I took tea yesterday with British economic analyst Andrew Sentance, author of a new book called Rediscovering Growth: After the Crisis. In fact we drank decaf cappucino at the HQ of PricewaterhouseCooper, where he is senior economic advisor. PWC is located in a 3-yr old new building within shouting distance of The Shard, at More London Place, which is not even mentioned in my London A to Z guide.

This site summed up the new British growth areas Mr. Sentance writes about, a driver for recovery.

His book casts doubt about much current economic chatter, like the idea that only making things matters. Too much statistical weight is being given to goods exports (which are quicker to be tallied), and not enough to service exports.

Britain's edge, he argues, is no longer in bashing metal or weaving cloth. Instead, the UK has an edge in services. Currently, British service exports account for a whopping 12% of GNP, triple the level of American service exports in US GNP, and much higher than service exports from other European centers. Britain, Mr Sentance says, has an advantage in services as a “small, open, competitive economy” (a SOCE) with significant “labor market flexibility”.

Another current shibboleth Mr. Sentance shoots down is the comparison of the latest economic crisis with that of the 1930s. In fact the Great Depression recovery was held back by a factor he doesn't think will halt the current one: protectionism. It was a period when globalization was considered the enemy, whereas now it is the key to growth. A better pattern for resuming growth he cited is from the 1970s after the dollar-based fixed-exchange regime ended. (We are both old enough to remember that period.)

Of course it's different this time. Mr. Sentance says that what economists learned from the 1970s is that the old Keynesian remedy of deficit spending doesn't work for a SOCE whose output performance depends on exports.

Letting inflation run rampant (the error of the 1970s) is no longer considered a valid economic policy option, even among the former Keynesians. Crafting barriers to trade as in the 1930s is no longer even considered as a policy option. He also takes a negative view of the parallel currently being drawn with Japan's “lost decade”, which he thinks overstates the risk of the reverse danger, deflation.

Au contraire: business confidence and investment depend on a perception that the authorities are in control against both risks.

Mr. Sentance warns too that expansion will not resume until a new economic generator of growth takes hold, and it will not be via “a manufacturing renaissance”. The trigger for growth may come perhaps in the information and communication area (where I hang out) or from energy efficiency spending and environmental breakthroughs. Expansion will resume, but it may take time. Low interest rates and eased lending alone will not be enough. Central banks have to gradually taper their monetary expansion for the health of their economies but with “no sudden lurch”.

While Mr. Sentance obviously has insight into British prospects, he also thinks some other Western economies will also create the conditions for new growth, including the USA, Germany, Ireland, and the Nordics. However, he cites lack of labor flexibility and pro-business legacies in southern Europe (including France!) as likely to hold them back.

Demographics he thinks will lead to growth in Asian economies, and not just China, because new consumers are demanding a better life. He worries about the lack of a pro-business legacy in Latin America and would not accept your editor's (anecdotal) comment that legacies can be changed. (I cited Israel, which in the 1970s was hag-ridden by trades unions which were worse than the British had.)

Mr. Sentance's book is part of the Perspectives series from www.londonpublishingpartnrship.co.uk.

I was just approached about a trade on coverage of IT and telecoms with Axel P., a Swiss analyst from a firm called Bitkom Research GmbH, who notes that Switzerland has the highest per capita spending on IT research on earth. While this is a sector highlighted by Mr. Sentance, and one where we invest, I think the Swiss spending just reflects their high wage levels. And the name does put me off for some reason.

Apart from interviewing sources, I am working here in Europe on improving our coverage of gold markets and bond prices. When I have something to report on these initiatives, I will share them with you.

More for from Britain, Ireland, Spain, Israel, Mexico, Brazil, and Canada.

*Covidien plc put a nice gloss on what were really flat earnings in 2013-4 Q1 (to last Dec. 31). Sales were up 3% y/o/y to $2.64 bn, or 5% in constant currencies at Irish the maker of medical equipment and supplies. It reports in US$ because ours is its largest market. Gross margins fell 7 basis points to 59.2% nipped by higher manufacturing costs while SG&A (sales, general, and administrative expenses) were hit by the new US medical devices tax which came into effect last spring to help finance Obama care. R&D rose 13% as COV invested 4.7% of net sales (vs 4.3% of sales a year earlier.). These hit operating income which fell over 10% to $531 mn because of forex and tax changes.

Taxes came to 22.4% from prior year's 16.9%, despite COV's incorporation in low-tax Ireland. Operating income was 22.7% of sales vs 23.5% in the prior Q. Diluted GAAP earnings per share were 87 cents/sh vs prior Q1 level of 96 cents.

COV is acting to overcome some of these headwinds, although to call these results “an excellent start in fiscal 2014” as did CEO Jose Almeida, is misleading. As reported, COV is buying Israel's Given Imaging, maker of a device you swallow to check for bowel cancer. It also is investing in Brazil and China to develop device production and sales in emerging markets. It launched Ligasure Impact and Blunt, plus a new Capnostreak bedside monitor (more exact and cheaper than a nurse.) It also sold its Confluent biosurgery arm (which took place after the Q1 ended) and abandoned a kidney treatment for high blood pressure.

Separately, COV Wednesday won a US appeals court judgment that it did not infringe patents of a sub of Johnson & Johnson, Ethicon Endo-Surgery, with its cordless Soncision ultrasound dissection devices. The court ruled that JNJ's devices did not include all the bells and whistles in the COV version.

COV also opened a training and education center in Mumbai for clinicians to educate them on procedures and techniques using its devices.

For shareholders, in Q1 COV bought back about 4.5 mn of its shares. We bought this stock to benefit from the spinoff of its Mallinckrodt pharm arm last year and decided to hang on. MNK. COV is a strong buy.

*Teva and its partner Active Biotech of Sweden were turned down by the European Union's FDA-like CHMP (Committee for Medical Products for Human Use) over their nerventra mutilple sclerosis drug, a successor-to-be for TEVA's blockbuster Copaxone. They are continuing to work on the drug and will reapply for marketing approval by proving the risk outweighs the reward for patients with relapsing-remittant MS.

However the CHMP did approve TEVA's generic of zoledronic acid, a treatment for cancer that has spread to the bones.

TEVA probably will reduce its board to a dozen from the current 15 and let CEO Erez Vigodman hold one of the seats. I would like to see ex-CEO Jeremy Levin given another because Teva is short of drug experts on its board, but that is unlikely after Dr Levin was forced out by board Chair Dr. Philip Frost.

*GlaxoSmithKline was downrated by two analysts, Cowen and Berenberg, from buy to hold. I like GSK despite this. Today it reported that its phase 1 trials of a combination of Tafinlar and Mekinist in melanoma met its primary endpoint, progression free survival. Melanoma is a killer cancer.

It also was able to get the CHMP to agree to examine its potential blockbuster weekly oral diabetes drug, which is also being studied by the FDA, eperzan (albiglutide), a biologic which has completed phase III trials successfully, by statistically significantly cutting blood sugar levels in type 2 diabetics. Diabetic patients in the trial also lost weight. It was pitted against januvia (sitagliptin) from Merck. However, the FDA is worried about heart risks and asked for further study. An eperzan decision can come as soon as this April.

*Our former gold stock Barrick Gold (we switched into its US$ bonds) yesterday warned that it would sell more gold mines this year because it is valuing their ore at $1100/oz extracted, 27% below last year's level. This came from ABX CEO Jamie Sokalsky's talk at a CIBC mining conference yesterday. He says the new price estimate is “conservative.” We think that selling high-cost mines will enhance the valuation of our bonds. Being from Canada they are not called Yankee bonds but for all intents and purposes they are. Cusip for Barrick North Am Financial 4.4% of 6/15/2021 is 06849RAF9.

*Nokia's report yesterday came too late for this blog but as I anticipated (based on leaks from Finland via Reuters) the main bad news was in the NSN area where Q4 sales fell 22% y/o/y to euros 3.1 bn. It forecast that this quarter will see NSN, operating margins come in at 1 to 9%, vs 11.2% in Q4, off but we don't know by how much. NSN, the cellular exchange arm, is now the heart of cellphoneless NOK. This spooked the market, along with a generalized selloff on China news, and NOK fell by 2.3% yesterday and another 5.7% in London trading today. NOK today said that the tables attached to its financial statements (in English) reversed full year and Q4 non-IFRS reconciliation calculations. NSN is where NOK will make or break its future, and we are in the game for now.

*Fear of Carlos Slim helps explain why Spain's Telefonica fell 3% yesteday. According to Eduardo Garcia (writing in sentidocomun.co.mx) TEF yesterday set up a second deal (for an unannounced amount) to share networks in Mexico and Brazil in competition with Slim's firm. The latest deals are with Virgin Media (acquired last year by Liberty Media of the UK, which bought our VM.) It is the powerhouse vehicle of John Malone which reportedly wants to lower its Latin American presence. TEF would be a great partner. Watch this space. Getting approvals in Mexico which is seeking alternatives to America Movil's dominant position would probably be easier for TEF than in Brazil. LBTYA/K.

*Citigroup retained its buy rating for both William Hill and Ladbrokes but cut the bookies' target prices by c20%. This is the best I can do trying to work out what will happen to our Irish bookie, Paddy Power plc which is not covered (except by institutional investors who appear to be buying PDYPF. Yesterday UBS reported that it had bought 7.09% of Paddy stock.

*Flight simulator maker CAE of Canada was tipped by The Successful Investor, according to Nancy Zambell at Dick Davis Digest (www.tsinetworks.com and www.dickdavis.com). We told you first thanks to our Biotech Maven's aviation relations.

I had a complaint from our reader over the sale of some ILMN I wrote up yesterday, a 10-bagger the BM shared with me. It is a US stock and we don't cover these in this blog. I am too busy, poor, and old to start a new newsletter to properly cover this sector in the USA and hire hands to help. But if you are interested in good FREE coverage of this sector, plus pharma and medical devices, visit www.fiercepharm.com and sign up. If like the reader you are member of the medical profession they will sign you up happily, but even journalists get a look in.