Europe

Demographia International Housing Affordability – 2024 Edition Released

Wendell Cox — Sun, 02 Jun 2024 20:28:58 -0400

Demographia International Housing Affordability assesses housing affordability in 94 major markets across eight nations (Australia, Canada, China, Ireland, New Zealand, Singapore, United Kingdom and the, United States). The 2024 edition focuses on data from the third quarter of 2023.

Key Points

Ratings: The report uses a median price-to-income ratio (“median multiple”) to determine affordability.

Affordability Categories: Housing markets are rated from “affordable” to “impossibly unaffordable” based on their median multiple (Table (ES-1).

Geography: Housing markets are labor markets (which are also metropolitan areas or functional urban areas), largely defined by the “commuting shed.” Housing affordability comparisons can be made, (1) between housing markets (such as a comparison between Adelaide and Melbourne) or (2) over time within the same housing market (such as between years in Adelaide).

Variations within Nations: The report emphasizes that affordability often varies significantly between markets within the same country. National averages aren’t always representative.

Housing affordability in 2023 is summarized by nation in Table ES-2.

International Housing Affordability in 2023: In the US, the most affordable market was Pittsburgh (PA), with a median multiple of 3.1, followed closely by Rochester (NY) and St. Louis (MO-IL) at 3.4, with Cleveland (OH) at 3.5. Rounding out the most affordable ten markets also includes one Canadian market, Edmonton, plus Buffalo (NY), Detroit (MI), Oklahoma City (OK) at 3.6, Cincinnati (OH-KY-IN) and Louisville (KY-IN) at 3.7. Singapore at 3.8 was also moderately unaffordable, along with, in the UK, Blackpool and Lancashire, and Glasgow at 3.9.

The Housing Affordability Crisis: Causes and a Path Forward

Middle-income households face rapidly escalating housing costs, which is the primary cause of the present cost-of-living crisis. For decades, home prices generally rose at about the same rate as income, and homeownership became more widespread. But affordability is disappearing in high-income nations as housing costs now far outpace income growth. The crisis stems principally from land use policies that artificially restrict housing supply, driving up land prices and making homeownership unattainable for many.

Urban containment policies (greenbelts urban growth boundaries, densification) are designed to limit sprawl and increase density. While well-intentioned, these policies severely constrict the land available for housing. In constrained markets, higher land values translate to dramatically higher house prices.

Economic Dynamics

Land values naturally increase closer to urban centers. Urban containment policies are associated with abrupt value spikes at established boundaries. Research confirms this, finding land prices inside urban containment boundaries can be 8-20 times higher than outside.

New Zealand's Reforms: A Model

New Zealand provides a hopeful path forward. Recognizing the crisis is rooted in high land values, new policies are proposed to open up sufficient land to accommodate demand.

A Focus on People, Not Places

The housing crisis demands prioritizing the well-being of people over abstract planning ideals. The planning orthodoxy, while aimed at improving cities, has worsened affordability. This undermines the economic opportunity essential for thriving middle- and lower-income households.

Elaboration and sources are in the full report. Click here to read and download the full report.

Wendell Cox is principal of Demographia, an international public policy firm located in the St. Louis metropolitan area. He is a founding senior fellow at the Urban Reform Institute, Houston, a Senior Fellow with the Frontier Centre for Public Policy in Winnipeg and a member of the Advisory Board of the Center for Demographics and Policy at Chapman University in Orange, California. He has served as a visiting professor at the Conservatoire National des Arts et Metiers in Paris. His principal interests are economics, poverty alleviation, demographics, urban policy and transport. He is co-author of the annual Demographia International Housing Affordability Survey and author of Demographia World Urban Areas.

Mayor Tom Bradley appointed him to three terms on the Los Angeles County Transportation Commission (1977-1985) and Speaker of the House Newt Gingrich appointed him to the Amtrak Reform Council, to complete the unexpired term of New Jersey Governor Christine Todd Whitman (1999-2002). He is author of War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life and Toward More Prosperous Cities: A Framing Essay on Urban Areas, Transport, Planning and the Dimensions of Sustainability.

Lead image: Demographia International Housing Affordability — 2024 Edition cover photo from New Matilda used under CC 2.0 License.

Europe is Not a Museum of Past Success

Nima Sanandaji — Fri, 31 May 2024 20:28:58 -0400

Is Europe a museum of old success? The question is topical, as Europe's population will peak in two years and is then expected to decline for the rest of the century. During the roughly three decades that have passed, Europe has also fallen behind North America economically. However, Europe is not yet a museum of old success, as Stockholm, London, Paris, Amsterdam, Dublin are among the world's leading centers for the development of deeptech. Sweden, Ireland, the UK and other European nations need to continue to be at the technological forefront, to avoid stagnation at a time when the emerging economies in Asia are catching up.

As late as 1990, the current EU countries and North America together constituted a clear majority of 55 percent of the world's global economic output. In connection with the financial crisis in 2008, it fell to less than half of the world economy. As the rest of the world has caught up, the percentage is now 42 percent.

