NCPA - National Center for Policy Analysis


March 8, 2007

Europeans once thought they had a better way -- a "third way" between socialism and capitalism -- that would deliver both income equality and economic growth.  But in reality, the third way delivers neither -- and now Europe faces a massive, long-term problem of catching up to the United States, says Investor's Business Daily (IBD).

Eurochambres, a continent-wide business think tank concludes that the European Union (EU) is roughly 20 years behind the United States in economic development:

  • The United States reached Europe's current level of economic development -- as measured by gross domestic product per person -- back in 1985, a 21-year deficit.
  • Europe also lags behind in a number of other measures, including productivity (17 years), employment and R&D (28 years), and Internet use (four years).
  • Even last year, when the EU touted its strong rebound, growth came in at just 2.9 percent across the continent -- compared with 3.3 percent in the United States.
  • Per capita GDP in the EU would have to grow 8 percent a year for the next four years to catch up, and that assumes the United States stays at its 2005 level.

Why the difference?  The United States has smaller government, less regulation and much higher productivity.  It also has what Nobel Prize-winning economist Edmund Phelps recently called "dynamism" -- a culture of entrepreneurialism that doesn't exist in Europe, says IBD.

Unfortunately, Europe's policies happen to point in the same direction that congressional Democrats seem to want to take the United States.  This would be a tragic mistake, says IBD.  Democrats want more in the way of taxes, spending, regulation and labor costs and less in the way of free trade -- the very combination that repeated studies show has dragged down Europe's economic performance.

Source: Editorial, "Europe Lags as U.S. Races Ahead," Investor's Business Daily, March 8, 2007


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