Following the Draghi report earlier this year on the future of European competitiveness, there has been a spate of articles and commentary on how Europe is performing significantly less well than the United States.
Yes, the coarseness of some of the language in the US election was a shock, even more so the leverage that a few wealthy billionaires had on the electoral system. However, the American “way” has led to untold riches for its people and who are we Europeans to criticise?
It is true that in terms of some key indicators the US economy is doing much better than the EU. In terms of innovation and technology, for example, it leads the world. It has the world’s biggest companies and is a hot bed for entrepreneurial activity and financial expertise.
These though are only the means to an end. How do these translate into benefits for the US population in general?
Well, the US has a higher income per capita than in Europe, the key source of material living standards. And the gap seems to be widening, albeit slowly. Per capita GDP since 2010 has increased more than in Europe but less than one might think and anyway the growth in Europe has been respectable, and from a very high base relative to most of the world.
Bear in mind also that the evolution of hours worked per employee differs greatly on the two side of the Atlantic. Between 2010 and 2022, hours worked per employee remained stable in the US while declining across Europe. In Europe, leisure was being substituted for higher material living standards. And leisure contributes greatly to quality of life. Hence the benefits of increases in it might well offset any loss due to lower material living standards.
Besides, a part of the decline in relative European living standards has been driven by long-term demographics. Thus, even on the economic front there is no agreement that the US does better than Europe in terms of economic competitiveness. In fact, there is no agreed definition of economic competitiveness.
The latter does not apply to the more easily measurable competitive arenas of sport. For example, much attention focuses on the success of the US in the Olympics, and the challenge to its supremacy in this regard from China. The EU, though, won more than 300 medals at the Olympics in Paris, far more than the US and China combined. Europe has three times as many tennis players in the world’s top 20 as the US, in an area where the US once dominated.
Quality of Life
Many factors beyond material living standards, including increased leisure time, contribute to quality of life.
Americans experience shorter and less healthy lives than people in other high-income countries. Figures published by the American Medical Association this week note that people in the US live with illness for 12.4 years on average – up from 10.9 years in 2000. That compares with an average across the 183 World Health Organisation member states of 9.6 years, up from 8.5 at the start of the century.
The American health disadvantage begins at birth and extends across the life-course, and it is particularly marked for American women. The US homicide rate is six times that in the UK, and around eight times that in Germany.
Income inequality in the United States has been rising for decades, with the incomes of the highest echelon of earners rapidly outpacing the rest of the population. Even among high earners, income gains have been heavily skewed toward the top of that bracket.
Today the top 1 per cent in Europe take 12 per cent of income, compared with 20 per cent in the US. The bottom 50 per cent in Europe take over a fifth of income, compared with about a tenth in the US. The situation regarding wealth is even more marked in the US, with the bottom half of the population owning less than a 40th – 2.5 per cent – of total wealth.
There is in fact then the lingering fear, as Martin Wolf of the Financial Times pondered recently, that the technologically dynamic society Draghi and some Europeans now seek might require the rugged, nay dog-eats-dog, individualism of the US, with some of the pathological side effects just mentioned.
Besides, the “real” issue for Europe is not economic competitiveness but military competitiveness and the continent’s huge dependence on a volatile US political system for its security. In Ireland we may have become overdependent on large US companies for the funding of public expenditure, but this pales by comparison to ours, and Europe’s, reliance on US military might for its future security.
John O’Hagan is professor emeritus in the Department of Economics at Trinity College Dublin