It is not surprising that the roughly one billion people living in North America and Europe no longer make up half the world economy. In this regard, a process of normalization has taken place, in connection with the spread of the market economy to more countries, which have been integrated into global trade and have grown economically. What is remarkable is that North America, which already accounted for a larger share of the world's economic output just over 30 years ago, has maintained its relative position significantly better than the EU.

Even in terms of population, the US and North America as a whole are growing, while the existing challenges with an aging population in Europe are getting worse according to new forecasts. According to Eurostat's latest analyses, the EU's population is expected to reach its peak as early as 2026, and then gradually decrease. While the UK and a few other countries have more positive growth during coming decades, for Europe as a whole the trend is clear. During the rest of the century, there will be fewer inhabitants, but more elderly people, in Europe year after year. In order to avoid economic stagnation, it is required that Europe at least maintains its technological leadership.

In the new Deep Tech Index, launched by the European Center for Entrepreneurship and Policy Reform (ECEPR), with support of Nordic Capital, the 500 leading deep-tech companies in the world are mapped out. A strong lead for North America relative to Europe is clearly evident when it comes to the development of cutting-edge technology. Despite that, Europe is not a museum of old success, because the lead over the rest of the world is still clear. There are more world leading deep tech companies in Europe than Asia.

The leading deep tech hubs outside the US are London, Tel Aviv, New Delhi, Toronto, Paris, Tokyo, Bengaluru, Amsterdam, Berlin, Stockholm, Montreal and Dublin. Many of them are in fact in Europe.

The countries with a high concentration of deep tech companies per million adults have strong private property protection, lower taxes as a share of total economic output, good school results in PISA, and a high proportion of world-leading colleges of engineering and technology per million adults.

School results according to PISA are plummeting in high-tax countries such as Sweden and Finland, but are stronger in Ireland and Estonia, European nations with limited taxation. Where individuals have stronger incentives to gaining education, growth is occurring.

According to the QS World University Rankings, 30 of the hundred leading universities in engineering and technology are in Europe, slightly more than 27 in North America and just behind 34 in Asia. It is true that the US benefits from attracting the sharpest minds, but again it is European politics that through high taxes push out talents. The UK is the leading higher learnings hub of Europe, with fully 7 out of the leading global universities. European nations need to focus better on fostering top universities, with the UK being the most successful nation to emulate in this regard.

Europe is not a museum of old success. Yet it is falling behind with policies focused on preserving old prosperity, not creating new economic values. The international connection is that the presence of one additional leading deep tech company per million adults is linked to 1.26 percentage points lower unemployment in that country. There are clear economic benefits associated with succeeding in technological progress, for the labor market and the level of prosperity. Ultimately it is about a Europe that is growing, or stagnating.

Development does not come by itself. Economic policy and education policy are needed that focus on future prosperity. A growth mentality is required for Europe to remain in the technological edge. Taxes need to be reduced, private property rights protection strengthened, school results improved, and top technological universities need more funding.

When for example a firm stagnates, this may create a reaction to preserve the old economic values, for example keep the old business model at any cost, instead of looking on how to again become profitable. The same goes for Europe, governments regulate and give grants, to protect the old – while doing so stifle new progress. This instinct, for long dominant in countries such as France, is spreading. There are clear signs of Europe moving towards polices of stagnation, for example the UK has shifted towards more regulation and higher taxation lately. Smaller European nations such as Ireland and Malta, with competitive taxation, are leading the way. Ireland, which has a factor ten higher population of the two, is also a strong hub of deep tech.

Europe as a whole should learn more to embrace new creation, becoming a museum of past success is not a given development. But as Europe in a couple of years from now is expected to stagnate population wise for the remainder of the century, it is worth focusing on what it takes to remain vibrant while the population is shrinking. Remaining on top of technological development really is the key challenge because that has been Europe’s bread and butter since it become world technology leader during the renaissance.

Nima Sanandaji, Director, European Centre for Entrepreneurship and Policy Reform (ECEPR)

Chart: courtesy Nima Sanandaji

The Myth of America's Decline

Joel Kotkin — Fri, 08 Mar 2024 20:28:58 -0500

North America may suffer from some of the world’s poorest political leadership. Yet it seems destined to remain the wealthiest, most dominant place on Earth.

This may come as a surprise to many. After all, generations of pundits have insisted that the future will be forged elsewhere – Europe for some, Japan for others and, more recently, China. But none have the resources, the dynamic population and innovative acumen of North Americans.

Once taken for granted, China’s claim to the future is looking especially wobbly. In 2018, Chinese foreign ministry official Zhao Lijian described efforts to slow China’s dominion as being ‘as stupid as Don Quixote versus the windmills’. He added that ‘China’s win is unstoppable’. Today, China’s triumph looks far from inevitable. Projections that China could surpass the US in terms of aggregate economic output as soon as 2028 are being readjusted to 2036. Some now believe it won’t happen at all.

As for Japan or the EU, neither are likely to ever surpass the US. Each has experienced consistently slower growth. According to International Monetary Fund data, the eurozone economy grew about six per cent over the past 15 years, compared with growth of 82 per cent for the US during the same period. Europe’s once formidable industrial base has eroded in large part due to the ever rising burden of regulation. Germany’s economy, the most powerful economy in the EU, is barely the size of that of California.

