Posted 6:47 PM by Robert

Apples ... Oranges ...

From the Timbro, June 2004 study EU versus USA by Fredrik Bergström and Robert Gidehag:

IF THE EU WERE A PART of the United States of America, would it belong to the richest or the poorest group of states?

At the beginning of the 1990s, there was no need to ask. Europe’s economic future was a subject of growing optimism. Productivity growth had for some decades been higher than in other countries of similar standing, and that growth was now going to be hugely accelerated by the elimination of trade barriers and the closer economic integration resulting from the Single Market. The EU as an institution was – and was undoubtedly seen as – a vehicle for growth and economic liberalisation. In other words, the EU was able to do what politicians in several member countries had wished for but had failed to achieve: to increase economic openness, to strengthen the process of competition, and harness the political process behind a liberal reform agenda.

Today, the perspectives on the EU, and the outlook on its future, are radically different. Economic growth during the 1990s never became what many had wished for. Some countries performed reasonably well, most notably Ireland, but on the whole the EU was lagging far behind other countries during the whole decade. Productivity growth decreased and by mid-decade the EU was running behind the US in this respect. The process of convergence in productivity, a much talked-about process since the 1970s, had once again become a process of divergence.

The Timbro study begins with comparisons of per capita GDP, which the study correctly notes is probably the best measure of comparative wealth - although it is not a perfect measure. While per capita GDP does not include some aspects of what some people might consider to be included in overall "wealth," such as political freedoms, environmental quality and government-enforced leisure - GDP does include the value of government services - including welfar spending. For some reason, it is curiously common for skeptics of such trans-border studies to deny that GDP includes the value of European-style welfare state programs.