IN MY OPINION: Institute of Management companion Sir Paul Judge, chairman of the Association of MBAs, explains how Europe can meet the global market challenge

IN MY OPINION: Institute of Management companion Sir Paul Judge, chairman of the Association of MBAs, explains how Europe can meet the global market challenge - Globalisation is bringing about dramatic change. But most talk of globalisation is primarily e

by SIR PAUL JUDGE
Last Updated: 31 Aug 2010

Globalisation is bringing about dramatic change. But most talk of globalisation is primarily economic. Human beings are even more complex than economies, and are much slower in going global.

It is the human issues that are the most important. The rate at which people adapt to change will determine the long-term global winners.

The rate of change is increasing. In the previous century, technology brought mass production. This century will see mass personalisation, with every individual in developed countries being independently documented and marketed. The impact of change will be felt immediately and directly through the media. The financial system will act like a lightning-conductor in taking money to the safest haven.

Technological change will bring the death of distance, as ideas and money move instantaneously. It will also bring the collapse of time, as competitive reactions become ever faster. As in nature, the sharks have to keep moving ahead or they die.

Two human factors will determine whether Europe has a successful economic future. The first is that sheer population numbers will tend to lead to an increasing proportion of resources being invested in the developing world rather than in the West. The second is whether Europe can fight that trend through the effectiveness and aspirations of its people.

During the past 10 years, China, India, Russia and eastern Europe have all joined the global competitive market, and many other countries have adopted more market-oriented policies. They are all now striving hard to improve their economies. Resources flow to where they can be best utilised. Jobs and technology will move in line with those resources.

The invisible hand will move to reduce the economic disparities. In 100 years' time, people will look back on our age and see us as quite callous in relation to those in developing countries, as Dickens portrayed the rich Victorians in relation to their poor. With improved communications it's now as quick to get from Europe to the people who can benefit from improved markets as it used to be to travel from London's affluent West End to the destitute East End.

So the threat is clear. Europe will inevitably become a smaller part of the world economy.

Despite its current strong position, Europe represents only about 6% of the world's population. In the very long term we might therefore expect it to account for 6% of the world's economic activity, rather than the present 30%.

Where does Europe stand as resources move to the developing countries?

How entrepreneurial are its people and its governments in trying to stay ahead of the game? Whether in companies or countries, competition is in the end between workforces. The future of Europe is therefore bound up with the aspirations and creativity of its people, and, probably most importantly, by the level of their entrepreneurial drive.

Entrepreneurialism needs the right national attitudes. Can we compete against developing nations when their overriding national objective is to greatly increase their national wealth? In Europe the objective of economic growth is diluted by many other concerns.

The biggest competitiveness issue is probably the welfare state. In Europe we are in a position where we pay people more not to work than the majority of the world's population are paid to work. That cannot be sustainable.

Europeans might resist paying more taxes, yet they are not in favour of dismantling the social safety net.

It seems unlikely that Europe can achieve startling growth rates, but there is a chance that it can still improve its standard of living if the right policies are applied. Those policies must build on Europe's strengths, most notably on the education and sophistication of its workforce.

If we believe that high technology really is the dominant force, we should be worried. It would be tragic if, by fighting the battles of the past century rather than of the next, we were sidelined and the global technical hub moved from California via the Pacific to Shanghai or Bombay rather than across the Atlantic and through Europe.

However, in any potential turnaround, the first imperative is an awareness of the need to change. Such an awareness is not well developed in Eur-ope. Even though we have tremendous resources of heritage, of politics and of econom-ic strength, the invisible hand will eventually take its toll.

MT readers need to make the case for entrepreneurs to be allowed to increase the size of the European cake. We may each feel that there is not a great deal we can do about any of these issues. However, we can all try to make people aware of the scale of the forces that are at work and raise their sights from individual industries to take in the total global picture.

Each of you, being potentially highly influential, can help to shape the new century.

Sir Paul Judge will be speaking at the Chartered Institute of Management Accountants' Global Business Management Week, which is supported by the Institute of Management and runs from 24-28 September 2001. For more details, visit www.globalbusinessmanagementweek.com.

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