Banks, Capital Markets, R&D and Economic Growth in Europe

Economic growth and prosperity go together, although high growth and a deteriorating environment can pose a transitory conflict of interest. The need to maintain natural wealth and human capital has become a major concern of economic policy in western Europe after 1945. While maintaining the stock of real capital via depreciations and reinvestments was considered a natural requirement of capitalism, the concern about the stock of the environment and labor market problems reflects more recent problems. Human capital of many workers in western Europe has been eroded as a consequence of high unemployment which is mainly the result of the two oil price shocks in the 1970s and strong wage pressure with a bias in favor of unskilled workers in EU countries. At the same time technological progress and the shift towards the service industry raised the marginal value product of skilled labor overproportionately — which is one reason why income differentials among workers are growing again in OECD countries (another being the global increase in the unskilled labor supply as a consequence of China’s opening up).