Is Europe Lagging Behind the US?

1. Is Europe Lagging Behind the US?

2. Europe and the US: A Comparison • GDP Per Capita • Productivity • R&D • Employment and Demographics • Quality of Life • Implications of Relative Economic Decline

3. GDP Per Capita • Europe’s per capita GDP grew more quickly than that of the US in the periods between 1970 and 1980 and 2000 and 2008 • From 2000 to 2008, the Nordic economies compensated for slower growth in continental Europe • Of course, per capita GDP growth does not necessarily indicate economic health (e.g. Greece grew at a rate of 3.7% until the crisis of 2010)

4. GDP Per Capita Source: McKinsey Global Institute, 2010

5. GDP Per Capita Source: OECD, 2011

6. Productivity • Productivity of continental (central) Europe is on par with the US, but is growing at a slower rate (1.1% compound annual growth rate vs. 2.0%) • Northern and Southern Europe have lower productivity

7. Productivity Source: McKinsey Global Institute, 2010

8. Productivity Source: McKinsey Global Institute, 2010

9. R&D • Innovation as a driver of competitiveness and growth • In 2007, only five out of the EU27 countries were named “innovation leaders” by the European Innovation Scoreboard • “Europe lags behind the US in both publicly and privately funded research and development” –Dominique Strauss-Kahn

10. R&D Source: McKinsey Global Institute, 2010

11. Unemployment

12. Hours Worked • Working time in the EU15 continues to fall, widening the gap with the US • Average US worker works 192 hours more per year than the average European worker (1,796 vs. 1,604) • EU15 employees worked 5 fewer weeks on average than US employees, 2007 • “MIT School” vs. “Minnesota School” Arguments

13. Demographics • From 2010 to 2050, the EU-15 population is projected to grow by 3% while the US population is projected to grow by 27% (McKinsey Global Institute, 2010) • In the EU27 today, each retiree is supported by 2.6 employed persons, while in 2050 there is predicted to be 1.5 employed persons for every one retiree

14. Dependency Ratios Source: Department for Work and Pensions, 2006

15. Quality of Life • “We must never forget the immense human costs of joblessness—long-lasting income loss, worse health, higher mortality, lower children’s educational attainment, and faltering beliefs in institutions and democracy.” Dominique Strauss-Kahn • In the metrics shown below, however, Europe is generally faring better • One story not told in the education data is that of a brain drain

16. Quality of Life Source: McKinsey Global Institute, 2010

17. Implications • Quality of life • See above: is this really a concern? • Fiscal crisis • “The unfolding crisis in Europe has focused policymakers’ attention on fiscal austerity and bailouts…Debt sustainability can only be founded on the sustained growth of our economies” (Amato et al, 2010) • Ability to act on the international stage • “Absent profound change, in twenty or thirty years the share of Europe in the world economy will be significantly lower than it is today, and perhaps more important, its political influence will be much trimmed” (Alesina & Giavazzi, 2006)

18. Appendix Employment and Demographics Source: McKinsey Global Institute, 2010

19. Employment and Demographics Source: McKinsey Global Institute, 2010

20. Employment and Demographics Source: McKinsey Global Institute, 2010

21. Productivity Source: McKinsey Global Institute, 2010

22. Debt as a Percentage of GDP Source: OECD, 2011

23. Job Growth