Suppose the US and China will grind their workers to dust and Europe will continue to produce a fine quality of life where health care is available and affordable and they take genuine summer vacations.
as someone in higher ed where productivity is often measured as number of students/class and overwork and burnout are real, I think that the impact on quality of life is vastly under rated in the US productivity arguments.
I didn't have a cell phone until 2008. I didn't want one, as, I didn't want to be reachable while outside of my home, or, office. I valued that outside time.
I didn't have a computer until late 2003. I moved up to a house in rural Pa. that had neither high speed internet, nor, cell tower connectivity. It might as well have been a dark zone in Northern Alaska.
I bought the computer mostly to be able to use PhotoShop as an editing tool in my artwork.
A very large portion of people alive today have no idea how good life was, when we were free from that "connectivity".
I'm so happy I was born earlier, so that I experienced that less technologically connected world.
We just started using smart phone a few years ago because we don't get cell service at our house. Apple allows you to use the internet to use the phone, so now we do that. Imagine people's shock when I said we didn't get text messages because all we had was a landline.
We've been very selective about what tech we adopt. Yes mRNA vaccines, No, for chatbots.
When I started working for Bellcore, the company would never contact people when they were on vacation. Later, the company was sold to SAIC and renamed Telcordia, and things changed. After a few years, we began to take vacations in or near the Smoky mountains; sometimes on the Carolina side, sometimes Tennessee. In most cases, there was no cell coverage and I had no wireless phone in those days. Even when the cabin we rented had a phone, I never told my employer. A few months before I was laid off, the policy became that you had to take your vacation to get it off of their books, but employees weren't allowed to go anywhere and had to call in to all scheduled meetings. Essentially working from home. Just before I left, upper level management announced that they were scheduling a mandatory all hands meeting for Saturday mornings. I'm sure the idea was that they could pressure people to put in a full day's work "as long as you're here."
People like Kyle Rhysdahl of NPR's "Marketplace" talked about "higher productivity" as if more work was being done per hour. All that was actually happening was that people were working longer hours.
My husband was in one of those highly paid high tech sectors. Most of the people working in it didn't have a very high quality of life. Long hours, no home life, very stressful as higher ups pushed for more, more, more.
The high pay is also an illusion. Not only do 'they', the well paid worker bees, have no life out of work, they live in places where their high pay is really a basic income because of the high cost of housing. You get taxed the same as if you lived in a place with a lower cost of living.
It is not just the high tech workers who are squeezed by the high cost of housing and everything else. Workers particularly within commuting distance of the high tech hubs are as financially stretched and time stretched as any other area. If you lose your job you have to move from the area.
There was one guy in central New Jersey who lived in an aircraft hanger at a small airport because the rent was about half that of an efficiency apartment. He did have access to a toilet. The airport was sold and the new owner kicked him out.
Having taught as adjunct prof in a small tech college international management bachelor's degree program for 20 years, also in US colleges in small business mgmt, I saw a lower tech, extraordinarily higher EQ based curriculum in German higher education.
Additionally, or because of their wider global student base... representing usually representing Asian, African, Middle East, So America, No America (sometimes from the US), Australia, India, Europe, former East block Slavic countries (all till Russia invaded Ukraine, then no Russians came).
These students were required to have 3 language(English is req) proficiency to graduate, plus study abroad somewhere outside national boundaries for a semester and a paid internship just to graduate,plus testing that had no "American easy grading". When I heard and read 'West Virginia analagous'... I coughed, tried not spray while writing that here. These students have no Placement center. They develop effective networks and rarely graduate without a job or 'plan'. That changes a bit when the economy is thrown off... more go onto graduate school, almost free till they are 27...and it's cheap even for Americans!!
Please, Prof Krugman... figure a way to translate EQ into macroeconomic equations! We use metrics in my Global Professional HR sector... something might apply here.
Supposedly Europe is doing terrible and at the same time Americans and Chinese would much rather live in most European countries rather than the opposite.
I know a thing or two about there standard of living! Europe is a third world country, I tell you. For xample there radical left-wing marxist lunatics outlawed the Cybertruck, taking away your free speach rights to make a statement of freedom on the road!
Can't even buy an AR15, there globalist anti-freedom stooges dont want you to become a real man! Can't buy no bulletproof backpack neither, its not for sale anywhere.