Nothing better reflects the tectonic shift in global economic power than investment flows. Between 2012 and 2022, US inbound foreign investment swelled by nearly $100 billion in adjusted dollars, well above the level of investment into China. Levels of inbound investment into the EU and the UK have actually fallen during the same period.

Indeed, investment in China dropped from more than $300 billion in 2021 to a 30-year low of less than $50 billion in 2023. Other parts of Asia are headed West. Last year, Taiwan-based TSMC, the world’s leading semiconductor foundry, decided to build a $12 billion new plant in Arizona. Samsung, a huge Korean chipmaker, is also shopping for sites for a $17 billion plant in the US.

The US is also the world’s preeminent military power. Although somewhat degraded from its Reagan-era strength, and challenged increasingly by China’s expansion, the US military remains the dominant force on Earth. The US spends roughly 3.5 per cent of GDP in defence and has a military budget roughly five times that for the combined militaries of the UK, France and Germany. Despite some recent increases, most European countries fail to spend even two per cent of GDP on defence. They have, until now, depended largely on the US to keep the Ukrainian cause alive. In recent months, European countries have once again been asking the US to protect what are really their own critical shipping lanes in the Red Sea.

Why America leads the way

The resurgence of North America clearly does not stem from either the leadership of doddering US president Joe Biden, who seems barely in control of his own White House, or his rival, the clearly demented Donald Trump. Nor has Canada’s uber-woke prime minister, Justin Trudeau, been of any help. Rather, the key lies in three factors: natural resources, technological dominance and demographic vitality.

Overall, natural resources account for more than half of all Canada’s exports and roughly one-quarter of those of the US. Together the US and Canada produce roughly twice as much oil as either Russia or Saudi Arabia. Fossil fuels, the demon rum of the green catastrophists, are not going away, even in Europe.

Read the rest of this piece at Spiked.

Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and and directs the Center for Demographics and Policy there. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Photo: Nikolas Zane, via Flickr, under CC 2.0 License.

America is Unprepared to Fight a War on Three Fronts

Joel Kotkin — Fri, 29 Dec 2023 20:28:38 -0500

In our short-attention-span world, we seem to only be able to comprehend one war at a time. But our moment has thrown up conflicts across the globe: Israel versus Hamas, Russians versus Ukrainians, or Chinese democrats versus the Communist Party. But these disparate battles are in fact part of one whole – a struggle to dominate the future.

The new wider war includes attempts by great powers, notably China, to secure natural resources by securing alliances with authoritarian regimes around the world. In exchange, China provides goods, including military items, to authoritarian regimes in Latin America, the Middle East, and Africa.

This de-facto alliance, a modern version of the World War Two “pact of steel”, is truly global in scope. It extends from Ukraine to the shutting off of the Red Sea by Yemen’s Houthis, and even Venezuelan plans to conquer much of oil-rich Guyana. Rather than Francis Fukuyama’s end of history, we are seeing Samuel Huntington’s bleak vision in his 2011 book, “The Clash of Civilizations and the Remaking of World Order”.

The wider war pits on one side the revanchist powers – China, Russia, Islamist, Latin American and African countries – who feel they have been wronged by the West and liberal capitalism. On the other side are the West and non-European allies like Japan, South Korea and perhaps most importantly Modi-led India.

The West’s leaders, as in the 1930s, seem more interested in diplomatic maneuvering than confronting a real and present danger. They view the appeasement of Iran as pragmatic, but the creation of a trade deal with Great Britain as marginal. It’s not far from the mark to describe US Secretary of State Anthony Blinken, as Tablet recently did, as “Neville Chamberlain with an iPad.”

The historical parallels are troubling. One has to doubt the West’s resolve not only in the Ukrainian and Israel-Hamas hot wars, but also in future conflicts: watch the US Navy respond to the Houthi attempts to shut down Red Sea shipping with meager half-measures. I shudder to think how pusillanimous the likely response to a potential future Chinese invasion of Taiwan, or further Russian steps to recover other parts of its lost empire, may be.

Winning the wider war depends on three things – a strong industrial base, military preparedness, and internal morale. Right now, the West seems determined to weaken its manufacturing industries, for example through electric vehicle mandates which will help Beijing. The Middle Kingdom retains an almost monopoly position on the EV battery supply chain – 80 per cent of the world’s raw material refining, 77 per cent of the world’s cell capacity and 60 per cent of the world’s component manufacturing. They produce more than four times the batteries as the United States, and control critical raw materials required for manufacture. China is also cultivating emerging vassal states in Africa and Central Asia as well as Latin America to meet their resource demand.

Read the rest of this piece at Telegraph.

Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Photo: Secretary of State Antony J. Blinken, GPA Archive via Flickr in Public domain.

Europe is Burning

Joel Kotkin — Fri, 10 Nov 2023 20:28:38 -0500

Ever since the earliest days of the Republic, American intellectuals, artists, and statesmen looked to Europe for models. Conservatives felt attracted to the continent’s sense of continuity and tradition, and as the base for Christianity. More recently, progressives saw in European social democracy and globalist pacifism a role model to be embraced.

