The exit of the UK from the EU is and will be a tremendous shock to the global economic and business community. Certainly no one knows what is going to happen in areas such as finance, immigration, and even trade.
Nevertheless, Brexit does nothing to change the fundamental economic problems facing the developed world: Slow growth, and an inability to create new industries that can employ the millions of workers whose careers have been disrupted in areas such as manufacturing and transportation. These problems are fueling populist revolts around the world that are all the more powerful because they are based on a kernel of reality.
The productivity numbers in Europe are, frankly, terrifying. Based on OECD data, from 2007 to 2015 labor productivity growth averaged 0.3% annually in France, 0.15% annually in the UK, and a stunningly low 0.02% in Germany. Let’s not forget Italy, where productivity actually shrank over this period.The US was doing a bit better at 0.9%, but only in comparison.
With growth so slow, no wonder the voters want something different, even if they are not sure what it is.
There is no end of good innovative ideas in London, Paris, and Berlin. The App Economy is booming in Europe, as our research has shown. But a combination of factors–ranging from culture to finance to government regulation–makes it more difficult to convert scientific research and small start-ups into productive and job-creating businesses. Indeed, the US is having much the same problems.
Innovation creates jobs and growth. The problem is that the developed world have not had enough innovation, not that there’s been too much. Our challenge is to fix that.