
The IT revolution and southern Europe's two lost decades - hhs
https://voxeu.org/article/it-revolution-and-southern-europes-two-lost-decades
======
icebraining
To me, the most relevant quote is:

> Subsidising IT adoption actually lowers southern productivity even further.
> Likewise, subsidising education has negative effects, as it is effectively
> becomes a transfer to the north through high-skilled migration. These
> surprising results are due to the fact that, in our model, low IT adoption
> and low education are a symptom, rather than the cause, of low productivity
> growth in southern Europe. Indeed, given management efficiency, southern
> workers and firms behave optimally. There is no further room for
> improvement.

As a citizen of a Southern EU country, this feels painfully true. Having
worked a year in the Benelux, returning here just heightened that sense: the
culture of hiding information, trading influence and promoting mediocrity. And
I fear those EU funds for creating startups will just be consumed by the
forces, being used by founders who have only known this reality. Working
abroad beforehand should be, if not mandatory, at least strongly encouraged.

~~~
xondono
As a someone working in hardware development (PCBs & firmware) in Spain, from
the 5 companies I worked:

\- Only one used version control, the rest I had to introduce them (and fight
management fears) to set it up.

\- Only two had onsite backup using RAID or similar

\- None had out-of-site backup

\- Only one had a system that supported shared libraries (for hardware), the
rest resorted to email or a shared drive and a LOT of back & forth to ensure
no one overwrote past edits.

\- I started working in 2010, yet I've managed to found "goto" statements (the
"jump out of this function to some weird place in code" type) in the wild.

But by far, the most damaging practice that I see around is how pointless much
of the work done is. Given the amount of investment required for developing
your own hardware, knowing that less than 40% of the products I have worked on
are on the market because they were pointless in the first place (and everyone
knew it) is the most demoralizing.

EDIT: I always forget to double the break lines

~~~
raverbashing
> yet I've managed to found "goto" statements (the "jump out of this function
> to some weird place in code" type) in the wild.

I might just add that this is not wrong and actually expected in some places.
Linux uses it. It helps with some error handling situations.

But yeah with the other points I agree.

~~~
golergka
While I've seen a few places where goto made sense (as in, "goto fail" in C),
a goto that lead somewhere out of a function has never been one of them.

------
bump64
Can't speak for all southern countries in EU but here are my impressions.

* At least from the people I know during the summer productivity drops because everyone is on a vacation to the seaside.

* People here seem to much more enjoy live. It is much more common to see young people just hanging around and socializing than doing anything productive.

* Tourism is usually the priority for those counties, not IT. This leads to high number of seasonal workers. Lots of people don't want to work in factories and offices. They just work a few months during the summer in the tourism and during the rest of the time they enjoy life and do nothing.

* EU allows everyone to work everywhere and smart people want to be part of the technological hubs of Europe which just happen not be here. It is the same as in USA. I haven't heard about any startup from Kansas, but plenty from Silicon Valley.

My two cents for the situation. EU has poured lots of money to these regions
but very few productive things have come out. People just learned how to
manipulate the system to get more funds. They are not thinking how to solve
real problems and make people lives better, everyone is just trying to get
money, spend them and then asks for more. The funds should be restructured to
allow entrepreneurship grow. You cannot make inefficient system better by just
giving it more money, you need to change the system.

~~~
icebraining
The long vacations (often a whistle word for "laziness") is a common refrain,
but as far as I know the numbers don't bear that out: the vacation days are
not very different, and the working hours are actually longer.

~~~
adventured
That's correct. People proclaiming that it's about quality of life are
mistaken, other nations have overwhelmingly demonstrated that you can have
both in abundance.

Portugal works more hours (1,842) than the US does (1,783; average labor hours
per worker per year). Yet US output per capita is nearly three times higher.
Greece works far more hours than the US. The US is near the OECD average for
hours worked, Greece is 15% higher than the OECD average. Spain works 4% fewer
hours than the US, with 1/2 the output. Italy works 3% fewer hours with close
to 1/2 the output.

Forget about the US though, it's nowhere near the best example of this in
action.

Germany is at $48k GDP per capita, over double that of Portugal or Greece,
while working 1363 hours per year. About 20% fewer hours than Spain and Italy.
That's nearly 500 fewer hours of annual work versus Portugal. The Germans are
averaging 26 hours per week across a year, Greek workers are at 39 (which in
real terms means once you remove vacation time, the average worker in Greece
is pulling well over 40 hours per work week).

The Greeks are among the worst off in hours worked, at 2035 hours. 672 more
hours than the Germans. That's a strong indictment of the quality of life
argument usually tossed about regarding countries like Spain, Portugal, Italy
and Greece.

Some of the countries near the bottom in hours worked in the OECD: Germany,
Belgium, Denmark, Netherlands, France, Austria, Sweden, Finland, Australia,
UK.

They're all simultaneously very high output countries, working fewer hours
than Spain, Portugal, Italy, Greece.

Norway and Switzerland are near the bottom in hours as well, however their
context are rather unique.