Yet today Europe seems not much of a model for much of anything outside of museums, charming cathedral towns, and terrific food. The notion that Europe represents the future, nurtured by the likes of Mitterrand advisor Jacques Attali, Jeremy Rifkind’s utopian European Dream, and the American journalist T.R. Reid’s 2005 The United States of Europe: The New Superpower and the End of American Supremacy, seem utterly delusional.

A common theme in the early years of the millennium was that Europe was on the verge of global resurgence while America was in decline. Europe’s eventual stagnation, as many conservatives point out, can be in part traced to an ever expanding high-tax welfare state that generally absorbs roughly ten more percentage points of GDP than in the U.S. But this is not the only explanation. Some of the moderately better off European economies, like Denmark and Sweden, are welfare states but manage to outperform the rest.

The real problem is civilizational. Europeans are unwilling to preserve their industrial base and control their borders, leaving the continent increasingly weak and largely defenseless. The leaderless American empire may be creaking, but Europe is in worse shape, hemmed in by dismal demographics, high taxes, suffocating regulation, and an entrenched bureaucracy that makes California seem like a libertarian paradise.

Europe’s decline can be seen in its rapidly shrinking portion of the global economy. It is hard to find any indicator that the continent is gaining global market share as money continues to pour into the U.S. For the last 15 years, European wages have fallen while those in the U.S. have continued to rise; the eurozone economy grew about six percent, measured in dollars, compared with 82 percent for the U.S., according to International Monetary Fund data.

European quality of life is dropping, its industrial base eroding, and there seems little promise of future improvement. Europe now lags in virtually every major advanced industry, from software and space to automobiles. Of the top 50 tech firms only three are located in Europe; the list is dominated largely by the United States with China second. Foreign investment has plummeted and by 2022 accounted for $100 billion less than the U.S.

Much of this decline is self-inflicted, which suggests some valuable lessons for us. A critical problem lies in E.U. climate policy, which has tended to be more extreme, and widely implemented, than in a more divided, decentralized United States. These policies are already eroding food production and sparking higher prices. Developing nations need more food production from exporters, but by Europe’s banning or restricting critical fertilizers, or the enforced culling of herds, they will have to get it elsewhere. This comes at a time when Europe’s old African and South American colonies are losing interest in ties with France and Britain and increasingly look elsewhere, notably China and Russia, for capital, goods, and natural resource development.

Read the rest of this piece at American Mind.

Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Photo: GNRC via Wikimedia under under CC 4.0 License.

Will Jews Return to the Ghetto?

Joel Kotkin — Wed, 01 Nov 2023 20:28:38 -0400

It is a warm Monday morning in Rome, and the city’s ancient ghetto resembles an armed camp. As carabinieri line the streets, a cloud of melancholy hangs in the air: not only had more than 1,400 Jews recently been slaughtered in Israel, but the date — October 16 — marks the anniversary of its residents forced evacuation to the concentration camps. History, it seems, is repeating itself.

Despite the unconscionable parallels, however, and regardless of the prevalence of Kosher restaurants and carciofi alla giudia, little in the ghetto is as it was. Few Jews, amid Italy’s population of less than 50,000, live there. The same can be said of almost every European city. After the Holocaust, most Jews, as historian Paul Johnson observed, “accepted oppression and second-class status” outside of the ghetto in return for being left alone.

To some extent, life in America was more welcoming; as far back as 1790, George Washington, writing to the Touro Synagogue in Rhode Island, went beyond upholding tolerance to embracing full citizenship as part of “their inherent natural rights”. Today, however, that credo is being called into question. Here, as in Europe, the great period of Jewish influence and efflorescence that started a century ago may be peaking. The result, once dismissed as inconceivable, is that the allure of a more separate existence, a ghetto of the spirit, may start to grow.

For now, the golden era of Jewish achievement still twinkles, but only just. Jews remain inordinately celebrated in the arts and sciences; both the Tony Award in 2023 and the Pulitzer for fiction the year before went to writers covering, somewhat obsessively, Jewish themes. The list of Jewish Nobel prize winners has also expanded since the War, constituting well over 20% of the total.

Yet such achievements cannot mask the fact that the Jewish Century is rapidly fading. On the surface, Jewish life, both inside and outside the diaspora, may seem unassailable. But just as terrorists were able to breach Israel’s supposedly impenetrable defences, the forces of antisemitism have penetrated Western society, as young, educated progressives, including a few Jews, make common cause with Hamas and its allies.

Continuing demographic retreat isn’t helping. After the war’s end, 3.8 million European Jews remained; today, there are barely 1.5 million. Even the last great redoubts of Jewish life are threatened by assimilation and the pernicious new hybrid that joins Leftist and Islamist hatred. Nearly 50,000 Jews have left France since 2000, mostly for Israel, the United States and Canada. With no likely source of new immigration, it’s difficult to envision how the country’s Jewish population will ever grow again. Likewise Eastern Europe, once the centre of the Jewish world with its 8 million Jews, is home to fewer than 400,000 today. Indeed, the only place there seems to be growth is among the orthodox — a community that may not live in official ghettos, but is still in inwardly focused and defensively minded areas.

