US economy takes lead over Europe – here’s why

Cryptopolitan has published an article claiming the United States’ economy outpaces Europe, with debate over using market exchange rates or purchasing power parity (PPP) for comparison. Caliber.Az reprints the article.

The economic tussle between the US and Europe has always been more than just numbers on a spreadsheet. It’s like a high-stakes chess game where every move is scrutinized. But in recent times, the US seems to have gained an upper hand. Diving into the nuances of this economic lead, it’s clear that there’s more to it than meets the eye.

Comparing economies, especially giants like the US and Europe, is as complex as it is contentious. The debate rages on whether to use market exchange rates or PPP for a fair comparison. On one hand, market exchange rates peg the EU economy at 68 per cent of the US size in 2023, a drop from parity in 2007. On the other, PPP shows the EU output just 6 per cent behind the US, also a decline from 2007.

Beyond GDP: A Deeper Dive into Economic Performance

Gross domestic product (GDP) per capita growth, often heralded as a better gauge of economic health, tells a different story. While the EU’s per capita output relative to the US has seen a downward trend over two decades, the picture is less gloomy under PPP. Yet, these metrics don’t fully capture the essence of economic vitality.

A simpler, yet insightful approach is to compare real GDP growth in national currencies. This method doesn’t crown a ‘wealthier’ region but rather highlights who’s growing faster. Using this yardstick, the US GDP has outpaced that of the EU significantly over the last twenty years. However, in terms of per capita output, the race is much tighter, thanks to the EU’s stagnant population growth compared to the burgeoning US populace.

The narrative becomes more intricate when dissecting per capita output growth since 2003. America leads with a 26 per cent growth, overshadowing the Eurozone and the UK, and even outperforming major European economies like France, Spain, and Italy. This discrepancy is accentuated by Italy’s stagnant growth and Greece’s struggle to rebound to pre-financial crisis levels.

Contrasting Growth Patterns in Europe and the US

Europe’s economic landscape is a patchwork of varying growth rates. While countries like Poland, Bulgaria, Romania, and the Baltic states have seen their GDP per capita more than double, central European nations like Croatia, the Czech Republic, and Slovenia also boast impressive growth figures. In contrast, regional differences within the US present a similar but unique picture. States like North Dakota, Washington, and Utah have excelled, outperforming larger economies like California and New York.

The US advantage over the EU isn’t just a matter of numbers. Factors like the recent energy crisis, which hit Europe harder, and the US’ status as an energy exporter, play a crucial role. The European sovereign debt crisis and the US’ substantial fiscal stimulus further tilt the balance in America’s favor. However, Europe’s growth potential remains under pressure from these ongoing factors, while the catch-up effect of poorer countries might soon plateau.

A case in point is Germany, once dubbed the “sick man of Europe.” After rebounding from early 2000s economic woes, Germany emerged as a strong EU performer pre-pandemic. Yet, current trends and IMF forecasts suggest it might lag behind the US in the coming years.

In essence, while the US economy’s lead over Europe is clear, it’s a complex tapestry woven from diverse economic policies, demographic changes, and external shocks. As we dissect these trends, the economic chess game continues, with each region maneuvering to strengthen its position on the global economic board.