Ways to increase sales and profitability in European Union

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the European Union is one of the largest but also one of the strangest economic entities to have ever existed it has become a policy maker and Authority acting in a way not too disimilar to the federal government of the USA economically the similarities are so close that the idea of a European Federation or the United States of Europe has seriously been proposed before it's realized that it kind of already exists a collection of states that share the same currency agree on policy together make trade deals collectively have joint departments and yet still fall back on the independence and rights of those individual states does sound famili but of course there are obvious differences which gives the European Union all of the drawbacks of a federation with not too many of the bonuses something that is a problem for more than just the member countries those 27 member states have a collective output of almost 20 trillion us which is surpassed only by the USA itself in raw nominal GDP for a non-sovereign entity it's not afraid to throw that economic weight around either whether intentionally or not it uses its size as a large Global producer and consumer to wield significant control over countries within and Beyond its borders and that power presents a risk as it faces major external and internal challenges the largest of its member economies have seen mostly stagnant economic growth and the story may not be much better for its smaller developing economies either we made an entire video about a year ago highlighting a lot of the threats and the influence they are having on the European Union as an entity but it's probably even more important to explore the influence that the EU has on its constituent economies and economies around the world so to keep things as simple as possible for such a complex topic what positive influences has the EU had what are the problems it's causing for its member states and finally what are the problems it's causing for the global economy as businesses scale their operations become more interdependent their staff more spread out and their process is more complex economics explained has many full-time staff as well as freelance editors and graphic designers and the only way we can keep track of everything that needs to get done is with our sponsor for this video notion notion is simply one of the greatest productivity tools on the internet we use it every day to manage tasks like our video production Pipeline and without it we would just be lost it's a nonstop place for assigning work to different people in our distributed team than tracking voice over and video links and ideating on thumbnails and titles for new videos we've got templates set up for every aspect of our media business and we've just started using their new calendar app that makes our task management just so much faster rather than sending emails to each other we can organize everything through the notion interface and then all of the deadlines and 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own long-established economies to merge into the collective system now of course that was partially because any societies that did exist in these regions before they were claimed and turned into States weren't really market economies in the western sense for lack of a less delicate way of putting it the states that became the USA really were starting from scratch the countries that have formed the EU and have joined its ranks over the past three decades had and still have extremely different economies that all realistically call for equally diverse economic management style the proper economic policy to implement when managing a large wealthy established and more stagnant economy like Germany France or Italy should be very different from the policies used to manage a small rapidly developing economy like Romania or Slovenia yes the country still maintain a lot of domestic Independence but collectively decisions like monetary policy and trade restrictions are done by the EU and striking a compromise between countries that have highly competitive exports and those that need protections is always going to be exactly that a compromise a country like Germany has highly advanced Industries and extremely valuing products that it could use to negotiate favorable trade deals for itself whereas a smaller country like Romania which is still developing and producing commodity outputs would probably really struggle if it had to genuinely compete in the global market for its exports extremely basic manufactured items like insulated wire and commodity crops like wheat and corn are basically completely fungible which is just a fancy economics word for interchangeable it might be possible to tell apart a german-made car or aircraft from one made in another country based off quality but copper wires and corn from Romania are effectively going to be identical to the same products from any other country and without proper trade agreements Global consumers are going to buy it from the cheapest source available to them given these different objectives it's very hard to create a trade deal that's going to work for all of the countries in the EU as well as it could for the most dominant economies individually the same problem happens with monetary policy interest rates across the EU are different for different countries but the overnight rate or the cash rate set by the European Central Bank is the same for all of Europe so why is that well each of the individual governments have their own risk profile a country like Germany is far less likely to default on their loans than a country like Greece so Greece has to offer investors higher Returns on their bonds if they want to raise money to compensate them for the risk that that country will default on its debts again a central bank is supposed to account for this while also managing inflation which in the EU varies wildly from country to Country thanks to different market conditions different tax systems and even different cultures what this all means is that again any policy is going to be a compromise between what this rather diverse group of Nations really needs this has already been a problem with the Greek financial crisis been Amplified by the high value of the Euro normally when a country faces significant financial strain like this the value of its currency drops which means it becomes cheaper to buy the country's exports which helps it to receive more income to service their debt when a whole group of countries are using the same currency that doesn't happen or at least it doesn't happen as significantly now the really interesting lesson here and something that's important to recognize is that the same thing happens to all economies the EU probably isn't even the most extreme example of things like monetary policy and trade deals needing to compromise for regional differences the difference between the most and least productive states in the USA for example is now around the same as the difference between the most and least productive countries in the EU on a per capita basis especially when outliers like Luxembourg and Washington DC are removed and yes of course DC is an estate but it's still an economic entity not too dissimilar from a lot of micro economies within Europe my is sure side the poorest countries in the EU are actually on average catching up to the richest by GDP per capita metrics where the opposite is happening in a place like the USA the richest US states are pulling even further ahead of poorer states by worker output and that's in part of least because these regions have even less flexibility around their economic policy and more restrictions on how industry moves around the economy but they are still subject to decisions made at the federal level even within unitary countries that don't have individual states policies that are good for advanced Industries and City centers might not be good for manufacturers and Regional settings or farmers in rural areas the difference is though that single National economies even large feder ations like