Read the rest of this piece at UnHerd.

Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Photo: by Jorge Láscar. The Jewish Quarter in Prague, known as Josefov, is located between the Old Town Square and the Vltava River. Its torrid history dates back to the 13th century, when the Jewish community in Prague were ordered to vacate their disparate homes and settle in one area. Flickr under CC 2.0 License.

Sweden Risks Falling Behind the Technology Race

Nima Sanandaji — Tue, 24 Oct 2023 16:05:04 -0400

For a long time, Sweden has been a leading innovation economy, known around the world for its technological competences. My first personal association of Sweden, as a child before I came to Europe, was as a country with talented engineers. But Sweden's position as a leading European engineering country is being undermined. Among the young generation, the country is no longer the European leader in technological skills. Neighboring Estonia, where the incentives for becoming an engineer or researcher is higher and where the education results are better, today in fact have a higher share of engineers and researchers amongst the young generation than what Sweden does. Sweden can still retain its position as Europe´s leading knowledge economy, but that requires a no-excuses school policy, more mathematics, and lowered taxes which incentives education and jobs in technology.

Sweden is currently dealing with numerous challenges, including the lowest rate of economic progress in the EU and a crime wave. The country, which in 1970 before the shift to high taxes ranked as the fourth most prosperous in the world, now ranks at 12th place in a comparison of economic production per capita. Sweden’s greatest strength is that it is the leading knowledge economy of the EU, but right now even this position is being challenged.

Six years in a row Sweden was ranked as the nation in the EU with the greatest innovative potential, by the European Innovation Scoreboard, but this year Denmark has surpassed Sweden. In terms of the proportion of the adult population who work in very knowledge-intensive jobs (so-called brain business jobs), Sweden is still by narrow margin the leading EU-member state, but Ireland has nearly caught up.

Why is Sweden stagnating? High levels of immigration coupled with lacking integration is part of the explanation, but it is also a generational issue related to technological competencies. Much of the economic change happening around the world is currently related to so-called STEM (science, technology, engineering, and math).

Among the older generation (45–64-year-olds), Sweden is at the top — no other member state has as high a proportion of its older population in STEM-jobs as Sweden. If, on the other hand, we look at the younger generation (25–34-year-olds), Sweden is no longer on top. Luxembourg has a considerably higher percentage of young people in STEM-jobs and the Netherlands is also ahead. Norway and Lithuania in fourth and fifth place have almost as high a share as Sweden. Amongst the new generation, Sweden is losing its leading position.

Top 5 countries with the highest share of STEM-jobs among the older population (percentage of 45–64-year-olds) 2022		Top 5 countries with the highest share of STEM-jobs among the older population (percentage of 25–34-year-olds) 2022
Sweden	27.8%	Luxembourg	47.7%
Finland	26.4%	Netherlands	41.7%
Luxembourg	26.0%	Sweden	37.5%
Norway	25.5%	Norway	36.9%
Iceland	23.9%	Lithuania	36.2%

Those individuals who are university-educated and work in science and technology are defined by Eurostat, the EU's statistical authority, as having STEM jobs.

A narrower group of STEM jobs, which play a particularly important role in the development and implementation of new technology, are engineers and scientists. Here we see the same pattern, for the older generation, Sweden has the first place among the EU countries, but among the younger generation ranks on third. The Netherlands and also Estonia have a higher share of the young generation who are engineers and scientists, as compared to Sweden.

Top 5 countries with the highest share of engineers and researchers among the older population (percentage of 45–64-year-olds) 2022		Top 5 countries with the highest share of engineers and researchers among the older population (percentage of 25–34-year-olds) 2022
Sweden	11.2%	Netherlands	17.3%
Norway	9.2%	Estonia	16.3%
Switzerland	9.0%	Sweden	16.1%
Netherlands	8.9%	Slovenia	14.8%
Finland	8.4%	Switzerland	14.8%

It is worth remembering that Estonia, a neighbor of Sweden, until 1990 was part of the Soviet Union, which then collapsed. At the time, just over 30 years ago, Estonia was very far behind Sweden in economic development. Since then, Estonia has focused on developing into an advanced and knowledge-intensive economy by promoting entrepreneurship and education. The fact that Estonia has more young engineers and researchers among young people is a clear illustration of the rapid changes happening in Europe, with growth in countries with lower tax burdens and stagnation in higher tax nations.

In a comparison of EU-nations, just over 50 percent of the variation of score in the European Innovation Scoreboard can be explained by the variation of share of STEM-employees in the population. If the innovation capacity is related to the proportion of engineers and researchers among the population, the degree of explanation increases to just over 60 percent. Having a high share of the population employed in technologically advanced jobs is, as one might expect, strongly linked to innovative capacity. This relation is found in a comparison of the EU-member states, most likely a similar relation exists also in comparison of US states. In a world economy driven by technological change, having a high share of the young generation engage in engineering and sciences is a recipe for success.