~~~
adventured
In case anyone is interested, here's how the figures break out on an hourly
basis, for output per capita and hours worked. The OECD average on hours
worked per year is 1,763.

Country | Hours (year) | GDP Per Capita | Output Per Hour

\--- Best results (low hours, high output) ---

Denmark | 1,410 | $60.7k | $43.05

Netherlands | 1,430 | $53.1k | $37.13

Germany | 1,363 | $48.3k | $35.44

\--- Mid or mid-upper tier outcomes ---

Ireland | 1,879 | $76.1k | $40.50

United States | 1,783 | $62.6k | $35.11

Australia | 1,669 | $56.4k | $33.79

Sweden | 1,621 | $53.9k | $33.25

Austria | 1,601 | $51.5k | $32.17

Finland | 1,653 | $49.8k | $30.13

Belgium | 1,550 | $46.7k | $30.13

France | 1,472 | $42.9k | $29.14

Canada | 1,703 | $46.3k | $27.19

\--- Underperforming (too many hours vs output) ---

UK | 1,676 | $42.6k | $25.42

New Zealand | 1,752 | $41.3k | $23.57

Japan | 1,713 | $39.3k | $22.94

Israel | 1,889 | $41.6k | $22.02

Italy | 1,730 | $34.3k | $19.83

Spain | 1,695 | $30.7k | $18.11

South Korea | 2,069 | $31.3k | $15.13

Portugal | 1,842 | $23.2k | $12.60

Greece | 2,035 | $20.4k | $10.02

\--- Some other miscellaneous results of note ---

Norway | 1,424 | $81.7k | $57.37

Switzerland | 1,590 | $82.9k | $52.14

Iceland | 1,883 | $74.3k | $39.46

Chile | 1,974 | $16.1k | $8.16

Poland | 1,928 | $15.4k | $7.99

Russia | 1,974 | $11.3k | $5.72

Turkey | 1,800 | $9.3k | $5.17

Mexico | 2,255 | $9.8k | $4.35

~~~
LeanderK
Wow! this is an really interesting chart. I would not have expected the US to
have the same Output Per Hour as germany. Switzerland is just killing it.
Where's your source? The distribution of Output Per Hour per country would be
even more interesting. I would expect countries like Italy to fairly multi-
modal (north/south divide).

~~~
adventured
I threw it together. The source is the OECD hours worked data (public
information), with IMF 2018 GDP figures (which are pretty similar to other
major sources like the World Bank).

This isn't a perfect system, as it doesn't account for the variance in % of
the population that is working. However, since the workers ultimately
represent all or nearly all of the GDP output regardless, it's quite effective
overall as a reference. Basically you just need to get to the broad view: how
many hours are the people of a nation working and what kind of output does the
nation have. You still get a lot of things in a given nation that impact GDP
that isn't going to represent perfectly when just looking at labor.

A potentially even better approach would be to take how many workers a nation
has, with the hours worked and the national GDP. So you look at GDP per
worker, rather than GDP per capita, and then look at the average hours worked.
The big question though is the accuracy of national worker count figures, and
how that compares to the accuracy on GDP figures. Flip a coin perhaps.

However, this data does tell you some clear things. It tells you that Mexico
is suffering pretty hard under those hours worked vs output (and as a share of
output, it tells you what their compensation limits are). The Polish are
working far too many hours, although it is producing a decent output figure.
The people of Denmark, Germany and the Netherlands are generating incredible
economic output with those very low hours figures.

It also tells you that while eg the French often get flack for supposedly
being lazy when it comes to working hours, they have one of the best hourly
output figures of any nation and match that up very well with low working
hours (they have one of the better combinations of hours & output, well
exceeding the UK).

