Will Europe ever catch the US?

With its huge prairie States and natural resources, the US would (according to Vogel) be reduced to exporting food and raw materials for the rest of the world.

Viewed in 2003, Vogel's projections appear to have bordered on pure fantasy. The Japanese economy has now stagnated for more than a decade. Financial failure, business collapse and high unemployment have coalesced with an imploding stock market to produce a complex and almost intractable economic mess. Even with interest rates at zero, the Japanese haven't been able to boot-strap their economy back to life.

Over the same period, the US economy has enjoyed a huge boom, even when you account for the bursting of the dot com 'bubble' and subsequent economic recession. Indeed, the US continues to bestride the world like a colossus towering over all the major industrial areas. The value of its stock markets dwarfs all others. At the time of writing, in fact, America seems to have pulled out of recession well before other economies, particularly those in Europe. Without doubt, the US remains vibrant and entrepreneurial.

That said, will the US stay at Number One? Well, on purely demographic terms alone it would appear unlikely. The population of China is an order of magnitude larger than America's so, even if its per-head production is much lower, because of faster growth China will eventually catch up in total output.

The International Monetary Fund recently listed China's real output in 2002 – adjusted for price differences – at $US6,137 billion, second only to the US ($US10,225 billion) and way ahead of Japan ($US3,445 billion). China will probably surpass the US in this imaginary league table within the next two decades. Due to its large population and fast rate of growth, India will not be far behind either.

Europe to overtake the US?
What of Europe, I hear you cry? Could Europe ever be in a position to catch the US? It's interesting that the very idea of Europe overtaking the US in economic terms seems far fetched. We seem to know instinctively that such an occurrence is totally out of the question. Europeans witnessed the rise of America in the 20th Century almost with awe and stupefaction.

The US' lead in technology seems to trump Europe at every juncture. Despite the fact that Europe has a far larger population than the US (375 million versus 270 million), our per capita output and economic growth still lags far behind that of our American cousins. In the security industry, however, total domination by the Americans is not yet a fact. Yes, there are American behemoths – ADT, GE and Honeywell among them – in the marketplace, but Europe too boasts plenty of strong companies. The likes of Securitas, Group 4 Falck, Gunnebo, Siemens and Bosch included.

What is an undeniable truism is the fact that the penetration of the European market by American companies is greater than that of the US by European concerns. Recent trends like the purchase of Chubb by the United Technologies Corporation (News Update, SMT, July 2003, p9) indicate that the American advance will indeed continue.

On closer examination, the simple ownership of companies can be somewhat illusory. If a European company is bought by a US conglomerate, it must still employ people locally to promote, sell and service its products. The old objection about manufacturing jobs moving to the US is less relevant today as products are now more likely to be made in the Far East than America. In truth, the real question is not about total output but rather productivity and entrepreneurship.

A question of productivity
For most of us, productivity is concerned with manufacturing. Cajoling staff into working harder and faster. This somewhat old-fashioned view is surprisingly common. In fact, productivity is better viewed as accomplishing more with less. More refers to output of services, products and quality. Less, on the other hand, refers to the input of materials, energy, labour, time and money.

Those 'organisations' with higher productivity – whether they're companies or indeed countries – tend to win out in the long run. Low productivity leads to higher prices, reduced income and slower rates of growth.

Although a good many specifications are written in open terms, there are still considerable numbers which have been crafted in favour of specific products. Others may simply be slightly modified copies of previous jobs, chosen deliberately to minimise ris

Much productivity comes from economies of scale. McDonald's, for instance, is able to produce standard burgers at a low cost because they buy basic raw materials in huge quantities. Not only are the raw materials bought in bulk, but capital items such as cookers, lighting, restaurant seating and signage all benefit from economies of scale.

Any Security Management Today readers who've travelled in the US will have seen how this standardisation across the continent has boosted the rapid growth of new enterprises. We in Europe have benefited from products and services developed in the US. Our own productivity depends in no small way on advances made in the US.

That being the case, and given our generally well-educated population and apparently open markets, why do we not see a rapid advance within Europe to achieve the levels of productivity and output common in the US?

Partly, at least, the answer lies in our tax structure which serves to channel far more of our gross national product – or GNP – through Government agencies. Studies suggest that the productivity of State-run organisations is considerably inferior to that of the private sector. However, this isn't the whole answer. Regulations and technical standards raise costs, and although the European Union has promoted the adoption of homogeneous rules, many countries and industries within its borders cling tenaciously to outdated and obscure guidelines in order to protect local interests and monopolies.

Specification: an attitude problem?
Differences in standards can be documented. Differences in mentality are more difficult to quantify. The evidence here is usually more anecdotal. For example, when it comes to larger security systems installations, it's standard practice for the end user to employ a specifier or consultant who will then draw up the functionality of the proposed solution.

Here, the theory is that the specification is drafted in functional terms, such as: "The camera will provide no fewer than 25 images per second", as opposed to being scripted in physical terms (ie: "The camera will be 10 cms long with a CS lens mount").

Although a good many specifications are written in open terms, there are still considerable numbers which have been crafted in favour of specific products. Others may simply be slightly modified copies of previous jobs, chosen to minimise risk to the specifier by demanding a technology that "worked last time", but may well be under-performing and inadequate for current needs.

While it's not the job of the specifier to expose his client to untried technology without tangible benefits, the tendency to play it safe with a battle-tested specification restricts the progress of the industry as a whole. The inadequacies thus introduced may not be readily apparent until the system needs to be modified or expanded, and then major constraints or extraordinary costs can come to light. By then, of course, it's too late.

Risk assessors, risk engineers
What this all boils down to is, ultimately, an attitude to risk. Traditionally, entrepreneurs are viewed by the national media as risk takers. In reality, most are simply skilled risk assessors and risk engineers. They recognise the inherent uncertainties in any venture, then work aggressively to reduce the associated risks.

However, such an approach only works if the final customer is duly exposed to the new product or service. The US wins out here.

We have plenty of entrepreneurial spirit in Europe. Visit any security trade show like IFSEC or Securex and you'll find plenty of smaller stands run by start-up companies with great potential. Will their offerings find their way on to a spec sheet or not? That's the question.