8th Annual NBP Conference
on the Future of the European Economy
The Mystery of Low Productivity Growth in Europe
Warsaw, 26 October 2018
The 8th edition of the Annual NBP Conference on the Future of the European Economy (CoFFEE) was held on 26 October 2018 at the Sheraton Hotel in Warsaw under the title
The Mystery of Low Productivity Growth in Europe.
Narodowy Bank Polski once again hosted economists from almost all over the world – central bankers, representatives of global financial institutions and academics. This year’s meeting under the title
The Mystery of Low Productivity Growth in Europe was devoted to the determinants of productivity, its measurements, the consequences of productivity slowdown, and seeking solutions to issues resulting from declining labour productivity, especially in the Central European region. This year the invitation to attend the conference as moderators of particular sessions was accepted by four presidents of European central banks: Ewald Nowotny – Governor of the Oesterreichische Nationalbank, Gaston Reinesch – Governor of the Banque centrale du Luxembourg, Jiří Rusnok – Governor of Česká národní banka, and Lars Rohde – Governor of Danmarks Nationalbank.
The conference was opened by Adam Glapiński, President of NBP, who referring to its title and agenda, discussed several issues concerning the “mystery” of the present low productivity growth. The NBP President emphasized, among other things, that it is difficult to explain the source of low productivity growth in a world full of innovation. In particular, it is still not quite clear what determines the falling TFP (total factor productivity) that Moses Abramovitz calls the “measure of our ignorance”.
However, assuming that we are able to properly measure productivity growth, its slowdown has been observed for decades, mostly in the developed European economies. The recent crisis seems to have influenced the scale of the phenomenon, both in developed and developing economies. In Central Europe, productivity growth dropped after the crisis from approximately 5% on average to approximately 2%. This is unsettling in terms of the process of convergence of Central European countries with more developed Western European economies.
The President of Poland, Andrzej Duda, welcomed the conference participants in a special letter, pointing out the importance of this forum for highlighting the role of Central Europe, and Poland, in the European economy. The Polish Prime Minister, Mateusz Morawiecki, also addressed a letter to the conference participants, wishing them a fruitful debate, emphasizing the challenges of low productivity, and stressing the need to discover the causes of the present economic slowdown in Europe and find solutions to the phenomenon.
A special opening address was given by Professor Daniel Sichel from Wellesley College. In his speech he attempted to define the causes of low productivity. The factors that according to him contribute to the low level of TFP include both supply-side factors (driven, among others, by the decreasing influence of new developments in digital technology on economic growth and the declining competition among companies caused by the emergence of the so-called superstar companies, such as Amazon or Google, that small enterprises are practically unable to compete with) and demand-side factors (driven by long-term stagnation, among other things). Professor Sichel believes that the factors crucial to future productivity growth will be technology development and diffusion, as well as maintaining stable policies that will encourage enterprises to make new investments.
Video report from the conference:
Video recording of the conference: