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Tale of two economies

In 1995, worker productivity in the U.S. and the EU was roughly the same. But today, European productivity is 20 percent below that of the U.S. And over the past 10 years, productivity growth in Europe has been less than half that in the U.S.

And this has translated into a growing disparity in the GDP of the two regions. The gap between GDP in Europe and the U.S. is now at 30 percent—having doubled over the past 20 years. In the third quarter of this year, for instance, GDP in the U.S. grew by 2.8 percent, but in the eurozone, by only 0.4 percent.

The majority of the world’s top 50 tech companies are American; only four are European. In the past decade, U.S. start-ups have taken on about five times more investment from venture capital than European start-ups have.

Germany, the largest economy in Europe, is on track to record a drop in GDP this year. Industrial production in Germany, once a leading driver—and global symbol—of European economic might, has fallen by 12 percent since 2018.

Neither do Europe’s short-term prospects look any better. In October, the International Monetary Fund revised its forecasts for GDP growth in 2025—adjusting its forecast for the U.S. upward, to 2.2 percent, while lowering it for the eurozone to 0.8 percent. How has Europe fallen so far behind?

Martin Wolf is the chief economics commentator for the Financial Times and the author of the 2023 book The Crisis of Democratic Capitalism. Wolf says the growing divergence between Europe and the U.S. is largely the result of superior American innovation. The long-term U.S. advantage in innovation has been powered by higher spending on basic research, greater investment in business, and more dynamic capital markets.

Europe’s relative economic weakness is meanwhile starting to make life appreciably harder for many on the continent. European companies’ poorer performance means a slowdown in tax revenues for European governments, which have responded by making regular cuts in public services—disproportionately affecting the vulnerable who depend on them most. At the same time, worse business performance has translated into stagnant wages for people making average or below-average incomes. And with the dramatic rise in inflation following the Covid pandemic, millions of Europeans are now struggling more and more to get by …

• “European companies never again innovated at the scale they did before World War II. After the war, Europe became an industrial museum. EU countries produce a lot of first-class products in their fields of expertise, and they’re the biggest exporters of capital goods—but they haven’t been innovators in new, high-productivity sectors.”
• “To this day, European economies remain dependent on banks. In Europe, banks are responsible for about three-quarters of intermediation—meaning the funding provided to businesses. But in America, around three-quarters of intermediation is from outside banks, whether investment funds, private equity, venture capital, or other sources.”
• “In the U.S., the inflation that followed the pandemic and the war in Ukraine was the byproduct of a strong economy. In Europe, the European Central Bank’s rate hikes depressed investor and consumer confidence. That created a self-perpetuating cycle: People thought the economy was weak, which created pessimism, which lowered investment, which made people think the economy was weak, and on and on. Europe’s economic disadvantages are serious—and they just keep accumulating now.”

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‘Bandits’

Remarkably, a significant number of Americans have either celebrated the crime or said that, even if they couldn’t condone murder, they could nevertheless understand why it happened here. When UnitedHealthcare expressed the company’s sorrow about Thompson’s death, the post received more than 80,000 laughing-emoji reactions. Some gave Mangione the nickname “the adjustor,” in reference to insurance adjustors who evaluate claims. And Delay, Deny, Defend sold out in bookstores within hours of news about the shell casings. As the title of an article in one local newspaper put it, “Torrent of Hate for Health Insurance Industry Follows C.E.O.’s Killing.” What is all this?

While edgy, hostile, or even outright terrible behavior may now be common on the internet, the killing does seem to have tapped into an unusual reservoir of frustration in U.S. society—at a time when about half of Americans say they have trouble meeting health-care costs. Polling indicates that most Americans consider the killing unjustified, yet more young people have a favorable view of Mangione than of UnitedHealthcare or the U.S. health insurance industry as a whole.

But the killing may also tap into a cultural trope with a very long history: the romanticization of the “social bandit,” the outlaw who—as the late British historian Eric Hobsbawm explores in his 1969 classic, Bandits—many admire for fighting what they see as injustice. Sometimes, the figure is a “noble robber,” like England’s Medieval Robin Hood; sometimes, a terror-bringing avenger, like Mexico’s nineteenth-century Joaquin Murrieta. “Such is the need for heroes and champions,” Hobsbawm writes, “that if there are no real ones, unsuitable candidates are pressed into service.”

—Gustav Jönsson

• Ukraine’s intelligence agency has assassinated the Russian general in charge of the country’s chemical and nuclear weapons, Lieutenant General Igor Kirillov, by detonating a bomb planted in an electric scooter outside a residential building in Moscow: “In June, Ukraine accused Russia of increasing frontline attacks using prohibited hazardous chemicals and said it had registered more than 700 cases of their use in the previous month.”
• Hundreds of depopulated or abandoned “ghost towns” in Greece are becoming markers of population decline in a country with one of the lowest fertility rates in Europe. It’s a phenomenon already visible in other developed nations, notably Japan and South Korea: “We are currently in the midst of an unprecedented demographic transition, whereby global population growth is continuously slowing, with little obvious sign that the trend is about to shift,” Jim Reid, Deutsche Bank’s global head of macro research, wrote in a November report.
• The Rev. Dr. Paul Chamberlain, a vicar in England has apologized for telling schoolchildren, aged 10 and 11, that Santa Claus does not exist. The vicar told the pupils to “be real,” whereupon some of them started to sob. Their parents claimed the vicar had “ruined Christmas.” “I don’t know how it can be undone,” said one mother. The diocese released this statement: “Paul has accepted that this was an error of judgment, and he should not have done so. He apologised unreservedly to the school, to the parents and to the children, and the headteacher immediately wrote to all parents to explain this.”

• There are more than 4 million podcasts out there. How to discover the best of them? Algorithms won’t do it; Find That Pod does. Sign up for their free newsletter, and each week, they’ll bring you five new podcasts you’ll love to know about.

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