Europe's economies are growing faster than "dynamic" Americaby P L / September 20, 2003 / Leave a comment
Published in September 2003 issue of Prospect Magazine
Europe’s economy is said to be a flop. Held back by high taxes, overprotected workers and inept policymakers, Europe appears to be slipping further and further behind the dynamic US economy.
In fact, over the past three years, living standards, as measured by GDP per capita, have risen by 5.9 per cent in the EU but by only 1 per cent in the US. So says the IMF, an institution hardly biased against the US. An unfair comparison, perhaps, given America’s recent recession? Then look at how the EU and the US size up since 1995, a period that includes America’s late 1990s boom. While living standards in the US have risen by a healthy 16.1 per cent over the past eight years, they are up by 18.3 per cent in the EU. This is not a sleight of hand. Pick any year between 1995 and 2000 as your starting point, and the conclusion is the same: Europe’s economy has outperformed America’s.
It is true that the US economy has grown by an average of 3.2 per cent a year since 1995, whereas Europe’s economy has swelled by only 2.3 per cent. These headline figures transfix pundits and policymakers. But this apparent success is deceptive. Not only are US growth figures inflated because American statisticians have done more than their European counterparts to take into account improvements in the quality of goods and services, but the US population is also growing much faster than Europe’s. It has increased by nearly one tenth in the past eight years, whereas Europe’s population has scarcely grown at all. So although the US pie is growing faster than Europe’s, so too is the number of mouths it has to feed. Most people care about higher living standards, not higher economic growth.
Europe-bashers also claim that America enjoys markedly faster productivity growth. Although productivity is notoriously hard to measure, let alone compare across countries, the Conference Board, a New York-based business research group that is hardly a fan of European ways…