Alert: Europe is lagging behind, being surpassed by the United States, and must act quickly to catch up with American growth levels. This discourse has been circulating in recent months. It probably includes recommendations for deregulation, tax cuts, and a reassessment of the European social model. But is this analysis really accurate? European economists are fiercely debating.
In response to this chorus, Gabriel Zucman was one of the first to speak out, refuting it in a blog post followed by an article in Le Monde. “The idea of European sclerosis in the face of a supposed American Eldorado does not hold up,” he writes.
Zucman points out that when comparing the economic performances of the two sides of the Atlantic, one must consider the number of available laborers for production. So, all analyses based on national gross domestic product (GDP) should be set aside in favor of GDP per capita.
Furthermore, a common mistake is comparing GDP per capita at market exchange rates, overlooking the price increases in the United States. This is akin to examining wage evolution without considering inflation, notes economist Thomas Piketty in his article in Le Monde.
To avoid this pitfall, GDP per capita expressed in purchasing power parity (PPP) and in constant dollars should be compared, neutralizing the purchasing power of the dollar and euro and adjusting for inflation.
Context: The debate around the economic performance of Europe compared to the United States has sparked discussions among economists. Gabriel Zucman and Thomas Piketty provided insights in Le Monde regarding the discrepancy in growth measurements and economic potential between the two regions.
Fact Check: GDP per capita adjusted for purchasing power parity and inflation provides a more reliable comparison of economic performance between different countries.
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