And real backwater too, most people never even heard of John Galt over there, and Ayn Rand is not teached at university. Its suppressed cuz there afraid of the Truth!
So thats the standard of living in Europe I kid you not. You dont wanna be there.
Could not agree more ! If you own a cybertruck, an AR15, a bullet-proof backpack, books by John Galt (Who he???) or Ayn Rand, please stay away from Yurp for your own sake!
I confess I had to look up John Galt on Wikipedia...and yes, I am from Europe and resident there. I once tried to read Ayn Rand. Could not go beyond one or two pages, if that. It is to litterature what spam is to caviar.
“There are two novels that can change a bookish fourteen-year old’s life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs."
It was interesting watching a Tesla driver at a dead end trying to back down a Spanish cobblestone street from medieval times...their cab & shuttle drivers are amazing trying to turn corners without dinging the edge of buildings. One of the places I stayed required rolling my suitcase through alleys to the entrance, as not accessible by car.
And as Prof. Krugman points out, the rest of the U.S. (not-California) is growing much more slowly – yet benefits from that higher tech productivity growth, similar to how Europe does...
So what makes us in Not-California so different, except that we don't have that more humane and balanced European standard of living?
The point of showing the numbers between CA and the rest of the U.S. is that obviously the standard of living is largely the same so the productivity numbers based on tech aren't a good measure of the latter.
Exactly – which makes the point that the rest of the U.S. is not much different from Europe in that regard, yet we are very different in terms of qualities of life they benefit from like universal healthcare, affordable childcare and college, paid family and medical leave, better public transportation, etc.
Doesn't sound like Mississippi or West Virginia to me, or anywhere in the U.S. for that matter.
Maybe? Arguably the standard of living *for equivalent jobs* is the same between California and the rest of the US, but the standard of living for people working in tech is better than for people working in the service industry. If you have more high paying jobs, your people are doing better--even if that's because of compositional effects.
Most Europeans live in houses or apartments, and drive cars, that Americans would find impossibly cramped. They pay very high taxes, which of course goes towards universal affordable healthcare, "free" education and great public transportation. Americans don't know enough about this to make informed choices, either way.
Well, of course, if you think of health insurance extortion payments as taxes, or college tuition as taxes, then Americans probably pay higher taxes than Europeans
I think impossibly is an exaggeration. I worked in NYC for decades and people adapt - so out of towners adapt to apartment life. And re space, i have a garage devoted to the tools I need to help maintain my house. The apartment dweller needs less space and if they can walk to a store that sells milk, eggs and bread - then they don't need to store so much in their kitchens. When my wife and I were firat married we walked to a small store and we were fine. Weekends were for fun, not cutting the grass
Take it from another homeowner: Get rid of the lawn. It's high maintenance and thirsty. Put in well-behaved shrubs and ground cover (the critters will love you for it). No more mowing or worrying about it looking patchy.
This is not about me. My yard is small and most is just plantings. My front lawn is less that 10 x 30. I don't water either (never did except for new seedlings). But we waste a lot of space as a people.
In the mid 70s, I spent time in so called 3rd world countries. There are places where I live that look as bad as or worse than those in countries in the 70s. On my infrequent visits to local stores, I don’t see happy people. They look tired, stressed, and obviously they are eating a terrible diet. What is so f-ing great here I wonder? These are trump voters.
For people, happiness is less tied to their current status than the direction they're heading. In China right now they're seeing reductions in poverty, improvements in public services, political stability, improvements in climate change adaptation, and improvements in agriculture. Yes, they are struggling with climate climate change (peak demands of air conditioning during more frequent and worse heat waves is chasing their grids' rapidly increasing gigawatt capacity), but they are a country that pays attention to infrastructure maintenance and improvement.
Bear in mind that four decades ago ~80% of the population of China was in "extreme" poverty, while today < 4% are below the World Bank poverty line.
Economists work with aggregate statistics, which are heavily weighted in favor of the wealthiest. And the rate of increase isn't linear, it's exponential. So the averages tend to grossly overestimate how well those of us below the top 1% are doing.