What then is needed for Sweden to become the number one European nation, amongst technological competencies of also the young generation? Three changes need to happen. Firstly, marginal taxes need to be reduced, so that individual gain a greater income advantage by studying to become a mathematician, engineer, or scientist. Estonia, where the incentives are much higher, can be a role model in this regard. The next inhibiting factor is that too little mathematics is taught in the early school years. The students who have a head for mathematics in particular need to be pushed extra. The third change that needs to happen is focus on grit in schools.

Education is not only about fostering knowledge, but also fostering grit – the ability to work hard and consistently. In the modern pupil-focused pedagogical model of Sweden, there is limited focus on this, even though the research shows that persistence in itself and separately from the level of knowledge has a very large impact on the individual's success in school and later in life. Young individual who after high school who have a good knowledge basis, but lack grit, will find it difficult to pass masters of science engineering educations, since they become overwhelmed by the amount of work they need to put into their studies. A non-excuses model for schools, where no bullying, vandalism or violence is tolerated, is needed so adult supervision replaces the pupil-focused pedagogical model. Students can then focus more on studies, learn more mathematics, and build up the grit they need for the future.

To sum up, Sweden can still retain its position as the most knowledge intensive country in the EU. It is however hard to see this happening without more adult supervision in schools, more mathematics in classrooms, and lowered taxes which strengthen incentives to become engineers and scientists. Economic incentives and how classrooms are run, play an important role for the future talent pool.

Nima Sanandaji, Director, European Centre for Entrepreneurship and Policy Reform (ECEPR)

Photo: Stockholm, Sweden via Flickr under CC 2.0 License.

Knowledge-intensive Jobs Move to Eastern and Western Parts of Europe

Nima Sanandaji and Klas Tikkanen — Wed, 27 Sep 2023 16:47:43 -0400

Preface: Europe is becoming more integrated – not only in terms of its defence policy but also through the spread of knowledge intensive jobs. The trend shows that a shift is underway and that brain business jobs are increasingly found in the Eastern and Southern parts of Europe. The study finds that the nations with the highest growth rates all seem to have relatively low tax rates, while high tax countries are stagnating.

Since 2017, the Brain Business Jobs project has mapped out the geography of knowledge-intensive jobs in Europe. The index, published by the ECEPR with support from Nordic Capital, comprises 31 nations and 277 regions in Europe and measures the share of the population (15-64) currently employed in highly knowledge-intensive companies within the following sectors: Technology, IT, communication, advanced services, design, or other creative jobs. The study concludes that Europe has become an increasingly integrated knowledge economy. The findings reinforce the connection between high shares of knowledge-intensive jobs and low unemployment rates.

While much of the policy discussions focus on how European nations are integrating their defence and foreign policy (in response to Russia’s invasion of Ukraine), simultaneous economic integration also takes place. One significant development is that nations in Eastern and Southern Europe have recorded an impressive growth of these jobs and are catching up.

The capital cities in Southern Europe (Paris, Madrid, Rome, Lisbon, Athens, Cyprus, and Valletta) together have more than 2.4 million knowledge-intensive jobs. This is far more than the 1.6 million jobs recorded in the capital cities in Western Europe (London, Berlin, Amsterdam, Vienna, Brussels, and Luxembourg).

The capital cities in Eastern Europe have twice as many knowledge-intensive jobs as the ones in the Nordics. Warsaw, Budapest, Bucharest, Prague, Sofia, Bratislava, Zagreb, Latvia, Ljubljana, Vilnius, and Tallinn together have more than 1.5 million of these jobs. Whereas the Nordics (Stockholm, Copenhagen, Helsinki, Oslo, and Reykjavik) have recorded an impressive and strong culture of creating and fostering knowledge-intensive jobs, but the smaller populations mean that the number of brain business jobs stands at about 700,000.

The concentration of these jobs remains the highest in Western and Northern European nations. Switzerland has the highest share (10.7%), and Sweden comes in second place (10.1%), with Ireland in third place and continuing to see growth (10.0%). Interestingly, Ireland has because of a favourable tax system and business-friendly policies, risen through the ranks and now caught up with Sweden.

The main growth, however, primarily takes place in Eastern and Southern Europe. Between 2014 and 2022 the relative increase of these jobs was 62% in Lithuania and Cyprus. In addition, Portugal, Romania, Hungary, and Bulgaria all recorded growth rates above 50%. For comparative purposes, some of the continent’s most notable nations struggled in the same period: Germany (28%), the UK (16%), and France (9%).

Table 1. Rate of change in brain business jobs concentration (per capita working-age inhabitants) between 2014 and 2022
Lithuania	62%	Netherlands	20%
Cyprus	62%	Belgium	17%
Portugal	61%	Finland	17%
Romania	53%	United Kingdom	16%
Hungary	51%	Italy	13%
Bulgaria	50%	Sweden	12%
Croatia	42%	Luxembourg	11%
Poland	42%	France	9%
Slovenia	42%	Norway	7%
Estonia	40%	Austria	7%
Malta	40%	Denmark	6%
Slovakia	37%	Iceland	6%
Latvia	37%	Switzerland	5%
Spain	36%	Greece	4%
Germany	28%
Czechia	25%

The study finds that the nations with the highest growth rates all seem to have relatively low tax rates, and vice versa. More than 33 percent of the variation can be explained by the variance in tax levels as share of GDP.

