Europe’s Economic Productivity is Falling Behind The US, Jeopardizing Its Stake In The Future of AI – The Average Joe

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    Europe’s Economic Productivity is Falling Behind The US, Jeopardizing Its Stake In The Future of AI

    Noah Weidner

    June 6, 2024

    They work less and are happier than Americans — but not without trade-offs. Europeans earn only 44% of what Americans make — and their productivity, measuring hours worked against output, lagged by 24.6% compared to Americans in 2023.

    Losing ground: Despite a population of over 345M, the Eurozone’s economy now accounts for only 65% of the US economy’s size when measured in dollars, down from 90% in 2013. While some European nations are more efficient, American productivity has vastly outstripped most of Europe since the turn of the century — rousing concern from business leaders, politicians, and central bankers in the world’s largest economic bloc.

    • Since 2000, American productivity has risen by over 60%, while the Eurozone’s increased by only 20% and declined since 2020.
    • Swedish central bank Governor Erik Thedéen warned that Europe must move swiftly to close the productivity gap to avoid missing out on growth opportunities.

    Mind the Gap

    America achieved a new productivity record in the first quarter due to a surge in new businesses, higher wages, and embracing new technology like AI. However, replicating these successes should be easy for Europe’s wealthy and well-educated population, but European Central Bank President Christine Lagarde notes that innovators and entrepreneurs tend to “run away from Europe.”

    • European think tank IREF says that regulation, bureaucracy, and taxes are among the biggest factors dampening Europe’s entrepreneurial potential.
    • Making matters worse, Europe’s aging population redirects workers from high-growth industries like e-commerce or software toward in-demand healthcare jobs.

    Tale of two economic goliaths: While the US invests trillions in infrastructure and private subsidies to prop up domestic production in green energy, semiconductors, and industrial goods, Europe lags behind. According to GlassView’s Co-Founder Yann Coantanlem, European tech R&D spending is only one-fifth of the US expenditure — and AI investments are 50x higher in the US. Without swift action, Europe risks falling further behind.

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