The cognitive dissonance of the view point of average Americans has alot to do with media social/mainstream not doing comparisions on lifestyle difference between the socially responsible societies of Europe versus the States irresponsibility to its Citizens. No food or shelter assurance or health regulation stabilites or affordable educational opportunities.
That is exactly why we in Europe got millions of poor immigrants/refugees looking for a better quality of life with free healthcare etc.. But I guess you can imagine this is not sustainable, somebody needs to pay for it. And this becomes a problem in an aging continent with increasing state pension and healthcare costs.
But times are changing, you increasingly need to bring a big bag of money, have a high pension or a good income job offer to emigrate to Europe.
"...this is not sustainable, somebody needs to pay for it"
Livy - what do you think happens to the taxes paid by immigrant workers to these countries?
I employ a skilled immigrant worker. He pays income tax, national insurance, and pension contributions into the UK revenue. And he had to buy 5 years worth of NHS dues for himself and his wife before his visa was granted.
Why is there always an assumption that immigrants don't work, and just want to live off benefits?
In Murica, our immigrants also pay all federal state and local taxes but benefit from NOT one social program. That’s hundreds of billions of their tax dollars into coffers but with no benefit to them
I did not mention benefits, though too many people that got asylum are still unemployed after several years.
I am not against skilled migration up to a certain point, the issue is more about the European welfare state that is based upon the principle of higher tax payers supporting lower tax payers. If you get too many low skilled, low tax jobs immigrants you put too much pressure upon the costs of the welfare state to be paid for by higher earning people. Employers might actually like it, but society will bear the costs. Welfare states are expensive and not all jobs benefit our welfare states!
As said, the times anybody could come are changing, as there are now more rules in my country who we accept as migrant (similar to typical immigration countries, like you mention yourself). But we want more skilled immigrants with high earning jobs as this brings in more tax money.
Asylum seekers is a different category than skilled migrants. Many come from poor countries, too many are low skilled, and would never get a work permit, that is why they try their luck as a refugee. As these numbers have been unsustainable high, basically all European countries are taking measures to bring them down.
If a European country's considerable wealth is distributed in such a way that everyone, including immigrants, has at least a survival standard of living, most of them will be productive and the rest won't be a problem. Providing that the unreasonably rich are not buying and plundering small businesses and not siphoning off all profits out of the national economy.
There are, but then also look at the laws around employing them - especially asylum seekers, who are not allowed to with until their status is settled...
Think how much better and more productive Europe would be if we said, "Welcome! Here's a list of areas where we have significant skills shortages (like agriculture and social care). Which would you like to work in? Here's your NI number and you'll be paying taxes straight away."
Lower income workers will pay less taxes, but they provide services needed by higher income workers and industry, which is a definite benefit to the country.
For example, a large part of health care workers are low paid (since relatively less skilled), often provided by immigrants. That is win-win for the host country.
That is correct but you need to keep the right balance. With work visas you can control this, with refugees you cannot.
Second issue is that the relationship between kind of work and immigrants is not one way, when you get a lot of low skilled workers in your country as happened in some West European countries from Eastern Europe, it suppresses wages (the new arrivals are prepared to work for less) and low value industries expand because they make use of the new low skilled work force. This results in low productivity growth, not something you want in (Western) Europe.
That is for sure possible. Do you happen to have any links to statistics or research that shows the proportion of “productive” immigrants (as in those paying enough taxes) and “non-productive” (as in those relying on social safety net)? Any country would do.
China has clean, modern cities, great public transit, improving energy infrastructure, rapidly improving air quality, and emotionally stable—if restrictive—government policy.
I don't know which is suffering worse from climate change (rain-bombs, droughts, heat waves), or which has greater housing challenges, or which has higher youth unemployment, but I don't think the difference is enough to attract a great many Chinese to Europe...except where all the new Chinese factories are being built (EVs, batteries, solar panels).
That was the first thing I thought reading this: there’s such a thing as “enough” productivity, with a competing interest in “having a life.” It’s a rational choice to have a life beyond cranking out more economic widgets.
As a family, we chose to not live in the Bay area of CA where my husband would easily have a steady high income. We chose to have a family life instead. The cost was uncertain high paid gig work.
Our home in S. Oregon on a hundred acres, would cost tens of millions of dollars in the Bay area. All we would have been able to afford would have been a small tract house in a subdivision with a 2 hour plus commute.
