Transcript Is Europe Lagging Behind the US?

Is Europe Lagging Behind the US?
Europe and the US: A Comparison
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GDP Per Capita
Productivity
R&D
Employment and Demographics
Quality of Life
Implications of Relative Economic Decline
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)
GDP Per Capita
Source: McKinsey Global Institute, 2010
GDP Per Capita
Source: OECD, 2011
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
Productivity
Source: McKinsey Global Institute, 2010
Productivity
Source: McKinsey Global Institute, 2010
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
R&D
Source: McKinsey Global Institute, 2010
Unemployment
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
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
Dependency Ratios
Source: Department for Work and Pensions, 2006
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 StraussKahn
• 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
Quality of Life
Source: McKinsey Global Institute, 2010
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)
Appendix
Employment and Demographics
Source: McKinsey Global Institute, 2010
Employment and Demographics
Source: McKinsey Global Institute, 2010
Employment and Demographics
Source: McKinsey Global Institute, 2010
Productivity
Source: McKinsey Global Institute, 2010
Debt as a Percentage of GDP
Source: OECD, 2011
Job Growth