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?
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.
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.
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.
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 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 as well, the EU+UK-to-America pipeline of founders remains red hot, and that brain drain isn't being reduced.
The EU can remediate this, but the window is increasingly closing as a number of traditional industries that EU states dominated 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.
> 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.
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.
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 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.
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?
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.
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.
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.
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.
And individual debt in America versus Europe?
Household debt rates in America are better than most of Western Europe and comparable to Germany [0].
[0] - https://www.oecd.org/en/data/indicators/household-debt.html
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 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 as well, the EU+UK-to-America pipeline of founders remains red hot, and that brain drain isn't being reduced.
The EU can remediate this, but the window is increasingly closing as a number of traditional industries that EU states dominated 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.
> 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
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!
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.
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 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.