Yup. I did used to live in Fremont, near San Jose, and back in the mid 80s our dumpy little tract house was about $137,000. It's $1.3M now. No freaking way...
But they still would have to improve their productivity, wouldn't they? Things aren't as bad as it seems for Europe, at least for now. However, declining population and reduction in working age population will take its toll.
Without immigration, the U.S. is effectively at zero population growth—and we’re approaching that point quickly. This demographic squeeze is shared by most advanced economies, with countries like South Korea, China, and Japan already feeling it acutely. While productivity gains may soften the impact on GDP, they are no cure-all for living standards. As Paul Krugman has noted, in the U.S., those gains—particularly in highly concentrated tech sectors—are rarely passed on to the public. In that sense, firms like Meta may impose greater social costs through monopoly power and externalities than through higher prices alone.
We’re actually shrinking sans immigration. Replacement rate is considered to be about 2.1 live births per woman. The US, last time I looked, was around 1.6 to 1.7.
To be fair, most of the developed world is in about the same condition. There will absolutely be a war for talent over the next few decades and a lot of that talent will come from countries where people have black or brown skin. A welcoming immigration policy isn’t just the moral thing to do, it’s also in our economic self-interest.
I don't think immigration will ever effectively stop in America. Assimilation process of new immigrants, all things considered, still works. Yes, I can easily see a rough patch of 10-15 odd years, but it is bound to pick up again. America's established advantages like Geography, stable geopolitics, and vast expanse of land will continue to attract immigrants over the course of this century.
I reckon what's happening today is a last ditch attempt by White Nationalists to keep the semblance of White majority nation. They can't withstand the tide of multi-racial, multi-ethnic groups in America. When that threshold is crossed, the US won't be the same ever again.
I hope you’re right. However, in today’s environment, I’ve personally seen several legal immigrants on work visas fail to secure renewals as a result of the current climate. Most were already uncertain about returning. While this is anecdotal, it reflects a pattern I’m hearing from colleagues across multiple industries.
This will continue for over a decade. But recently I have become hopeful even in the short run. Despite the entrenched hatred in our political system, the positive sentiments towards immigrants has reached an all time high since the 80s. America endured the destruction of civil war. All things considered, I believe, figure like Trump is just a blip.
However, I do agree that the current environment is very ugly, perilous and replete with uncertainty. But I am hopeful for America. The things we can achieve if we become a multi-ethnic, multi-racial society. Right now, I am not in the US but I have spend a considerable period of time there.
All I suggest is that maybe Europe is off the rat race. And I read those reports that had European GDPs as similar to WV and Mississippi. Do Europe feeds itself, has adequate fresh water and the towns don't lose electric power like some third world powers. Maybe they shouldn't panic and we in the US should not gloat.
You can't tar all of Europe with the same brush, but some of them seem to be, yes.
Portugal comes to mind. When we were vacationing there 20+ years ago, I was struck by two things: (1), many of the houses in Lisbon looked downright decrepit, and (2) a dazzling selection of ham in ordinary supermarkets, including _porco preto_ for 300+ € per leg. I have never seen anything like that in Germany, but in Portugal there must've been a market, obviously, in spite of the fact that Portugal's GDP per capita was only 2/3 of Germany's at the time.
These two observations put together seemed to indicate to me that the priorities people have down there are very different from those in many capitalist countries. And IMHO saner priorities too.
Our cruise ship put in at Porto and Lisbon a few years ago. We saw mainly the inner cities, which were mostly rental housing. Those areas were much improved over what you describe. We did see laundry hung out to dry, and I can't remember seeing a dryer vent anywhere. Our walking tour guide in Lisbon pointed out a fairly simple older building there. IIRC, he said one of the apartments there would rent for about 1,000 Euros. That area may have been one of the higher priced sections of town.
The funicular that crashed a few months ago is the one we took to the fancy part of town.
BTW - a one-bedroom apartment near me in a house similar to that one goes for $2,200/month. That's a bit more than 1,800 Euros.
This is also a country by country issues. Countries like Poland and Ireland look much more like the US with regards to population. EU is improving productivity, just not as much tech specific productivity whose benefits are primarily going to mega wealthy Californians.
