Washington D.C. – Prominent economist Tyler Cowen asserts that the United States is poised to continue gaining economic ground relative to Europe, a trend he highlighted in a recent social media post. Cowen, a professor of economics at George Mason University and director of the Mercatus Center, has consistently argued for America's superior economic trajectory, citing a significant lead in living standards.
"Most of all, as time passes, America is likely to gain relative to Europe," Cowen stated in a tweet, linking to an article elaborating on his perspective.
Cowen's analysis suggests that American living standards are already notably higher, with his subjective judgment placing them 20 to 30 percent above those in Western Europe. This assessment is supported by various economic indicators that show a widening gap. Data from 2022 indicated that the US economy was a third larger than the EU's, a substantial increase from 2008.
The divergence in economic performance is attributed to several factors. The US has demonstrated faster GDP growth rates, with projections suggesting continued outperformance. For instance, the US is expected to grow close to 2% in the coming years, while the EU may fall short of this mark. Productivity differences are a major contributor, with the EU's productivity growth consistently lagging behind the United States.
Experts point to disparities in innovation and investment as key reasons for Europe's struggle to keep pace. The European Commission's Draghi report on EU competitiveness noted that only four of the world's top fifty technology firms are based in Europe. Additionally, the US benefits from a more dynamic labor market and an ability to resupply its workforce, partly through immigration, which contrasts with Europe's aging and declining population trends.
While some analyses, such as those from Bruegel, suggest that the narrative of the EU falling significantly behind the US in terms of output might overlook purchasing power parity (PPP) adjustments, the overall trend in living standards and per capita consumption favors the US. The International Monetary Fund (IMF) has also warned that the economic growth gap between the US and Europe is expected to widen further, urging Europe to increase public investment to enhance productivity.