However it obviously doesn't tell you what effect lowering or increasing hours
worked would have exactly on a given nation. For example, can Germany push its
export machine a lot further by increasing the hours worked to US levels (are
there buyers for those additional exports), or is that already heavily
optimized and so they're doing the logical thing and reducing hours while
trying to maintain max exports & output generally. Nearly all of the OECD have
been persistently reducing hours worked the past decade plus, while largely
maintaining or increasing output. A nice combination when you can manage it.

Switzerland, Norway, Ireland and Iceland are freak outliers for the most part.
Switzerland is a banking empire, with rather dramatic banking related output
concentration as a share of their GDP; no doubt they're killing it though.
Ireland's GDP moderately misrepresents what their individual income levels
are, as their GDP figure is quite inflated by corporations that have moved
there for tax purposes; Ireland's workers have done very well overall, just
not quite as well as their incredibly high GDP figure implies. Norway's
numbers as everyone understands are skewed by their exceptional oil output per
capita. And Iceland only has 338,000 people (it's kind of like including
Luxembourg), interesting to note non the less.

~~~
LeanderK
there should more granular data, at least in europe. Producing a map with GDP
per working hour per worker on a district level would be quite cool (whatever
the most precise avaiable statistic is)! I don't think just listing countries
ist actually that interesting, because i would suspect some countries to be
quite heterogenous and other quite homogenous.

When I think about it, GDP per working hour is actually quite the interesting
metric.

------
playing_colours
I met many engineers here, in Germany, from Italy. There are a lot of them,
young and educated. I heard their stories why they left.

* Salaries and status of software engineers are low, you'd want to switch to management asap,

* There are very few interesting tech companies,

* Corruption and bureaucracy doesn't help with innovation and starting your own businesses.

~~~
ChuckNorris89
_> Salaries and status of software engineers are low, you'd want to switch to
management asap_

I wish we'd stop with these memes about how perfect Germany's work culture is.

Unless you work in a tech bubble or as a costly contractor, that statement is
true for most of Europe, including Germany.

In my time working in wealthy southern Germany's top engineering companies,
most of my colleagues were immigrants, usually from poorer countries while the
managers were German without exception.

German culture values management (even poor quality one) way more as
developers and engineers are seen as a plentiful resource that can easily be
replaced, imported or outsourced if needed.

On a stint working for one of the TOP 3 German car makers I witnessed how they
had to fire 3 sub par project managers before they could find a competent one,
even thoug all the previous ones had impressive resumes.

In Germany you're not allowed to write negative things about the employee in a
reference letter so all incompetent managers who had the luck to work at
prestigious companies jump ship easily for big money to other prestigious
organization once the shit hits the fan and no one's the wiser.

~~~
smcl
Re the reference letter - I thought that this law caused a shift in how people
interpreted the content. So instead of "was incompetent and lazy" you'd put
"met expectations" \- sort of damning the candidate with faint praise

~~~
ChuckNorris89
Yes, but you're allowed to reject the reference letter you received if you do
not like it and ask for a _better_ one. Otherwise your ex employer might get a
call from your lawyers.

Reference letters have no value anymore other than proving you worked
somewhere.

You can leetcode an engineer to weed out the fakers but you can't leetmanage a
manager so the bad ones slip in much easier.

~~~
smcl
Oh my I had no idea!

------
CaciaraAsAServi
The major reason in Italy is enormous fragmentation of capital. We lost most
big concentrations in the years following the 1970s crisis because the
direction the post-crisis restructuration took has been towards very small
enterprises and not the consolidation of big groups. Reasons for this are
complex, but I would call as the two most important

1\. the way the urbanisation process during Les Trente Glorieuses didn't push
people into working for big companies as much as in other European countries,
leaving more room for small companies in later years (there are also
historical reasons for this unusually stronger weight of small capital, of
course, which go long back to the past);

2\. how the political cadres didn't have enough, basically, courage, to push
for the consolidation of bigger companies, if not in a way that amounted to
stitching some smaller low-productivity companies together - pushing for an
increased industrial productivity would have meant that many smaller
enterprises would have gone out of business, that would have meant the loss of
MANY votes from those social groups! Excuse me if I say something
controversial, but just read up on the Reggio Calabria riots in 1970,
especially the afternath.

The 1980s have been characterised by the widespread diffusion of the SME model
(the meme was "piccolo è bello" \- small is beautiful), also with remarkable
examples like Veneto which saw a real facelift, turning from a somewhat still
rural region into the homeland of the "capannone" (the small industrial shed)
in little less than 10 years! Personally I think that all of this has been a
major mistake, but maybe unavoidable due to the social structure and history
of the country.

But in all of this, consider also that northern Italy is basically Europe's
second most important industrial zone (we serve as component makers for the
larger industries of northern Europe)

So.. it is very complicated.

------
Discombulator
One of the best explanations of the issues of Southern Europe, and Italy in
specific, that I read about during my studies, can be found in the book “The
Moral Basis of a Backward Society” (Banfield). It describes a village in
southern Italy in which inhabitants are unwilling to contribute anything that
does not immediately and directly benefit their own family. For example, they
are unwilling to build a road to the next town, even given the large benefits
the village overall would gain, because “only fools would do so” (paraphrasing
here).

Seen with a game theoretic lens, and extending beyond Italy, it appears that
there are low trust and high trust (or “social capital”) equilibria in
societies, and it is especially difficult to go from the low trust to the high
trust one. Secondly, these cultural norms and institutions (in a broad sense)
are extremely persistent over time.

Of course, this is only one aspect of a multifaceted problem, but I find it
particularly enlightening.

