How much will European economies grow in the medium term (3-5 years)?
Different quarters will answer in totally different ways at present. If you are talking with a politician, the answer will probably be that, following a period of austerity and deficit reduction, Europe will be back to growth.
Analysts and investors will likely give you a different answer. Everyone is talking about the so-called muddle-through economy. Few analysts expect a period of sustained growth in Western Europe before 2020.
These different views will be the source of many difficulties in the coming years. It is very likely that politicians will continue to over-promise until the political class itself realises that the muddle through scenario is, in fact, most likely to happen.
This is all to do with types of innovation. Clayton Christensen wrote about types of innovation in a recent article (see link below) and mentions three broad categories: empowering innovations (think Ford T), sustaining innovations (think Toyota Prius) and efficiency innovations (online banking). While the first type of innovation involves building huge factories to bring new products to the masses, thus creating jobs, the second type is neutral (in Christensen’s example, Toyota sells less Camrys as it increases its Prius sales) and the third type destroys jobs (your bank will employ fewer cashiers if customers prefer to bank online).
Sustaining innovation (Photo credit: Wikipedia)
Europe’s economy is all about sustaining and efficiency innovation at present. This means moderate economic growth and persistently high unemployment. We just need to adapt to this new reality. It will impact the way we work and live.
[Updated Nov 2012 by Hugo Mendes Domingos]
Innovation Models 