Should Europe be afraid of the developing world?

Neelie Kroes, Vice President of the EC in charge of the Digital Agenda and Maroš Šefčovič, Vice President of the EC in charge of Inter-Institutional Relations and Administration at the inauguration of the LED pilot installation ‘Shades of Light’. Denis Mortiaux, at the left, Andre Papoular, at centre, Neelie Kroes, at the right, and Maroš Šefčovič. (EC Audiovisual Services)

China and India are undoubtedly the two heavyweights of the developing world. On their foot-steps one can categorise also Indonesia, Malaysia, Thailand, Vietnam and some more countries of South East Asia. Yes, those are the tigers of growth, based on the iron willingness of their people to secure a more or less comfortable life, after having overpassed the difficult decades of working and living “from hand to mouth”. There are also other fast developing countries like Brazil and Russia, but those two have based their growth on their immense natural resources.

But let’s fly back to Europe and ask ourselves, if we should be afraid of all those billions of people, determined to continue working hard and having as a vision to reach our level of life. Do they threaten our economies with their success? Or probably all those billions of new consumers and spenders are a real new Eldorado for our high value products and cervices?

Some researchers estimate that in the brief period of the current decade, from 2011 to 2020 the Chinese and the Indians will triple their consumption spending and taken together they will be spending anything between $9 to 11 trillion yearly on consumption. Can’t Europe profit from this bonanza? The answer is surely yes, because the truth is that those consumers already have a test for our high value products and services. Food and drink specialities, luxury cars, Eurobus airplanes, heavy manufacturing, construction and energy production equipment, environmental industries, financial services or every kind, education, cultural products and tourism are but a few sectors that Europe excels, ahead of the rest of the world. Why loose this this preponderance?

True, Asians and other developing regions are now specialising in agricultural commodities, mass production of clothing, footwear, electronics, even in ship building and heavy machinery. But the export of jobs in these sectors from Europe to Asia and Latin America is taking its toll slowly and the European Union is monitoring the whole procedure very carefully. For decades the EU protected its own production of food staples, like cereals, with heavy import duties and generous export subsidies. Not any more.

European farmers are now just a very tiny percentage of the working population. Their children have become small businessmen and scientists. Even the numbers of traditional factory workers have diminished very fast in Europe, while the sector of services is expanding exponentially. Finance, commerce, education, culture, health, tourism, market services, security and other sectors of services are exploding.

Of course nobody can underestimate the repercussions of the present credit and fiscal crisis in Europe. Employment is fading unbelievably fast in Greece, Spain and Portugal. But there are special conditions there. Those countries have failed to manage their public finance with a long term vision. Their political elites failed to understand the changing conditions in the world arena. In any case they do not represent the cutting edge of Europe’s economy. Italy is not a part of this lot. The country may have a government debt problem, but it is also an excellent export machine. Northern Italy is the most industrialised region of Europe. Its range of manufacturing production covers Germany and France taken together, turning out a hefty trade surplus. And on top of all that Italy can self-finance its borrowing. Italians are among the biggest savers in the developed world.

As for the rest of Europe even smaller countries like Austria, Holland, Belgium, Ireland, Denmark, Finland and Luxembourg they are all doing very well on the international arena, with specialities and high added value products and services. As for Greece only its shipping and tourist industries can bring the country out of its misery. Each provides incomes of around €15bn yearly. But first the corrupt and incapable elites in politics and public administration have to be phased out.
In short Europe has nothing to fear from the developing countries. On the contrary, the increasing spending power of their citizens can feed generously Europe’s high quality production and services.