Thoughts on cafés and competitiveness

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I was walking about in a quite-hot Barcelona this summer and badly needed a cold drink. In Asia, you never have to worry about finding a bottle of water or Coca-Cola. Small convenience stores sit practically on every corner, either hole-in-the-wall mom-and-pop shops, or the bright, boxy chain store variety. Large sections of Tokyo and Hong Kong appear to be owned by the 7-11 company. But not in Spain. I wandered from street to street, getting thirstier, but there were no convenience stories to be found, no place where I could just grab a drink and continue on my way. What, I wondered, do the Spanish do when they’re on the run and just need a quick beverage? I posed this question to Cristina Mateo-Yanguas, the Madrid-based journalist who was reporting with me. She said the locals usually sit down at a café for a quiet refreshment rather than grabbing something and rushing on.

How luxurious, I thought. That just doesn’t happen in Hong Kong, and for that matter, just about anywhere else in Asia. Out here everyone is incessantly on the go, running Blackberry in hand from appointment to appointment. Time is money, as they say, and most people in Asia prefer to use their time making it. Yet there is something very civilized about taking a moment to actually sit down in the middle of the day and relax with a coffee. In Spain, you’ll find the cafés filled up at 3pm, everyone chatting over long lunches. The spirit is contagious. I have to admit there were a couple days on which I couldn’t resist sitting outside in Spain’s beautiful weather with a book and an espresso for a few minutes instead of powering away on my notebook PC. (Just don’t tell my editors.)

Yet as I sat with my coffee I also began wondering if such traditions are becoming a thing of the past. Can the Spanish continue to enjoy their wonderful lifestyles as the world changes around them? In other words, can the people of Europe – and for that matter, everywhere else — find the proper work-life balance in the increasingly intense country-eat-country world we live in?

When I compare lifestyles in a rising Asia and a struggling Europe, the answer seems to be a resounding no. In Hong Kong, the subways are crammed with people furiously emailing or talking business on their iPhones. In Spain, don’t expect anyone to respond to your emails on Friday afternoons, or take a phone call during their long lunches. In South Korea, many Koreans consider it inappropriate to use their allotted vacation days, to the point where the government has had to implore them to take holidays. During the hottest weeks of summer in Spain, good luck finding people in the offices after 3pm. In Hong Kong, you can do some serious shopping at 10pm. While visiting the town of Jerez in Spain, I had a terrible headache but couldn’t find an open pharmacy for an entire Thursday afternoon.

After my travels in Spain, there was little question in my mind why Asia is leaping from strength to strength while Europe is mired in slow growth and unemployment. According to statistics from the OECD, people from emerging markets or nouveau riche nations generally tend to work longer hours. The Koreans worked more hours in 2009 than anyone else in the OECD (2,074), followed by Poland and Mexico. The Spanish, by comparison, worked 1,615 hours, roughly in line with the British and Portuguese. The poorer countries appear hungrier. They want what the Spanish and other residents of the most advanced economies have had for decades, if not centuries.

Of course, simply spending more time at your desk doesn’t necessarily ensure economic success. Looking at the OECD figures, there doesn’t appear to be a clear connection between working hours and economic performance. The Greeks work about as much as Americans, but that doesn’t seem to have gotten them very far. If you’re going to work less, you have to work smarter. But here again, the Spanish run into trouble. The OECD is also kind enough to compile statistics on labor productivity – which measures GDP per hour worked. In Spain, labor productivity is only about 80% that of America’s. Nor is Spain’s productivity improving very much. Between 2000 and 2007, Spain’s labor productivity grew more than 1% annually only once. In Germany, the growth rate fell below 1% only once. Though Spain still holds a big advantage in labor productivity over an up-and-coming country like South Korea, the gap is closing. Korea’s labor productivity growth routinely topped 4%, even 5%, over the past decade. In other words, the Koreans are not only working more hours than the Spanish, they’re also improving their productivity on the job more quickly as well.

The Europeans seem to understand the challenge from emerging markets, but many don’t appear willing to sacrifice their lifestyles and work habits to compete. That’s what’s going on in France, with massive protests against the government’s plan to raise the retirement age. The resistance is completely understandable. For decades, West Europeans have been paying ridiculous tax rates, expecting the payoff in extensive social services and a comfy retirement. But there are real concerns in Europe about the ability of strained states to deliver on their welfare-state promises. With populations aging, fewer working citizens will be carrying the burden of a greater number of retired. And with debt levels of most West European states rising to scary levels, the big payouts in social services may not be sustainable, at least not without reform or higher taxes. Simply put, the entire European welfare state and way of life is under threat. The people still working may have to sacrifice more to support those who aren’t.

Yet the alternative – more working hours, fewer benefits — doesn’t seem viable either. The fact is that modern capitalism is destroying the work-life balance of many people in the West and around the world. Economists have been praising how labor productivity in the U.S. increased so significantly during the Great Recession – by 2.5% in 2009. But there is a cost to that improvement as well. Part of the gain was due to investments in more technology that has made workers more productive. Those Blackberries that used to be a symbol of the high-ranking executive are now becoming almost as common as regular mobile phones. Quiet commutes to the office reading a newspaper have been replaced by furious mornings answering emails. And even worse, in the wake of the incredible number of job cuts by American companies, work has been reallocated to the survivors. Is there any surprise, then, that a Conference Board survey conducted in the U.S. earlier this year showed job satisfaction among Americans is at its lowest point in two decades?

Some of you are probably saying: At least these people have jobs. True, of course. But the issue of work-life balance impacts unemployment as well. The more work companies can extract out of their existing staffs, with new technology or other means, the less need they have to hire new employees. Unemployment will start to reverse only when business improves and companies feel they can no longer rely on their existing workers to handle it. That’s not fair to either the employed or unemployed.

What’s the answer? I think the U.S. needs to forge a new social contract between shareholders, management and employees. Yes, companies are supposed to be run to maximize shareholder returns, but they’re also supposed to be run in the long-term interests of shareholders. Those two don’t always go hand in hand. There needs to be a renewed appreciation in the U.S. that worker welfare is an important part of achieving shareholder welfare, and the healthy growth of the economy overall. In Europe, the numbers just don’t add up. The state, the companies and the public are going to have to find a new balance, in which a sustainable welfare-state system is forged for the long term. That will take sacrifices on all sides. In Asia and other emerging markets, workers will start to demand better quality of life as they get wealthier, and that will force a change to how labor systems operate. None of these changes will happen smoothly or easily.

I have some more thoughts on this issue, from a recent trip to Germany. But perhaps it can wait for now. Maybe I’ll find a quiet café, open a book, and just take a few moments to get some balance back into my life. While I still can.