Is Europe really falling behind? A narrative is taking hold, painting a picture of a declining Europe while America surges ahead. But what if this narrative is built on shaky ground? What if the perceived 'decline' is more myth than reality? This idea, whispered in the halls of Brussels and shouted from Washington, argues that Europe's regulations are stifling innovation and productivity, leading to economic stagnation. You can even find echoes of this sentiment in official documents like the White House's National Security Strategy, which points to a shrinking share of global GDP for Western Europe due to regulations. But here's where it gets controversial... is this really the full story?
Fueling this narrative, European conservative parties are clamoring for widespread deregulation. They want to dismantle the Green Deal, question the responsibility of multinational corporations, and even scrap the minimum tax on these powerful entities. The US ambassador to the European Union has even chimed in, suggesting that poorer US states like Mississippi and West Virginia now boast a higher standard of living than Germany. Is this an exaggeration? Absolutely.
This notion of European decline, used to justify a wave of deregulation, simply doesn't hold up under scrutiny. It's based on three key myths, which we're about to debunk, one by one. Prepare to have your assumptions challenged.
Myth #1: America's Rocketing Growth
At first glance, the statistics seem to confirm the American success story. The United States' Gross Domestic Product (GDP) – the total value of goods and services produced within its borders – appears to have grown faster than the European Union's over the past 15 years. But this is where the devil is in the details. A significant portion of this growth is simply due to a faster-growing population in the US. More people generally mean more economic activity.
And this is the part most people miss... the rising cost of living in America is eating away at these gains. Once you adjust for differences in price levels, the supposed American miracle fades, and the picture of European stagnation looks equally dubious. For example, while nominal GDP growth might look impressive in the US, the actual purchasing power of that growth is less substantial when everyday expenses are factored in.
Consider this: GDP per capita, adjusted for cost of living, has increased by 70% in the United States since 1990, compared to 63% in the EU-27. That translates to an average annual growth of 1.6% in the US versus 1.5% in the EU. The US has indeed performed slightly better since the COVID-19 crisis, but over the long term, the difference is hardly earth-shattering. The US National Security Strategy bemoans the shrinking share of European GDP in global GDP. But guess what? Once you correct for cost-of-living differences, you see the same decline for the United States! Both the EU and the US have seen their share of global GDP fall from 20% in 1995 to around 15% today. So, is Europe really the only one struggling?
Myth #2: Unproductive Europe
The United States, with its 340 million inhabitants, is less populous than the European Union, which has around 450 million people. Yet, the US carries just as much weight in global GDP. This naturally leads to a higher GDP per capita in the US – about 35% higher than in the EU. But contrary to popular belief, this isn't because Europeans are less productive. The real reason? Europeans prioritize leisure time. They enjoy more vacation days and work shorter weeks. It's a conscious choice about work-life balance.
In terms of raw productivity, the European Union is almost on par with the United States. In the six core EU countries (Germany, France, Italy, Spain, the Netherlands, and Belgium) – a group of 290 million people, nearly the same size as the US population – productivity is virtually identical to that of America. According to the World Inequality Lab, workers in both regions produce an average of €60 per hour worked. If we include the entire EU (450 million inhabitants), productivity is slightly lower than in the US, mainly due to lower productivity levels in Eastern Europe. However, the gap remains relatively small.
According to the International Labour Organization, GDP per hour worked (a standard measure of productivity) is $81.8 in the United States, $83 in Western Europe, and $71.1 in the EU-27. And there's no evidence of European "sclerosis." Productivity is growing at roughly the same pace in Europe as it is in the United States. So, where does this narrative of European unproductivity come from?
Myth #3: Productivism is Everything
All these measurements, focused solely on the production of goods and services, suffer from a limited perspective. Europeans enjoy more free time, longer life expectancies, and lower levels of inequality – all while maintaining comparable productivity to the US. By any measure, this represents a superior economic outcome. It's about quality of life, not just quantity of production.
Even if we stick to a purely "productivist" viewpoint, the EU-27 probably outperforms the United States, and here's why: greater sustainability. The United States may produce $81 of gross value per hour worked, but it comes at a significant environmental cost. The EU-27, on the other hand, produces $71 per hour with substantially lower carbon emissions. The EU prioritizes sustainable growth, even if it means slightly lower raw output. Is chasing pure GDP growth at all costs really the best strategy?
More leisure time, better health outcomes, less inequality, and lower carbon emissions, all coupled with broadly comparable productivity: Europeans can be proud of their development model. It's a model that prioritizes well-being alongside economic output.
Of course, this doesn't mean the EU is perfect. It needs reform, just like any other major economic power. But we must focus on the right challenges. The urgent need isn't deregulation, but investment in education, universities, research, public infrastructure, and the energy transition. These are the keys to future prosperity, just as they were in the past.
So, I ask you: Is the narrative of a declining Europe accurate? Or is it a convenient myth used to push a particular agenda? What do you think are the biggest challenges facing Europe today, and what solutions would you propose? Share your thoughts in the comments below!