~~~
LeanderK
the game-theoretic aspect is certainly interesting. A more formal study would
certainly be worth reading.

------
m00dy
Turkey has now the biggest brain drainage ever in its history [0]. Most of
them prefer western countries.

[0]: [https://www.nytimes.com/2019/01/02/world/europe/turkey-
emigr...](https://www.nytimes.com/2019/01/02/world/europe/turkey-emigration-
erdogan.html)

~~~
mschuster91
Yeah because everyone with a brain is being accused of being a Gulen
terrorist, or knows someone who is being accused.

The downfall of the justice system as Erdogan makes himself a dictator causes
everyone who can to vote with their feet. This especially includes foreign
investors who were responsible for a large part of the economic rise of Turkey
in the last decade - when investors cannot be sure that the government will
randomly imprison their workers, they retract their investment.

Erdogan really sets up Turkey for doom.

------
tim333
His graphs all seem to start from the 90s and he assumes slower growth is down
to IT but I think the phenomena has been going on much longer and predates IT.
Back in the 60s say Germany and northern Italy had manufacturing industries
and the like while southern Italy and places like Greece and Portugal remained
doing mostly agriculture and tourism. For better or worse industries seem to
concentrate in certain areas - I imagine California will have more tech
industry than Nebraska say for a while yet.

~~~
icebraining
Later the article says it's due to management, not IT. I agree that in the
60s-70s there was a tremendous difference (hence the massive migrations from
e.g. Portugal to France and Germany at the time), but I think there was also
some convergence in the 90s. I fear the divergence has just been increasing
from then on.

~~~
tim333
The Euro crisis didn't help of course. Many used cheap Euro loans to buy
overpriced property in the bubble. That doesn't really go away till the
mortgages are paid off in a decade or two.

------
danmaz74
I think that one very important factor, at least in Italy which is where I
lived for a long time, is the culture about processes and organisation.

In Italy there are lots of very talented people, but very often they work best
in a self organised/ad hoc way. "Just following the rules" is mostly thought
of as something stupid people do.

It's very difficult to automate processes which were non standardised or
haphazard in the first place.

------
amiguel
This seems about spot on the related issues with Southern European Countries,
although after the big debt crisis we can see that some, namely Portugal and
Spain raised their bar on the IT revolution. They have seen a big startup boom
in AI, ecommerce, SaaS, even blockchain.

Portugal: Farfetch (unicorn, IPO'd), Talkdesk (unicorn), Unbabel, Apptoide,
UTRUST

Spain: Glovo, Typeform, Spotahome, Travelperk

They came late to the game, but now their tech scene is rising.

------
LeanderK
What about southern Europe's technology hubs (Milan, Barcelona, Madrid,
Lisbon)? Are they evolving differently?

I don't remeber it exactly, but I spoke recenetly on a party with somebody who
lived for a few years in Lisbon and he quite liked it (and didn't spoke
negativly on the IT-enviroment there, be it management or other stuff like
meetups). Their universities are also not to underestimated (at least what
I've heard from barcelona and lisbon. I've heard bad things from the CS at one
of the universities around madrid).

