No disruptive innovation without great productivity growth

By now, word Innovation flourishes often on political and managers lips as many entrepreneurs dream to transform an idea in gold. This is the modern rush. Looking at carefully, allows to discover soon that the race is likely to have few winners against many loosers. If United States seems to come close to win, among loosers lay old Europe. Are old fashioned countries showing so much resistance to change that it will anihilate all innovation benefits ?

To show what is happening, let’s consider a simple economy of four producer groups :

  1. Food producers to feed all people
  2. Clothes, equipment and leisure producers to give all support to make production and cater people for
  3. Government services and army producer for all state administration services and army
  4. Property and liabilities which produce nothing but are owners or charge for others

Let’s suppose that this order is matching the order of needs and all production cater everybody for what he needs.

There no money, this is a barter economy everybody gets his goods exchanging his own production for all his needs.

At this this moment, economy is at equilibrium.

All the the game will be to try to shock this model with  population growth DP

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Service industry productivity is the current challenge for Europe

The term “post-industrial society” was first coined by Daniel Bell in 1973. He predicted things like the global diffusion of capital, the imbalance of international trade, and the decline of the manufacturing sector on the behalf of service industry. This leads to slow growth economies since services usually show less productivity growth than manufacturing. This is  the Baumol Effect which states that in labor-intensive sectors that rely heavily on human interaction or activities, such as nursing,education, or the performing arts, there is little or no growth in productivity over time.

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