On a regional level, Eastern Europe is already on top. This is because an unusually high share of knowledge-intensive jobs is located exclusively in the capitals – most of which combine competitive taxes with a strong pool of talent within the sciences, technology, engineering, and mathematics sectors.

In all previous studies, Bratislava has had the highest concentration of these jobs per capita. Whereas it remains impressive that about 22.8 percent of people in Bratislava are employed in knowledge-intensive companies, the latest index has another region on top. In 2023, Budapest records its first-ever gold medal (23.9%), ahead of both Bratislava and Prague in second and third place, respectively. These are followed by Upper Bavaria, Paris, Stockholm, the Southeast England region (Berkshire, Buckinghamshire and Oxfordshire), Copenhagen, London, and Bucharest. In the top ten, four regions are found in Eastern Europe, three in Western Europe, two in the Nordics and one in Southern Europe.

The number of knowledge-intensive jobs is mainly increasing in East and South, two regions that long used to be far behind its counterparts in North and West. While Stockholm and London remain frontrunners and hubs, Eastern Europe suddenly records impressive growths and now has three capital regions at the top.

As English has become the go-to language professionally and digital connectiveness continues to transform the continent, Europe is increasingly becoming an integrated economy.

Healthy co-operation and institutional competition have always laid a solid foundation for progress and success in Europe. We are certain that this is the way forward, too. Southern and Eastern Europe are now catching up, by combining competitive taxes and investments in education. This, naturally, spurs Western and Northern Europe to sharpen their own offerings and policies. It is common for knowledge-intensive firms in Europe to co-operate through value-chains that span across the continent. Some firms in Stockholm and London, for instance, may have a few employees working on-site for a particular project, while the lion’s share is carried out by subcontractors in talented and more affordable places such as Budapest, Bratislava, or Bucharest.

As Europe is becoming an increasingly important platform for security and defence cooperation, we believe that it is also important to recognise the significant integration that is happening within knowledge-intensive jobs. This is, ultimately, a positive development. By combining competition and cooperation, Europe can create more secure communities and achieve stronger economic and technological progress.

Understanding and acknowledging the growth patterns of knowledge-intensive jobs in Europe is also relevant for policymakers and businesses on the other side of the Atlantic. Nowadays, Europe is increasingly progressing as a whole.

Northern and Western European nations have historically developed strong institutions with low corruption rates but exaggerated public sectors and high taxes have halted their development. Eastern and Southern European countries aim at strengthening their institutions, reducing the historically high level of corruption, and leveraging the evident benefits with lower taxes.

We believe that this trend will continue – similarly to the one seen in the US, where technology firms are expanding outside of Silicon Valley. Digitalisation is a key explanation, as it allows for knowledge-intensive businesses to cooperate over vast distances. That the growth is shifting to the East and South creates an institutional pressure on the governments in Western and Northern Europe to adopt business-friendly policies, invest in and encourage more people to pursue careers in the sciences, technology, engineering, and mathematics sectors. This would set the stage for a more dynamic and stronger European economy to emerge.

Nima Sanandaji, Director, European Centre for Entrepreneurship and Policy Reform (ECEPR)
Klas Tikkanen, Chief Operating Officer at Nordic Capital

Ukes

John Sanphillippo — Fri, 21 Jul 2023 20:28:58 -0400

A flurry of Ukrainian flags appeared all over San Francisco a year ago when Russia’s incremental acquisition of Ukrainian territory ramped up in earnest and turned to a hot war. It was a show of solidarity - what is sometimes called raising awareness. There were so many of these flags they displaced the Black Lives Matter signs in many windows. (I’m rolling my eyes.) These flags weren’t doing anyone in Ukraine any good. If you feel strongly about something it’s perfectly fine to let your neighbors know. But if you’re serious you need to take meaningful action as well. Otherwise you’re just moralizing and flattering yourself. And no, that $5 donation to an online charity doesn’t count.

I have a longstanding attachment to Eastern Europe. When the Berlin Wall fell in 1989 I was one of those kids who filled a duffel bag with Levis, got a cheap flight to Helsinki, and trekked from Leningrad to Moscow. I lived with a series of Russian families along the way and got an up close and personal view of the Soviet Union just as it was coming unglued. At the time it was unclear what would happen after communism. Many of those Russian families made the difficult decision to immigrate to Western Europe, North America, Australia, or Israel. Others stayed and took their chances in their homeland as things wobbled.

Other trips to the Baltic Republics and Ukraine followed over the decades. I like the people, the culture, the great food, and natural beauty of the land. It’s an undervalued part of the world. The region is also full of time capsules of past experiments for someone who’s interested in architecture, land use, and urban form. A czarist palace might sit near a communist era khrushchoba apartment block, new construction luxury condos, and a suburban big box store. It’s a layer cake of geopolitics made solid in brick, steel and concrete.