~~~
rasz
I find game development as a good proxy for the overall level of CS in a
region. Can you name, from the top of your head, a Spanish game studio? or
Italian? or Portugal? or even a single game? I could only come up with
Commandos/Runaway series (Spanish) and Screamer/Assetto Corsa (Italian) on my
own, plus knowledge Screamer developer is the only notable one still making
racing games to this day. I couldnt remember a single game studio name :( and
Im an avid current/retro gamer. Even looking up
[https://en.wikipedia.org/wiki/Category:Video_game_companies_...](https://en.wikipedia.org/wiki/Category:Video_game_companies_by_country)
is not that helpful. You know its bad when you get results like
[https://en.wikipedia.org/wiki/Golden_age_of_Spanish_software](https://en.wikipedia.org/wiki/Golden_age_of_Spanish_software).
Thats really not that great compared to the rest of Europe.

~~~
LeanderK
>
> [https://en.wikipedia.org/wiki/Golden_age_of_Spanish_software](https://en.wikipedia.org/wiki/Golden_age_of_Spanish_software).
> Thats really not that great compared to the rest of Europe.

Wow, this is shocking. Every wikipedia article about the spanish companies
mentioned is worded in the past. None survived. Crazy how they not only
declined, but disappeared.

But I am not sure whether game dev is a good proxy for the overall CS level of
a region.

------
hevi_jos
All of those ideas are generalizations of complex realities.

For example saying that people in Spain or Portugal love living the good live
and not working is a generalization.

Today, when most work is actually done by machines and not humans, you could
actually be way more productive not burning yourself out than burning.

In Germany they have more machines, because they have more capital and because
they forced the Southern countries to destroy its industries. That happened
with Spain and specially Italy for entering the EU. 32-36% of the Spanish
economy was industry before joining the UE, now it is 12% and going down.

For example, In Spain they put quotas(limits) in the milk that every milk
producer could generate in the north of Spain, that has a wet climate, like
France, UK, or Germany. Those countries of course had not quotas.

This way European companies(specially French companies) could enter the
Spanish market and have bigger markets, but the Spanish companies could not
compete because they had to reduce production.

With bigger markets, they had bigger mass scale productions, more efficiency
and could put prices that put out of the market Spanish companies.

On the other hand, the South of Spain was benefited as it produces things that
Europe do not.

They also flooded the real state market with easy money coming from European
banks that will lend outrageous amount of money to anybody with a pulse.

That made year to year profits of 20-30% in real state in the bubble, further
increasing the desinvestment in industry, that could only give moderate 3-4%.

Of course lending to people that could not pay back was a bad idea, and when
the bubble burst lots of banks from Germany, UK, or France should have gone
down.

But of course the governments of those countries forced the Spanish government
to buy the bad debt, making the Spanish Government bankrupt itself.

Reality is complex, but we love simple arguments.

~~~
pjc50
The milk quota system applied to every country, including the UK:
[https://www.bbc.co.uk/news/uk-32136218](https://www.bbc.co.uk/news/uk-32136218)

(It's important to be accurate about what the EU actually does and does not
do, otherwise you get Brexit)

------
ptah
productivity gains typically translate into greater profit and not much wage
increase so from a worker's perspective: _shrug_

------
saykou
Southern European here have worked with Nothern European companies and
southern European ones. I can attest that management is the greatest
difference. It is part due to HR how the hire and check people for management
position ( it is loosely a series of questions + his CV) while even for the
Junior developer role you can have developer programming tests plus theory
question. It is more reliable, and I have seen time and time again bad
management that his hired due to the cv and it is just bad professional, can't
organize anything doesn't take decisions etc etc and the problem is that it
can't be fired.

But also Capital accumulation, when you start from a good starting point where
you have the capital to invest in IT. The earnings are exponentially greater,
so the effects on Germany from the IT revolution should be greater then in
Southern Europe.

[https://en.wikipedia.org/wiki/Capital_accumulation](https://en.wikipedia.org/wiki/Capital_accumulation)

~~~
theK
I’m with you in the hiring fallacies. From personal experience northern
countries have proven much more “adventurous” regarding IT hiring. Still, even
fixing that will probably only get you onto sinking ships.

Sure Spain and Portugal have some unicorns but missing VC and the heavily
tourism-take-all-their-money-asap management mentality of big capital and
administration seem to be setting up a bad environment.

But that’s only personal experience not a thorough analysis...