the USA which gives a lot of Independence to its member states can still take federal tax money and redistribute it to poorer regions either directly through transfers or indirectly through subsidies and contracts while we were researching this video another economics Focus Channel posa Pua whatever stick animal Enthusiast Man released a great video about why Regional subsidies to farmers are so common of course we don't want to repeat too much here but one of the big points was that these payments are not necessarily economically efficient but they are made anyway because it stops Regional inequality between City cities and rural areas getting too out of whack similarly to Regional output inflation is different in different areas of all economies as well the inflation rate in a major city center like New York Tokyo or Sydney would be different at any given time to the inflation rate in the rural areas of the countries those respective cities are in the only reason this looks like a problem with the EU specifically is that normally a currency is specific to one country and that country will measure its inflation rate once collectively for the whole economy but since the EU has the Euro which is used by dozens of different countries with regional differences they all report different inflation numbers which is really more indicative of reality whereas other National economies kind of naively assume that prices are going up everywhere across the country at exactly the same rate so while this sounds like a positive for the EU collecting precise economic figures won't do it much good if it can't take precise action to control them compared to the federal government of the USA the EU has a very modest budget that's mostly just used to keep administrative functions operating so even if it had the authority to use its own spending to balance for things like compromised trade deals monetary policy it couldn't the strange divide between what economic policies get handled by the individual National economies and what policies get handled by the EU centrally has created a system where economic management is very difficult especially in extreme situations like debt crisis energy restrictions with Russia and brexit this difficulty also applies to businesses within this economic region theoretically the EU with its almost completely free movement of goods services and Personnel within and between member countries should have made things easier for businesses to operate and grow without the restrictions of tightly packed National borders unfortunately there have been some major challenges to this assumption the EU has added an extra layer of regulations that businesses have to adhere to on top of their own National regulations this is one area where they do not take a light hand regulations around technology especially has meant that even International companies have had to make big changes so they can continue to operate in one of the most lucrative consumer markets in the world now the regulations themselves at least the ones that make headlines are mostly pretty Pro consumer and pro- worker things like demanding that smartphones all use the same charging port reduce the barriers to competition in that space the reason that Apple begrudgingly got rid of their objectively infera proprietary connector is because the EU said they had to or else they wouldn't be allowed to sell their phones there a law that the rest of the world has also benefited from but while these laws may be a net positive for the world it makes it very hard for businesses founded within the EU to compete globally against ones that don't have as many restrictions the European Union has fallen significantly behind the USA and developing Asian economies and Technical innovation which means it's missing out on competing in one of the most lucrative economic drivers in the world us and even Chinese tech companies have been able to spread their influence around and generate revenues from a product that has almost zero marginal cost if a German manufacturing company wants to increase Revenue it needs to sell more manufactured goods which means it needs to employ more staff buy more materials and potentially Even build more factories if a tech company signs up a new customer the additional resources required could be as simple as some data entry into an electronic record which makes these businesses far more scalable the EU itself recognizes it shortcoming in this industry and has used some of its limited budget to try and make it easier to develop another Spotify but outside of that one example at least for now it's hard to think of another European technology company that is dominant beyond the borders of the EU now in the interest of fairness it's important to recognize that there are other factors apart from EU regulation stifling technological development in Europe its diversity of languages means that it's harder to reach a critical mass of users like it is in China or the USA the companies have hundreds of millions of domestic customers before they need to expand out internationally it also suffers from brain drain and lower investment because skill developers and risk-taking investors within Europe can use their talent or cash remotely in the US market which generally pays better and of course the EU itself has in many ways made that more popular by introducing a major world currency that makes this kind of crossb work and investment easier so with all of these issues it's easy to think that perhaps the EU was a bad idea but it's also important to assess if it was just in the wrong place at the wrong time by the standards of an economy this large the European Union is incredibly Young only formally been created just over three decades ago and in that time it's endured a lot of headwinds which have probably stopped it from living up to its full potential of course nobody can predict alternative paths least of all economists but even assuming that Europe maintains systems like the European economic Community a precursor to the EU or maintain complete Independence between its Nations there are no guarantees that it would have fared better through things like the GFC the Eurozone crisis Co and now the conflict on its border with Eastern Europe in return the EU has given a lot of opportunities for people to live and work more freely across the union it's made tourism easier as visitors don't have to juggle dozens of currencies and mountains of Visa paperwork to travel around and it's also given the countries the Euro the currency is a double-edged sword certainly but having the world's second most held Reserve medium of exchange has made operations within the EU and Beyond easier for most businesses even if they do have to account for extra regulations and look the collective economy of the EU has been mostly stagnant for well over a decade now but so too have most other major advanced economies like Canada Australia Japan and even places like the UAE the USA The Logical comparison to the collective EU is more of an outlier in the growth it's been able to achieve over this time and while technology the industry that has been primarily responsible for that outstanding growth has a long list of advantages over more traditional Industries it's also far more fickle there isn't much physically holding tech companies down and without being overly glib the value that these companies truly create is much harder to qualify the EU has its problems sure but it's also been a great stabilizing Force within Europe and around the world and sometimes that's more important than headline economic figures that only really benefit a small handful of Highly skilled workers and already wealthy Capital investors now we have made an entire video recently about the UK and the challenges it is facing as an exe member which is an important consideration in this equation if the economic cost to leave the EU is too high it doesn't really matter if it's a net positive or not because it's going to have its members trapped anyway as always we don't want to repeat too much here but you should be able to click to that video on your screen now thanks for watching mate bye