What Everyone Gets Wrong About the Economic Problems in Europe

Joe Weisenthal (0:00)

Hey, Odd Lots listeners, the Odd Lots tour continues, and our next stop is in Chicago.

Tracy Alloway (0:04)

That's right, Joe and I will be at the City Winery Chicago on October 15th for a live Odd Lots recording. Tickets are on sale now at bloomberg.com/oddlots.

Joe Weisenthal (0:15)

And of course, a special thank you to Barclays for supporting Odd Lots Live.

Tracy Alloway (0:19)

So that's October 15th at City Winery in Chicago. Get your tickets now.

SPEAKER_3 (0:27)

Bloomberg Audio Studios, Podcasts, Radio, News.

Joe Weisenthal (0:42)

Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:47)

And I'm Tracy Alloway.

Joe Weisenthal (0:48)

Tracy, I think a comment that you've made a few times over the episodes is like, no, no, no, it's not. It's like, we have these conversations. And then usually or frequently, when we're talking about trade or AI or anything, there's usually, oh, and it seems like Europe is getting the short end of the stick here. Or it seems like it's all going to end up being kind of bad for Europe.

Tracy Alloway (1:07)

Well, yes. I would say that-

Joe Weisenthal (1:09)

You have said this.

Tracy Alloway (1:11)

I'm sure I have in the past. However, what I would say is, if you are bullish on AI and its ability to boost productivity across the board, in my mind, you have to be bullish on Europe because there is no region out there perhaps more motivated than Europe to try to eke out every extra ounce of output per work hour.

If you want a long lunch in France, if you want to take a long vacation in August, you should be very, very interested in AI. If you think those gains are going to be widely spread through businesses in other countries, think about Europe.

Joe Weisenthal (1:46)

Did you see the red headline that just hit as you were talking?

Tracy Alloway (1:50)

No.

Joe Weisenthal (1:50)

It's so surreal. So we just got a red headline the moment you were saying that BMW targets shedding a fifth of manager roles with the help of AI. I don't think that could be more perfect because A, it's the two sides of the coin. So you have a lot of big industrial behemoths in Europe that in theory, like you're like, I remember we've talked about this for years, actually. You know, if AI is going to diffuse across the economy, suddenly maybe these companies can be more lean, etc. But then this also gets to two things. Okay, what does that mean about jobs themselves? And then also it's like, okay, maybe they can modestly trim some of their management layers with the help of AI. But can that actually make these European car companies competitive with the Chinese companies?

That still seems like a tall order at the trajectory.

But it's very funny that you said that the second that that headline crossed the terminal.

Tracy Alloway (2:45)

Plugged into the zeitgeist, I guess. One other thing I would say, speaking about the zeitgeist, and since you mentioned China, we are recording this on September 30th. And Europe seems to be gearing up to take some sort of action against China in order to boost their competitiveness against it. We're not entirely sure just yet what that's gonna look like, but people are definitely talking about it.

Joe Weisenthal (3:06)

I mean, there's like this very deep concern about all of the industrial behemoths, a lot of the German chemical companies, the German automakers, et cetera. And like, you know, five, ten years ago, they were like riding high. And then suddenly in a few years, people are talking about potentially existential risk to them and so forth. And it's sort of wild to me, you know, thinking back to how much the mood has changed from, say, the first Trump administration and even the Biden administration, when, you know, the idea of like, you know, there was the European anger at the Inflation Reduction Act and so forth. And, you know, just this this concern that the trade issue that was sort of really catalyzed by the US and Trump a decade ago is now just sort of it's becoming just very mainstream.

Tracy Alloway (3:55)

Well, you use the word diffuse the benefits of AI again. I think, you know, the idea of having to compete seriously against China and take actual steps to do so has diffused across many places in the world.

Joe Weisenthal (4:06)

Very well put. All right. Well, I'm very excited to say we do have the perfect guest. Someone who's writing, I've mired for a long time and who has interesting takes about all these things, including debates about European economic productivity, whether they're falling behind, et cetera, nuanced positions on various trade questions. We're going to be speaking with Dominik Leusder, economist policy analyst, former researcher at LSE and author of The Leusder of Last Resort Substack. So Dominik, thank you so much for coming on Odd Lots.