EU to become USE?

Since the euro-based austerity crises visited on Greece, Spain, Portugal and Italy – followed by the refugee crises causing Schengen alarm bells to ring loudly across most EU states – then Brexit – and now elections in France and Germany raising increasingly important national sovereignty issues there – the likelihood is the EU, as constituted, will not last much longer

Add to this mix the sclerotic performance of most EU economies, their lack of agreement over foreign and defence policies, the niggling irritation with the power and expenses of unelected powerbrokers in Brussels or judges meddling in matters which have nothing to do with ‘level-playing-field’ markets and you have a recipe for widespread disillusion with the EU

Radical EU reform has thus become a ‘must’ for at least 50% of the overall population but no alternative visions have been proposed/ publicised to date – and most of the current top players have too much vested interest to seek major change

Hence, it’s for outsiders to propose a new acceptable-to-all EU format i.e. a USE – a United States of Europe – a federation of independent states which the majority in the UK would also be keen to join – one where each member state might:

  • Regain its national sovereignty
  • Determine its own laws, foreign and defence policies
  • Drop the euro and re-establish its own currency
  • Control its own borders and immigration levels
  • Agree new trading rules for a ‘common market’ whilst not discouraging access for undeveloped nations nor competition from the rest of the world
  • Collaborate in such public service areas as social security, health. education, defence, transport and R&D – to improve lives everywhere

 

It’s surely only a matter of time before such a USE is formed

And if one seems ‘on the cards’ before 2020, Brexit negotiations most probably would be halted and the UK willingly become a member state instead

 

 

Passports to productivity Improvement?

Some say the ‘Productivity Puzzle’ is the result of a storm of problems affecting both supply and demand in G7 developed nations viz:

  • Supply: In the past, major technological advances (aka Schumpeter discontinuities) enabled quantum leaps in productivity levels – G7 nations would all adopt them and improve at about the same rate – now, without more significant advances (as Robert Gordon, US economist, suggests) and much of what does add value being offered for free, GDP and so national productivity levels have flattened out – most goods and services have kept on improving in quality but are being offered at the same or less unit prices
  • Demand: G7 populations have stopped growing significantly, some even falling, so demand for most goods and services has also stalled – also, most people in the G7 already have enough of the goods and services they need – they don’t want more cars, TVs or iphones but simply to replace them when better quality and latest versions are on offer – hence consumer demand has apparently stopped growing

 

Overall, therefore, it’s no surprise that G7 GDP and productivity growth are both suffering ‘secular stagnation’ according to Larry Summers, Harvard economics professor and ex US Treasury Secretary – and this is likely to persist for many more years

So, if G7 nations are to increase demand (i.e. GDP) as before, they must export more – sales directors and government ministers must dust down their passports and go find the extra demand needed from outside their home borders i.e. from the two thirds of the world that, so far, has been left trailing far behind

At the same time, their companies must keep the pressure on productivity improvement to ensure their unit costs and prices are at levels the nations abroad can afford

 

IoT to transform many processes

“The IoT (Internet of Things) can help businesses be more productive and efficient” says Phil Goldstein, web editor for BizTech – “but they need a plan to integrate disparate technologies whilst addressing protection needs against malicious actors”

Steve Darrah, Director of National Solutions at Intel, says that “IoT can be used to improve efficiency and profitability, drive safety and increase worker productivity”

For example:.

  • Retailers can use radio frequency identification tags to track inventory
  • Healthcare providers can use wearables to track the vital signs of seniors in long-term care and predict if a person is going to suffer a heart attack

 

Link Simpson of CDW, an international IT company, notes that IoT technologies work in combination with other systems e.g. in the event of a fire, an office with IoT sensors can:

  • Call the fire service
  • Shut down elevators
  • Take control of digital signage in the office
  • Turn on video cameras to find workers and feed the images to the firemen on site
  • And lock or unlock doors to direct traffic out of the building

 

However, Simpson cautioned about one major hurdle to afflict the IT revolution ever since it began mid last century – different technologies running on different protocols and programming languages often cannot talk to each other

But the good news is that this can now be accomplished using ‘modern network gateway technologies’

He concluded: “IoT is really no longer just about the data and the information you can pick up from sensors – it’s about transforming your business processes”

 

Diageo appoints a CPO

Many companies employ inspectors and quality controllers in an effort to minimise waste and boost good output volumes

Very few indeed  have anyone specifically in charge of productivity or widespread employment of best practices, whether from internal or external sources

Now, at long last, a major company has appointed a Chief Productivity Officer (CPO) – at least it’s the first one we’ve read about

Diageo have clearly recognised the importance of productivity improvement to their long term success and elevated their previous CIO, Brian Franz, to this new position

IT is indeed important, but it’s only one of the tools/ skills needed for productivity improvement

In his new role as CPO Franz says he is: “Helping to lead a targeted drive across our entire cost base and plans to save £500m in the next three years, two-thirds of which will be reinvested in growth”

He adds: “Productivity savings are often wrongly associated with cutting costs – we want to put the consumer at the heart of what we’re doing and drive top-line growth through productivity-focused activities”

One can only hope all other FTSE 100 companies, indeed,all UK SMEs, follow suit

Then, at long last, we might see a breakout in the apparent sclerotic UK productivity growth rate

 

Pareto analyses

Pareto, a 19th century Italian economist, spotted that “80% of effects arise from only 20% of possible causes” – apply this rule to national productivity levels and just the top quintile of companies determine whether improvements are made – and it has been ever thus

In other words, the great majority of companies are doing little or nothing to improve their productivity – not only do they lag far behind the vanguard companies but the productivity gap between them could even be widening, especially when patenting and intellectual property rights restrict the spreading of new ideas and better ways of doing things

Andy Haldane, chief economist at the Bank of England, recently supported this view by arguing that, if UK firms in the three least productive quartiles were able to improve at the same rate as companies in the top quartile, overall UK productivity would rise by 13% – whilst we might question the veracity of the data he used, we fully agree with his view that most companies have enormous scope for improvement

So, given such a distribution of companies applies to most nations, not just the UK, a two-pronged national productivity improvement effort is needed by all viz:

  1. Incentivise the 80% of companies/ organisations that lag behind leaders in their sectors to improve productivity levels:
    1. First, offer them good measures that clearly establish their current productivity levels and scope to improve relative to others – otherwise most will assume they’re at least average, have little to worry about and so need do little to change
    2. Also, provide education/ help in how to cut waste and make best use of existing costly resources – most will have the opportunity for at least a 20% improvement from these actions alone
    3. Then, after successfully completing the above, have them consider using latest best practices and major investment in new resources and systems – and so will need advice/ support to do this
  2. At the same time, encourage the vanguard 20% of organisations in each sector to at least continue to improve as before, not least by offering more financial incentives for more ‘open research’ and ‘market creating innovations’

 

For too long, productivity improvement has been ignored by most organisations despite it being more important than just about any other business issue

And, if and when it does appear on the national radar, the focus is usually on progress made by vanguard organisations in the manufacturing sector i.e. the 20% of a sector that comprises only some 15% of any developed nation’s GDP i.e. a mere 3% of its economy!

Is it any wonder most managers and ministers don’t ‘get it’ and national productivity improvement staggers from year to year

They’re all focussed on other ‘key result areas’ i.e. areas of less importance

They need to understand Pareto’s Rule and its relevance to productivity