Kenneth Rogoff, economics professor at Harvard University apparently felt that Europe needed a pat on the back…
“Today, if you really want to get a rise out of top European policymakers and business leaders, don’t berate them about Europe’s well-known economic ills. Don’t mention the rigid labor markets, the aging population, or the weak state-run university systems. Instead, tell them that there is a one in three chance that the world’s leading economic superpower in 2050 will not be the United States or China, but Europe. They’ll stand and stare at you, waiting for the punch line.
The truth is that Europe’s economy is far from hopeless. First, the notion that European firms and workers are much less productive than those in the United States is simply uninformed. The main reason why Europe’s output per capita stands at only 70 percent of U.S. levels is that Europeans work less than Americans?a lot less. Europeans work fewer hours per week, take longer vacations, and retire earlier. When it comes to leisure, it is the Americans, Japanese, and even the Chinese who have plenty of catching up to do. And as they and others start ?consuming? more leisure over the next 50 years, Europe’s relative economic size will expand. Second, Europe still has a spectacularly well-educated and versatile work force, even if dubious labor legislation holds it back, particularly in Germany. Third, recent empirical studies have convincingly shown that strong political and legal institutions drive economic growth. Say what you want about Italian politicians and the EU’s new draft constitution, but European institutions remain models of honesty and transparency compared to those in Asia, Latin America, and the Middle East.”
His entire column for Foreign Policy is available online. Not that we haven’t talked about these issues here before, but it’s nice to hear it from someone like Mr Rogoff. On the other hand, I think Europe’s odds are far better than one-in-three.