Especially when competition among tech companies, however imperfect, leads mostly to lower prices for consumers wherever they are located. And increases in GDP, sadly, are neither necessarily good for the environment, or for the real standard of living of producers - we allow GDP growth to be everything that matters. Thus we get no vacations for workers, declining shares of the profits generated, and little if any protection for our natural resources.
it is naive to think that in a world where (productivity) growth is happening outside Europe, and stalling in Europe, we can continue to produce a fine quality of life where health care is available and affordable.
Doesn’t this analysis imply that Europe is free-riding off technological improvements minted in the United States? When you put this together with the free-riding Europeans have done on drug development and defense, aren’t we extensively subsidizing their celebrated low-work, artisanal, chill lifestyles?
Between very high immigration levels and the varied damages of climate change record drought, heat flood), Europe can't hope to skate on policies that gave them a good quality of life twenty years ago.
That's kind of true, but Americans can also spend more than Europeans on their summer vacations because they're more productive and have more money! It's hard to take a great vacation on a 35k euro salary.
Well a European can take a train from Berlin to Paris. I would not overestimate the value of our supposed wealth. And denizens of WVa may be lucky to earn 35k
I obviously think the US should build more trains.
I'm just making the empirical point that a much larger share of Americans (about 50%) than Europeans (about 20%) are over the threshold where they can really enjoy the benefits of consumerism (let's say 70k USD, 60k EUR). I'm not trying to hit at Europeans--I want them to succeed and be better off.
But most people don't live in WV. It's a failed state. I used to live in Boston metropolitan area, and my experience was substantially better than living in Ireland. But then again most people don't live in Boston metropolitan region either. US offers a myriad of experiences based on the geography of your location.
I am starting to love NYC too. It's more culturally diverse than, say, Dublin. Racism against Indians is also a factor in Ireland nowadays.
Admittedly I'm not a Nobel laureate economist. My degree was an undergraduate one (one of like 6, but that's another story) that's been coupled with an MBA from a top 20 school and 35 years of consulting to most of the industries out there across the globe. That said, it'd seem to me after all this, and a lifetime of studying people, politics and life in general, that this focus on productivity may not be the best way to look at things. Shocking, I know. Instead wouldn't it be better to focus on the translation of that improvement of productivity into better living standards for the greatest number of people? Hear me out - here in the US we've made policy choices to take that productivity gain and let it accrue to the broligarchs (Paul's term I believe) - allowing them to amass unbelievable fortunes and power - to the point we more resemble some medieval suzerainty of a foreign power with no control over our own country or destiny than a Democracy, while in Europe they've made the choice to ensure a more fair proportion has accrued to the common man - ensuring better living standards, education, healthcare etc. Perhaps it's time to develop a new standard to evaluate general output and improvement in economies that evaluates true impact on humankind, rather than continued amassing of material goods and services and lower human factor input. Just saying
That seems right to me. Thev Rawls’s test: Your place in a society will be randomly assigned ; which one would you chose to be in? In US, you have a tiny chance of being unbelievably rich, but a significant chance of being quite poor. In most of Europe, you’re very likely to be in pretty decent shape and in some of Europe’s, that chance is extremely high.
That's it, exactly. My wife's family formed a lifelong bond with a Danish exchange student who lived with them while finishing high school here, and we remain friends to this day. We visited each other, even vacationing in Hawaii together. That gave me the opportunity to compare-and-contrast our social values.
Short summary: The typical Dane has it much better than we Americans do. The Danes have a more balanced society, while we Americans are more competitive and unequal: for us it's about the Benjamins. The result is that Danes value a broader spectrum of human values while we are much more unequal. A couple of examples: our capitalist-based healthcare system is more expensive and produces worse outcomes than most of Europe. Another example: The children of my Danish friends graduated with advanced degrees, debt-free. Middle class Americans often spend decades paying off student loan debt.
Denmark is also statistically wealthier than the US and far far wealthier than the rest of Europe. It is not at all indicative. But yes it's an incredible country.
