The Answer Lingers in Productivity

Nowadays some people argue on the reason for the critical situation of Europe in its economy, meanwhile others turn to study the factors that originated all this crisis in order to comprehend the chaotic economic condition.

An analyst having a reasonable level of intellect shouldn’t cast doubt over any other reason than the one linked to productivity, which turns to be uneven among the members of European Community. Before delving into the subject, it should be defined productivity as concept firstly.

Productivity by Alexander J. Field, The Concise Encyclopedia of Economics, gives this example if your bakery business buys flour and yeast, rents a shop and equipment, and pays for fuel, its contribution to GDP is not the sales price of the bread made, but the difference between gross revenues and purchased materials and services except hired labor. Your firm’s output is what you and your employees have added to the value of the materials and services purchased from other firms. He adds if you discover a way to rearrange your labor force and equipment so that production is more efficient, or discover a great new recipe for a loaf that is equally tasty but costs you less to bake, multifactor productivity in your firm may go up, increasing your output (value added) per hour even in the absence of any capital deepening.

Obviously this bakery would operate very different in any country member of the European Community. This is a revealing example the reason for the chaos that has been created.

According to Wikipedia, Productivity is a measure of the efficiency of production. Here it is possible to highlight that what determines the efficiency of production is human capital, and -some will argue that this is a key factor but not the only one- there could be others like technology.

However, this argument is refutable on terms of that it is not only the accessibility of the existent technology that a country whether might have or not; despite having a very high degree of technology but what determines its efficiency is the use of this and, there human capital comes along.

Wikipedia also says that Productivity is a ratio of what is produced to what is required to produce it. In Productivity by Alexander J. Field, The Concise Encyclopedia of Economics, the growth of productivity –output per unit of input- is the fundamental determinant of the growth of a country’s material standard of living.

This concept discloses the importance of labour productivity –which offers a dynamic measure of economic growth, competitiveness, and living standards. So if the labour productivity is rather variable from one country to another, no analyst or economist could expect to have the same indexes in both economies. One of the both will show clearly any increase or decrease in their numbers comparing with the other.

Here, two questions come along. If economies present enormous differences in their labour productivity how can these come together as one country in a community of members and even how could these countries associate them in a non-commercial barriers trade?

It is studied that human and social capitals together with competition have a significant impact on productivity growth. One paramount factor that exercises a determinant influence on human capital is culture –values and concepts with which a man is brought up, and which varies from one country to another. A relative example of disparate concepts from one country to another in Europe is the vision on work. For European southern countries this is appreciated as curse meanwhile for European northern ones work is the medium to create wealth and, therefore bring as result an increase in the growth of a country’s material standard of living.

In fact, we can find that EU’s GDP is shrinking as a proportion of world GDP. A deeper integration brings as consequence less competition among the member states, so the benefit is higher taxes and more regulation.

Therefore, it could be stated that for better job opportunities and higher quality education are need to improve labour productivity and boost growth, besides if the countries of a community don’t have the same vision about how wealth is created and their productivity index is uneven between them their union will have some countries bearing the burden of the less productive members and bringing chaos into their economies, plus don’t give any chance to those countries already in chaotic conditions take some rules on their own

America’s Supremacy: Immigration

In previous articles I attempted to analyse the causes for some countries still in the condition of underdevelopment in a global world, also such a reasoning tries to have understanding about this new tendency - which will help to develop in a better society – denominated The New Socialism of XXI Century; socialism that supposedly is not the same one as that of the last century. In the following lines, I will expose the reason for America is always in steps ahead from the rest of the world, which absolutely grants supremacy to the country.

            One aspect that many countries overlook, due to the fact of their underlined regionalism, or aversion or just simply not being in capacity of taking in, is Immigration.

            America owes its increasing specialization, the enhancement of its productive capacity and innovation to Immigrants. They allow American workers to boost their degree of specialization and become more productive –earning high wages. This is a key factor that produces as result supremacy above other nations. As the economist Giovanni Peri states in his research “Technological and scientific innovation is the acknowledged engine of United States economic growth and human talent is the main input in generating this growth.”

            In many countries a skilled immigrant is not considered on the terms of having not been a native-born, and he is catalogued as a disestablishing element in the opportunities for native professionals. This contra juxtaposes with Peri’s description “A team of engineers may have greater productively than an engineer working in isolation, implying that a foreign-born engineer may increase the productivity of native-born team members.”

            Although, it could be stated that immigration is harmful for the economy and society of a country, some papers have found out that immigration has a little adverse impact on natives.

            “Foreign-born workers complement rather than substitute for native-born workers because they have a different pattern of education and skills…” Diana Furchtgott-Roth, Director of the Hudson Institute’s Center for Employment Policy.

            In the United States, in the field of scientific innovation, the leaders are foreign students, skilled immigrants and doctorates in science and engineering. And, America supremacy is summed up in this “For every 100 international students who receive science or engineering Ph.D.’s from American university, the nation gains 62 future patent applications.” According to a study by Keith Maskus, an economist at the University of Colorado, Aaditya Mattoo, Lead Economist at the World Bank’s Development Economies Group, and Granaraj Chellaraj, a Consultant to the World Bank.

            The bottom line conclusion of their research is that “Reducing foreign students by tighter enforcement of visa restrains could reduce innovative activity significantly in the United States.”

            So those countries that restrain immigration are deprived of innovation. It is hard for them to attain a high level of advance and supremacy over other nations.