people in Europe today.

This is something everyone needs to remember in comparisons.

[0] - https://www.europarl.europa.eu/meps/en/197554/LUIS_GARICANO/...

[1] - https://cepr.org/about/people/luis-garicano

[2] - https://www.bruegel.org/people/luis-garicano

p t

> American technology companies bid workers away from haircutting and waiting tables to write code.

What?

> Europeans now work at all, and fewer Americans do. (In the authors’ view, the American decline is driven mainly by the expansion of government health benefits for the non-employed, especially Medicaid, which raised the value of not working.

Um, other than the confusing “now work at all” which I interpret “are all employed”, this is a strange coincidence that the author thinks hair cutters are writing code and a vast population aren’t working at all.

I have lived and traveled throughout Europe, I have to say despite the “grateful” comments there truly are deeper cultural issues than software pays good so Europeans should write more software.

Besides, American VC pumps enormous cash into those salaries, most of which FAIL (20% success is the ideal VC margin isn’t it? I’m an outsider looking in on this one.)

So huge segments of American software developer payouts are actually failed investments (how much did Meta blow on “metaverse”? How much did Twitter hemorrhage before the Elon buy out? Etc.)

VC cash transfusion life support is not exactly the healthy economic float that saves civilization.

And really, vanishingly few benefit from this dynamic, which I think the deteriorating tech roles due to AI infiltration exhibits.

American vitality is a bubble trend without societal stability.

>> American technology companies bid workers away from haircutting and waiting tables to write code.

> What?

The context is clear is you read the whole paragraph instead of that one sentence:

> Once a good is non-tradable, the wage is not set globally but in local markets. Newly productive American technology companies bid workers away from haircutting and waiting tables to write code. Since Americans still need haircuts and cannot import them, the wages of hairdressers increase, without it affecting wages for hairdressers in Germany. American software wages rise and so do American non-software wages. In Europe this does not happen, because there is no growing software sector to start with.

And the author is correct (while the phrasing is a bit weird.) American hairdressers aren't not better at haircutting than European or African hairdressers. But they still (mostly) earn more than their counterparts in other continents, because their customers, or the customers of their customers, are richer.

> So huge segments of American software developer payouts are actually failed investments (how much did Meta blow on “metaverse”? How much did Twitter hemorrhage before the Elon buy out? Etc.)

In other words, capital pays laborers. It takes a huge amount of mental gymnastic to frame this as a bad thing.

If you think there are more than zero writers of code who were drawn away from cutting hair and waiting tables, I’ll eat a hat!

* it must be an unused natural fiber hat.

HN, anyone among you who once cut hair and waited tables? Pizza delivery does not count!

It's really hard to comprehend how this comment is relevant to the original article or my comment. It seems that you didn't read the whole article, the whole paragraph, nor the whole sentence you quoted. You only read one single phrase ('bid away') and decided to nitpick it to death.

I bussed tables at one time. Like 25 years ago I think. Pretty much everyone has done some crappy job. But I was not bid away from bussing tables to write code, I was not really bid away from bussing tables for anything because nobody is bidding on table bussers to go work on anything at all.

> Pretty much everyone has done some crappy job.

you'd think so, but a lot of HN went to places like MIT and then straight into FAANG. Or Perdue and then into MechEng jobs, etc. etc.

Is one of the reasons why you see some of the hot takes at HN -- homeboy never had to pay his rent waiting tables or cutting grass.

I'm still thinking a lot of HN probably amounts to a relatively big amount like 12% which still means pretty much everyone, even on HN, probably did some crappy job. Also a lot of people, in non-HN pop, do crappy jobs and still end up with those hot takes.

You should eat your hat. The majority of people who work in restaurants do not stay there their entire life. Most move on to different careers, and for some of them it's coding. I'm one of them.

And even if the person doesn't move from waiting tables to coding, they are probably switching jobs because a position opened in a better field, and that position opened because somebody else switched to a better job - maybe coding?

It's a waterfall effect when salaries increase and employers have to compete for talent. It is the ideal state of things, and the entire purpose of having a free market economy.

> And the author is correct (while the phrasing is a bit weird.)

Right, that's just a description of the https://en.wikipedia.org/wiki/Baumol_effect

I mean it seems to me that Danish hair stylists and California hair stylists earn about the same amount of money before taxes, obviously the California has higher take home pay while the Danish has more governmental services so I feel it somewhat evens out.

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