I live in an Eastern European country! When young I have valued US for their standard of life, for democratic values! Couple of years ago, I visited US! The shock was big, never ever I would have thought I would see infrastructure so down, lots of people marginally broke! My country is not so reach as Denmark, or Germany but even us can afford more than 2 weeks holiday per year! For us, is mandatory to take 21 days leave at least per year! If you work, you have medical insurance (minimum services, but you do not die or get swamped by medical invoices), education is free .. not the best but there is ! So, i do believe that EU as a society did not fail its citizens! I do fail to understand how people educated in a democracy failed to choose a normal president! If US will continue on this path, not only it will fail its citizens, but you will lose all your values only in favor of the few not so good man!
One of my favorite economists - been to numerous lectures of his. Love his description of the IMF as a group of nations that have taken their wealth, climbed into the clouds and pulled the ladder up behind them so the poor nations can't follow.
100%. The prof of my intro to microeconomics for public policy PhD students at a top tier university proudly proclaimed that we don’t do “allocative” questions here, ie we don’t address whether and how wealth is spread throughout society. And that was it. A whole generation of future business and public policy leaders, academics who even might care about this told really not to.
I actually thought Paul was going to talk about this very distributional question in his thought experiment. That to me is the most salient difference between the US and Europe. Eg some of the profit that a European firm might derive from worker productivity gains might end up in public coffers to distribute to the rest of society.
Stock buybacks are definitely not the only source of inequality in the US and not even the most important one. They are just one aspect of the US economic system that is plain wrong in.
What is the justification of stock buybacks? Seems like a deeply unfair manipulation of one’s share price. Since most owners of capital are compensated by equities which can provide untaxed wealth it seems to be a form of tax evasion?
I remember my fascination with Rand in my early 20’s. I was all black-and-white then. It was very appealing to someone like me who had no philosophical background and eschewed religion. But, as with you, I came to be unhappy with her philosophy; it felt false after experiencing more of life.
There are some things she wrote that still stick with me, mainly that ideas matter, the notions we adopt guide our actions for better or for worse.
Ha. Same. My dad, an FDR/Jimmy Carter Democrat, asked me why I was reading that “reactionary writer” when I was in the throes of Atlas Shrugged. I came of age in the shadow of Si Valley and its ahistorical crypto-libertarianism. A bachelor of science degree in engineering requires only 18 semester units in humanities and social sciences out of a total of 120 units to graduate. The rest are all STEM. So you’d be lucky to have much exposure to philosophy, history, sociology, Econ, poli sci, lit., etc etc.
How ironic it’s this portion of the post-secondary STEM education that hasn’t kept up with the times.
Education is the driving force behind our technology superiority. The current administration is doing all they can to cripple the best of higher education. How dumb is that? I continue to be amazed at how given two choices, they seem to constantly choose the one with the wort outcome.
Have you read Neal Stephenson's "Snow Crash"? An early work of his, he postulates a dystopian, yet now frightfully recognizable future world of corporate cities with techno serfs. This is what the oligarchs and Trump as their muse are designing and setting up, and what Project 2025 is really all about in my estimation. Putting in place the structures and military / police controls to rule over the "mudsills" (look it up if the term is unfamiliar) and return us to feudal times / indentured servitude. In this model, an educated populace is actually a threat to their power and control. Reagan and the Republicans recognized this ages ago and set about destroying our education system in the early 80s. And now the chickens are coming home to roost.
Better living standards for the greatest number of people is keynote. We have an ability that we could excercise as a species that we have used to advance to this messa we currently contemplate. Overseers and minions of control have not worked in the past, only care of the weak and old; the keepers and disspersers of knowledge are key.
You took the words right out of my … fingers. I had started a response to this PK post asking “what is an economy for”, but you’ve asked essentially that same question and provided a perfectly reasonable answer, one I happen to agree with.
It's funny. As a teenager and young man I was an ardent reader of Ayn Rand. The whole dog eat dog, capitalism reigns supreme mantra made so much sense. Then I grew up. Studied economics. Ran intel ops against the Soviet Union. Realized Ayn Rand had plagiarized her basic works from Soviet authors of the 20s (Anthem is a complete gloss of Zamyatin's "Мы"). Then started really thinking, what is the purpose of society? Of economy? Of politics? And came to the realization that it's (in economic terms) to maximize utility for the maximum number of people possible.
That's it. Nothing more.
