What’s Wrong with Lisbon? From Low to High Quality Growth

Summary:

The annual GDP growth differential between the USA and the EU over the past decade has been around 1%.

Most of it originates in the labor supply differential – due to ageing demography, lower participation rate and shorter working hours – and the rest in lagging behind in information technologies production and absorption.

Although this differential seems modest over a rather short period and could be reversed quickly should the US economy brutally adjust to its impending structural imbalances, it seems nevertheless a prudent strategy to improve the active/inactive ratio and the productivity growth prospects in Europe, especially in view of its rapidly ageing population.

In Lisbon, in March2000, UK Prime Minister Tony Blair who had inherited Mrs Thatcher’s radical supply-side reforms, successfully convinced his colleagues - which included twelve heads of governments with social-democrat participation-to engage in a three-pronged agenda focused on competitiveness, a business concept which sits uneasily when applied to a now 450 million strong continental economy.

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