Thomas Friedman has an extremely astute column in The New York Times on why Europe is sinking and India is rising:
To appreciate just how explosive, come to Bangalore, India, the outsourcing capital of the world. The dirty little secret is that India is taking work from Europe or America not simply because of low wages. It is also because Indians are ready to work harder and can do anything from answering your phone to designing your next airplane or car. They are not racing us to the bottom. They are racing us to the top.
Indeed, there is a huge famine breaking out all over India today, an incredible hunger. But it is not for food. It is a hunger for opportunity that has been pent up like volcanic lava under four decades of socialism, and it’s now just bursting out with India’s young generation.
“India is the oldest civilization, the largest democracy and the youngest population – almost 70 percent is below age 35 and almost 50 percent is 25 and under,” said Shekhar Gupta, editor of The Indian Express. Next to India, Western Europe looks like an assisted-living facility with Turkish nurses.
Indeed, Friedman’s onto something here. Productivity in Europe is extremely low – European society has shifted from an emphasis on work to an emphasis on doing anything other than working. Months of paid vacation are nice, but months of paid vacation don’t produce widgets, software, or expand the economy. Meanwhile, Indians have a very strong work ethic, and even if the wage differences were nonexistant, would still be more cost-effective than European workers. Countries in Eastern Europe, Asia, and the Indian subcontinent are perfectly willing to work hard and don’t demand 35-hour work weeks.
The welfare state may make its workers arguably happier, but it isn’t sustainable. There’s a key difference between protecting workers from harm and creating a society in which work is systematically devalued. Europe crossed that line years ago. Unless Europe can instill a greater work ethic in its people, they can’t be competitive with the rest of the world. The ossified European labor market makes that difficult at best.