The scars of past wars are evident, along with new interpretations of who did what to whom and why. Ukraine, as its ancient name implies, has aways been a borderland squeezed on all sides by aggressive neighbors. It’s a tempting bread basket offering lebensraum and a buffer zone against military advances from whoever is on the other side. Occupation, famine, and death is the usual result for the locals.

Unsurprisingly, Ukrainians are xenophobic by nature and more than a little prejudiced against people they feel don’t belong. Anti-immigrant sentiments are always high. Ukrainians have had a bone to pick with Jews, Greeks, Catholics, and Armenians for centuries with regular purges. The Nazis didn’t exterminate the “undesirables” of Ukraine so much as they gave the green light to the locals who were not all that sad to see the riffraff done away with. You can say the same about Lithuanians, Poles, and even the French. America closed its doors to select refugees before and during World War II and sent people back to their deaths. These are unfashionable statements, but it doesn’t make the underlying reality any less true.

Read the rest of this piece at Granola Shotgun.

Johnny Sanphillippo is an amateur architecture buff with a passionate interest in where and how we all live and occupy the landscape, from small rural towns to skyscrapers and everything in between. He travels often, conducts interviews with people of interest, and gathers photos and video of places worth talking about (which he often shares on Strong Towns). Johnny writes for Strong Towns, and his blog, Granola Shotgun.

Photos: by the author.

The Twilight of the Anglosphere

Joel Kotkin — Wed, 10 May 2023 20:28:58 -0400

The pomp and ceremony of this weekend’s coronation of King Charles III could not hide the fact that Britain, once the most powerful nation on Earth, has become slightly dysfunctional and even a bit weird. In fact, this dysfunction is not just afflicting the United Kingdom itself, but also the broader Anglosphere, right from the antipodes up to the snowy wastes of Canada.

‘Every nation or group of nations has its own tale to tell’, noted Winston Churchill in A History of the English-Speaking Peoples. To be sure, the Anglosphere has an ugly legacy concerning its treatment of indigenous people, slaves, convicts and indentured servants, not just in imperial possessions but also in the United States both before and after independence. Some mainly non-white former colonies, whose populations are made up largely of the descendants of slaves and indentured servants, are now seeking reparations. Some are also moving to eliminate the last vestiges of loyalty to the British crown.

Yet despite this, in modern times, many of the countries formerly colonised by Britain have since served as beacons of opportunity for millions. Led by the United States, the Anglosphere countries account for four of the 10 most attractive destinations for immigrants worldwide. However, this legacy of opportunity appears to be fading. Unless there is some revival of the old Anglo spirit, a new era, likely dominated by China, India and other resurgent countries, seems in the offing.

Much of this decline of the English-speaking world is self-inflicted. A kind of slow suicide is taking place in which once-proud nations seem determined to squander their economies, their self-reliance, their moral code and, most critically, their belief in law, due process and representative democracy. The Anglosphere is a civilisation increasingly focussed on creating a more ecologically ‘sustainable’ way of life, and far less willing to compete with more vibrant foreign cultures.

In this sense, the newly crowned Charlies III is a perfect sovereign for a culture primed for decline. Charles is the model of a modern plutocrat. He has inherited a huge and growing fortune, including nearly $10 billion in real-estate assets, and he holds the ‘correct’ eco-friendly views on how his subjects should live. Although many among the elites consider his green politics to be ‘enlightened’, Charles’s worldview is fundamentally backward-looking or, I would even suggest, neo-feudalist.

Like a medieval millenarian, Charles has asserted, for well over a decade, that humanity is running out of time to save the world. In 2009, for example, he suggested that the world had barely eight years to save itself. Charles has emerged as perhaps the world’s premier ‘feudal critic of capitalism’, as one socialist publication put it. Vice magazine once described him as ‘a sort of feudal George Monbiot’, referring to the Guardian’s reliably apocalyptic in-house climate scold. Charles views industrial capitalism as a scourge upon the Earth. He promotes a new kind of noblesse oblige centred on concern for the natural world and for social harmony.

The new king rules a UK which was the first nation in the world – under Theresa May’s Conservative government – to impose Net Zero climate targets. This plan for a radical reduction in carbon emissions seems all but guaranteed to immiserate most British subjects, although it will be good news for the investment banks and oligarchs eager to cash in on the green handouts promised by the energy transition. Just as the UK government prepares to spend £11.6 billion of British taxpayers’ money on international climate finance, it has raised taxes to their highest level in 70 years.

As usual, it’s the lower orders who pay for the fixations of the ruling class. The policies associated with Net Zero will fall mostly on working-class people and communities – especially in places like the Midlands, once a global centre of energy and manufacturing. Particularly threatened will be the roughly 1.3 million UK workers engaged in energy-intensive industries. Such policies are likely to both expand the class divide and accelerate the divergence between the UK’s old industrial heartlands in the Midlands and the north of England, and the services economy around London. Nationwide rates of poverty and food shortages are already on the rise. Rising energy bills hit those on the lowest incomes the hardest. The poorest households spend up to three times as much of their earnings on energy bills as the richest in the UK do. The future prospects for the new green serfs are not great.

Read the rest of this piece at Spiked.

Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Photo: courtesy Spiked.