On the back of my previous post on the depressing statistics on declining productivity in Spain, it’s initiatives like these that are going to be essential for Spain to reverse the trend and create real wealth in high-productivity activities.

Link: Más sobre el centro de I+D de Yahoo! en Barcelona

Here’s the story:

- German ad agency launches expensive, lame ad campaign to convince people to “cheer up”.
- Campaign gets ridiculed on German blogosphere.
- Head of ad agency writes memo dismissing blogs as “the toilet walls of the Internet”.
- Memo gets leaked onto internet.
- Head of ad agency gets ridiculed on German blogosphere, and has to issue an apology (although it’s obviously not a sincere apology).

Looks like Old Media is getting a bit frustrated. I guess this agency was happier in the days when agencies would just produce their campaigns, and consumers would consume them. Kind of annoying that those consumers can talk back now. Especially if your campaigns suck.

Link: MediaGuardian.co.uk | Media | German ad boss apologises to bloggers

Update: Wow, sensitive topic, judging by the emails I received commenting about these statistics. Some very good points raised by readers, whose mood generally ranged from circumspect to downright pessimistic about Spain’s economic prospects.

- Spain’s population has boomed from 40 to 45 million in the time period in question, all due to immigration. So a large, maybe entire, portion of additional hours worked has come from this raw increase in labor inputs. Very true…
- Much of the sector growth has come in low-productivity services such as construction & tourism, even as higher productivity manufacturing has been shrinking. Also very true…

Yet these points don’t disprove the problem. They merely explain it. Increasing your country’s output by increasing input (just add people!) is a 3rd world strategy- first, get everybody a job. But it doesn’t actually make anybody wealthier.

Real wealth comes from only one place: productivity. If you aren’t increasing your output per unit input, you are not becoming wealthier. Period. It’s mathematical.

The things that have made Spaniards wealthy this decade are unfortunately not very solid. All the EU funds invested in Spain every year are not creating wealth, but simply transferring it from the rest of the EU to here. Similarly, money made from booming house prices is not weath created, but rather transferred from future home owners to current ones.
So yes, we can explain that declines in productivity are affected by one-time immigration booms, or transitions to alternative sectors. But the trend should still be a huge concern to all of us here in Spain.

** end of update! **
From the latest Economist, a pretty amazing statistic:

Spain’s economic growth stems from industriousness, not ingenuity, according to a study by the Conference Board. Total hours worked rose by an annual average of 3.8% in 2000-05. Labour productivity, or output per hour, fell by an annual average of 0.6%. By contrast, Ireland’s growth came from both sources, with labour productivity rising by an annual average of 3.0% and hours worked increasing by an average of 2.2%.

This is the great chimera of economic growth. All growth boils down to two things: increasing units of input (more people, more hours worked, etc.), and increasing units of output per unit of input (productivity- getting more done).

I think it’s fine for countries like China to grow first with increased inputs, but wholly unacceptable for country like Spain to depend on this. Increasing hours worked isn’t exactly a long-term, sustainable strategy for growth.

Maybe more scandalous is that productivity in Spain has been decreasing every year for almost a decade! In peacetime, during an era with the most productivity-enhancing tools ever known to man (computing power, mobile phones, internet, etc.)- for Spain to be unable to increase its productivity is scary.

This nifty graph is also provided:

And so it begins…

Om (and many others) are talking about how European fiber to the home networks are starting to pop up everywhere: plans have been announced for Amsterdam, Paris, and now Vienna. ADSL2+ is everywhere, triple-play is cheap, and incumbents are under massive competition. Broadband Europe is on fire compared to the US.

But I’ve just returned from the US, where I was astonished to see ads for mobile phone plans around $40 per month for 1,500 minutes! Good luck finding a deal like that anywhere in Europe. Yeah, yeah… US penetration is still lower, Americans don’t SMS as much, etc. But the fact is that American mobile telephony is far, far cheaper than in Europe- and price is the most important attribute, so in my book that makes the American market far more advanced than Europe’s.

Funny, because six years ago it was the opposite: Europe was easily ahead of the US in mobile, and the US easily ahead of Europe in Internet access.

Link:  Om Malik on Broadband : » Now Vienna Plans a Fiber Network

sorry for the absence in blogging, and hope everyone is having a great start to 2006!

To celebrate my first post of the year, I’ve finally made my long-overdue switch from TypePad to WordPress. A number of reasons for this change, but the biggest has to do with community- the WP community is much more active, creative, and helpful with each other than the TP folks.

Anyway, look forward to some good posting in the coming weeks. Lots of interesting things happening