The European Economic Model Lives

Back in the early 1990's, American officials like me who were making long-term forecasts for the Clinton administration cautioned that it would be rash to forecast an average long-run growth rate of more than 2.5% per year - and that actual growth might turn out to be even slower. Now we look back at a decade during which the American economy has grown at an average rate of 3.4% per year.

Indeed, the United States today is 9% richer than we would have dared forecast a decade ago, and that is true despite labor-market slack and thus the largest production shortfalls below potential output in two decades. In America, the "new economy" has proven to be real, and there is every reason to think that growth in the next decade will be faster than it was in the past.

The acceleration of US economic growth in the late 1990's posed a puzzle for those of us who looked across the Atlantic at Western Europe: where was Europe's "new economy"? We could see it in Scandinavia, and in scattered pockets elsewhere, but the strong imprint of improved computer and communications technologies on the growth rates of output and productivity economy-wide seemed to be missing. Europe seemed to be falling further and further behind the US.

To continue reading, please log in or enter your email address.

Registration is quick and easy and requires only your email address. If you already have an account with us, please log in. Or subscribe now for unlimited access.


Log in;
  1. China corruption Isaac Lawrence/Getty Images

    The Next Battle in China’s War on Corruption

    • Chinese President Xi Jinping knows well the threat that corruption poses to the authority of the Communist Party of China and the state it controls. 
    • But moving beyond Xi's anti-corruption purge to build robust and lasting anti-graft institutions will not be easy, owing to enduring opportunities for bureaucratic capture.
  2. Italy unemployed demonstration SalvatoreEsposito/Barcroftimages / Barcroft Media via Getty Images

    Putting Europe’s Long-Term Unemployed Back to Work

    Across the European Union, millions of people who are willing and able to work have been unemployed for a year or longer, at great cost to social cohesion and political stability. If the EU is serious about stopping the rise of populism, it will need to do more to ensure that labor markets are working for everyone.

  3. Latin America market Federico Parra/Getty Images

    A Belt and Road for the Americas?

    In a time of global uncertainty, a vision of “made in the Americas” prosperity provides a unifying agenda for the continent. If implemented, the US could reassert its historical leadership among a group of countries that share its fundamental values, as well as an interest in inclusive economic growth and rising living standards.

  4. Startup office Mladlen Antonov/Getty Images

    How Best to Promote Research and Development

    Clearly, there is something appealing about a start-up-based innovation strategy: it feels democratic, accessible, and so California. But it is definitely not the only way to boost research and development, or even the main way, and it is certainly not the way most major innovations in the US came about during the twentieth century.

  5. Trump Trade speech Bill Pugliano/Getty Images .

    Preparing for the Trump Trade Wars

    In the first 11 months of his presidency, Donald Trump has failed to back up his words – or tweets – with action on a variety of fronts. But the rest of the world's governments, and particularly those in Asia and Europe, would be mistaken to assume that he won't follow through on his promised "America First" trade agenda.