what caused the EU economic growth rate to fall so far behind the US?

Question

I can't have results of what happened, I need reasons that led up to it such as taxation and G&D investments, etc. and can you explain this to me?

Answer 1

Its really very simple. Socialism.

To provide all the social benefits requires heavy taxes. Taxes drain away money from the private sector where economic growth is generated. Why do you think gasoline is so high in Europe they buy the same oil as us. But lay a heavy tax burden on it.

Government required minimum 6 weeks of vacation time may sound good but they drive the productivity down, and reduce the economic growth. If your people are lounging around on vacation they aren't producing, or creating wealth.

It turned Sweden from a first class first world country into almost a third world country.

Even in Germany the standard of living is about the same as in Arkansas or Louisiana. If they don't change their ways they will be ruined.

Answer 2

You might want to delve into the statistics you're looking at. The GDP and inflation numbers that the US Government have been producing are widely seen as being rubbish. The Bureau of Labor Statistics, which produces the US Consumer Price Index (commonly viewed as "the rate of inflation") is so skewed with "hedonic adjustments" and assumptions that it underreports inflation by a full percentage point, or more. In fact, if the CPI were calculated, today, the same way that it was, in the 70s, you'd find that inflation might be running as high as 9%.

Since inflation is subtracted from nominal GDP, when calculating the growth of the economy, you can clearly see that the underreporting of inflation has a direct bearing on the growth figures for the US economy. It's because of these skewed figures that the economic growth of the US appears larger than that of Europe.

While it's true that Europe's welfare states are spending themselves into the poor house, the United States is doing the same. Even without universal health care, the US Government had to borrow and spend $620 billion more, last year, than it took in. What little GDP growth has occurred, in the US, over the last half-decade, has been due to a combination of reckless spending by the Government and reckless borrowing by the American public. This situation cannot continue much longer.

When our creditors finally put a stop to our borrowing, we will finally be able to see whether the USA or the EU enjoys the healthier economic picture.

Answer 3

EU countries have had welfare states since WWII and some even longer. During most of this period their per capita growth rates were as high or higher than the US, but over the last 10 years or so they have been falling behind. The events that may be responsible is the economic stress cause by the adoption of a common currency, the incorporation of eastern Europe into their economy, and the fact that the US did very well during the Tech Boom in the 90's. The EU has much higher tax rates on labor but get free healthcare and better unemployment benefits in return. Their population is static so their economies do not need to create jobs at the rate that the US does. Here is the "European point of view"
http://3quarksdaily.blogs.com/3quarksdaily/2006/04/eurobashing_som.html

Answer 4

The United States has more innovation than Europe. Its universities produce engineers and scientists who develop technologies that increases wealth and productivity. Europe has a good secondary education sector, but aside from a few star performers there are few really important centres of excellence.

People might remark about American education, but then again glibness ain't a substitute for technical prowess.