NCPA - National Center for Policy Analysis

Europe Underperforms

September 20, 2002

While the U.S. economy was shrinking for three straight quarters in 2001, the economies of the 12 nations of the European Union slowed -- but never followed the U.S. into outright recession.

The contrast prompted some Europeans to proclaim the vindication of Europe's "third way" -- its blend of capitalism and socialism.

But that was premature. The latest figures indicate that EU nations lag the U.S. by almost every economic measure.

  • Over the last decade, annual EU economic growth averaged around 2.5 percent -- almost 1 percent less than U.S. growth.
  • Were that trend to continue, it would take Europe 29 years to double its gross domestic product -- whereas it would take the U.S. only 21 years.
  • That means the U.S. economy in 2030 would be $25.5 trillion versus $15.4 trillion for the EU -- a $10 trillion gap.
  • That $10 trillion is the size of the U.S. economy today.

Analysts point to a laundry list of things Europe could do to improve its performance: deregulate, cut taxes, knock down trade barriers and slash bureaucracy. Absent such reforms, Europe is condemned to play catch-up -- even as it falls further behind.

Source: Editorial, "Europe's Laggards," Investor's Business Daily, September 17, 2002.


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