And that then dovetailed into my growing spirituality - I refuted Christianity and adopted Buddhism. Studied yoga extensively. Traveled to India to study with His Holiness the Dalai Lama. Went on numerous retreats with Thich Naht Hahn. Joined a Transgender / Gay / Lesbian Sangha in San Francisco's Castro District. Began working with the homeless. All while still serving the "man" as a high paid consultant.
I now understand. The meaning of life is really nothing more than the golden rule folks, and that rule is consistent across all major religions, an integral component of Marx and Engels works (bought my first copies in Russian and German wearing my dress greens in East Berlin in the 80s by the way, used to read them in the SCIF running intercept operations,) and needs to serve as the basis of all things going forward:
Do unto others as you would have others do unto you.
That's it.
Well, and First Nations' call to plan to the Seventh Generation, that's a good one too.
Absolutely the point. GDP is just an average. It doesn’t state how the wealth is distributed. We really need to know what population quintiles are benefitting in order to compare living standards.
I don’t disagree. But my impression is that decades ago (the eighties) the political right captured the self image of the American aspirational worker and convinced them that voting for the interests of the rich few made sense because they (the majority non rich) hoped to join them soon and enjoy the fruits of their labour. To vote against the interests of the few rich thus became un-American and therefore - for those dreaming the American dream - against one’s own interests. The UK right have been trying to create the same mood music for a while and not without some success.
Goes back way further than that - it's not a matter of party so much as of class.
"Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires." - John Steinbeck
One possible standard to measure quality of life for any geographical region or demographic group is longevity.
US longevity peaked in 2014 and has only increased a bit toward pre-pandemic levels.
The gold study for US longevity reports that females in the southeastern US added three years to their longevity between 1900 and 2000. The women clearly lacked access to vaccines, antibiotics, and reproductive healthcare. We suspect, too, that the rest of y'all hate us. And that takes its toll.
What the Europeans aspire to is much more equitable. The average resident has a much better shot at having a balanced life. What good is having that one extra dollar? Not much value if you have to run on the treadmill that much faster. Hard to enjoy your gains that way.
JiSK, you must be completely deluded. Have you been to the average European home? No washers/dryers - really? Really? No dishwashers - really? You're nuts. And the range of fresh food in the average European supermarket is broader and healthier than the average US equivalent. I have experienced both. What is true is that average US homes are larger in square footage, because there is more land. But that does not translate in Europe to a lower quality of life. In the intangibles too, Europe certainly wins. I think you should get on a plane and have a look for yourself.
Have you eaten the food or actually shopped there?
Have you looked at the Happiness Indices? Europeans have more vacations, shorter work weeks, better food, cleaner water, cleaner air, longer life spans, healthier lives.
By all objective standards their lives are better than ours on almost every parameter you could measure or think of.
US standards of living have been decreasing for the past decade at least. And that decrease has accelerated under Trump.
But please, provide us with objective information from credible sources that refute my assertions.
I am French, I live in the UK, and , result of 2 world wars , and associated movement of population (which the Brits never understand) I have relatives in several European countries. France, of course, Belgium, Poland, and Germany. The numbers have constantly shown (at least according to the UK media) that France is always behind on the economic side compared to the UK. Yet, with family in France, with similar earnings, similar number of children, I can see that in spite of that, over the last 50 years, my family members (and there are a lot of them, 90 at the last family reunion) have a much better standard of living than us. Their kids were educated in a system that seemed to work. Their Health service was and still is better. Their cars a more expensive models than ours, their holidays, even with young kids at home, are longer and spent in more exotic places, winter and summer (we could only afford summer, in wet Wales). The education and Health system are starting to show the strain in France. Because the neo con con trick of low taxes and small government has reached the Continent's shores sadly, and been adopted by many politicians.
I say this with a great amount of respect for the UK and its working class people, but conditions for the average person seem quite miserable for the average person, especially when compared to European peers like France or Germany. I lived in London for a few years and loved the city, but I couldn’t imagine settling down there given the cost of everyday life.
