2 JUL 29,
2015 2:00 AM EDT
By Mark Buchanan
Bloomberg
One of the
more troubling elements of the recent drama over Greece 's debt was the urge by many
to see a deficiency of national character, rather than euro-zone economics, as
the problem. Right-leaning opinion, not only in Germany
but around the world, put the trouble down to Greek corruption and, worse,
laziness: The bad people of Greece retire
too early and produce less per capita than the European average, despite
working longer hours.
We
shouldn't conclude much of anything from such comparisons. It's a complete myth
that economic productivity somehow reflects the average ability of people to
work hard. It has far more to do with the nature of industries in different
nations, and how technology has changed their productivity over time.
Nearly 20
percent of Greek economic output comes from tourism, which is natural enough,
given the nation's surpassing beauty. Aside from the Internet making it easier
to book and advertise trips, however, tourism remains a labor-intensive
activity not that different from 30 years ago. People take planes and taxis,
stay in hotels, eat meals, listen to music and take excursions on boats. All of
that requires a large number of people to cook and serve, entertain, clean
rooms and drive taxis for long hours. The amount of these things that can be
produced per hour and per person hasn't changed a lot with time.
Compare
that with, say, the German automobile industry. According to Eurostat data, the
total output of the European motor-vehicle industry -- German companies account
for about half of it -- grew in the decade before the financial crisis by about
4.4 percent a year. That corresponds to a doubling of output in 15 years. Much
of this increase came from gains in manufacturing productivity -- value created
per hour of work -- which in Germany ,
according to OECD numbers, grew by 40 percent over the same period.
In other
words, rapid economic growth in Germany
and other fast-growing, developed nations has come mostly from improvements in
industrial efficiency, not from some morally superior character of the workers
in those nations.
All this
links up with a notion that economists call Baumol's cost disease, originally
proposed by William Baumol and William Bowen in the 1960s. Why, they wondered,
do some things like education, medical care and live musical performances get
more expensive with time, while so many other things, like manufactured goods,
get cheaper?
The answer
is simply that productivity improves faster in some industries than in others.
As auto manufacturers make ever more and better cars -- faster and with fewer
workers -- they can sell them more cheaply and still afford to raise wages. In
contrast, a live orchestral performance today takes as long and demands as much
skilled labor as it did two centuries ago. Getting good musicians requires
wages that rise as fast as elsewhere in the economy, and so prices in
"stagnant" sectors of this sort go up relative to others.
This dynamic
is a significant contributor to relentlessly rising medical costs around the
world. Medical technology certainly drives productivity improvements, but
time-consuming individual interactions between doctors and patients remain
necessary. Doctors can't give high-quality health care to more patients in one
hour today than they could a few decades ago. Prices rise, but not because
doctors are getting lazy.
Getting
back to Greece : It's no
surprise that the productivity per capita of its tourism-heavy economy hasn't
kept up with Germany 's
industrial juggernaut. These are different economies supplying different kinds
of goods. Before 2010, Greek productivity per capita was stable at a level of
about 93 percent of the European average. Productivity in Greece only
plummeted after 2010, following the imposition of severe austerity.
Here's the
simple, amoral story of Greece and Germany: One economy thrives on rapidly
advancing industrial technology, the other on valuable economic services that
get created and delivered in ways that just don't change a lot with time. The
Greeks aren't lazy, and the euro zone's problems have nothing to do with
anyone's moral shortcomings.
This column
does not necessarily reflect the opinion of the editorial board or Bloomberg LP
and its owners.
To contact
the author on this story:
Mark
Buchanan at buchanan.mark@gmail.com
To contact
the editor on this story:
Paula Dwyer
at pdwyer11@bloomberg.net
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