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.
Related articles
- A Capitalist’s Dilemma, Whoever Wins the Election (nytimes.com)
- Toyota Hits 1 Million Hybrids in 2012 (thetruthaboutcars.com)
[Updated Nov 2012 by Hugo Mendes Domingos]
Innovation Models 
I think that innovation will have a positive effect on the average productivity of workers, wether it is neutral or not in the sense of Clay Christensen. Therefore the most probable outcome on innovation will be a slow economic growth coupled with a flat level of employment.
Unless there is employment created in low tecnhologic activities, say agriculture or services, this will be the most forseable future for Europe. Just like Japan!
[…] Types of innovation and economic growth […]
[…] fifth most viewed post was Types of Innovation and Economic Growth posted in November 2012. This post discussed the different ways in which innovation can lead to […]