The neo con con is a pernicious lie that needs to be strenuously debunked at every opportunity. Simon Kuper in the Financial Times in October says “It’s easy to mock the French … most of them expect the state to fund their 25 year retirement and everything else” He goes on to say “their anger is partly justified. France today is an underfunded social democracy, crossed with an oligarchy. More than any other Western European country, it’s dominated by powerful billionaires paying relatively low taxes…Oligarchs (people who possess both wealth and power, and use one to acquire the other) tend to keep their wealth in holding companies. Because corporate tax (cut by Macron) is lower than income tax they pay an effective rate that is about half that of the average French person.” Gabriel Zucman the economist Prof Krugman was talking about has a book coming out “whose title translates as The Billionaires Don’t Pay Tax on Revenues and We’re Going to Put a Stop to that. “ It’s a really good article. I love the line “This annoys many French people. France isn’t the US, where the rich are admired.” My mother was from the Cotswolds, which is very pretty. London is an amazing city, but the locked gardens, which you never see in Paris, drive me crazy. Kuper obviously thinks the French people could compromise a bit on their generous welfare state. I think Britain, which is a great country, could stand to be a lot more like France, (obviously never admitting to it) with its Oligarchs paying their fair share of taxes.
With basically zero (productivity) growth in the past years in the big 4 (France, UK, Italy, Germany), do you think the quality of life in Europe will still be as good in 10-20 years?
Hi Catherine. Just a short note from me - I think your observations are on the correct points, and that you have drawn the correct conclusions. What Paul Krugman has argued in this, and in previous, post is that traditional economic measures of ‘productivity’, the measure used as measure of a populations wealth in disposable income, has limitations. Other measures of well-being, you and I might even say ‘our human productivity’, are not measured. Consequently the examples of well-being which you cite are left out of the economic analysis, but are very important for human satisfaction and happiness. I’m Irish, Republic of Ireland, but resident in Scotland for almost all of my adult life. GDP in Ireland is exceptionally high, and choice for Irish citizens has improved enormously. However, Irish people face huge challenges in areas like the cost-of-living, housing costs, insurance (across all areas, including health), and ever more pressure on essential services without apparent answers. In short, GDP growth - the difference which Paul Krugman addresses - between the US and Europe is both factual and also misleading when you look at people’s lives. And, of course, it is used in political polemics! Yours, Anthony.
How much do you think being a tax haven for ill-gotten gains contributes to that? It seems to be the major industry of the UK--protecting wealth. Inequality as high as the US with only the NHS as a benefit?
I agree with all the quality of life comments, I moved to the Netherlands for a work project for a US company in 1995, left that company in 2000, and haven’t worked for Americans since. I’m now semi-retired, but during my executive years with several companies, I can tell you that most European countries (here I exclude the UK) have quality of life for all the workers, not just management; might have been better a few years ago (has been 10 years since I’ve led a company over here), but you can take your GDP growth powered by tech and leave it in the US — I’d rather have a country which still has Saturday markets with real farmers selling their produce, with independent shops in the town centre, restaurants that aren’t big chains, the ability to drink a really decent cup of coffee which isn’t from a chain, and have a piece of apple tart with it for around $5. I remember the Economist’s Cheeseburger index (or was it a hamburger index) which gave us an idea of comparative prices around the world. But of course, they lack any kind of relevance or usefulness without a comparison to the average wage of a non-management worker in that country. What I can say, is I have a fairly unimpressive pension income and I manage here, something that would be impossible in the US. And I have great healthcare, green spaces, the ability to walk to all the things I need (stores, doctor, pharmacy, physio, churches, parks, restaurants, cafes) and I still live in my own house - and my mortgage, bought in 2018, is a paltry 250 euros a month. You can keep my home country, the US, with its “great” economy and GDP growth. I’ll happily stay here.
Yet we still follow their news. If America weren't so destructive for the broader world, it would've been in the interest of the world for America to die down or collapse.
They hate Europe for its freedom!! Any examples of well functioning governments that answer to everyone and try to live by rule of law are a threat and must be attacked … Trump is the enemy within.
Productivity growth is not just primarily a measurement problem and a distribution problem.
Those are important questions. Yet they leave intact a deeper assumption that remains largely unquestioned: that productivity growth itself is the natural benchmark against which economic success or failure should be judged.
Once productivity growth becomes the implicit norm, stagnation automatically appears as economic failure — even when living standards, institutional robustness, social cohesion, or ecological sustainability may be holding up comparatively well.
Europe is then framed as “lagging” not because outcomes are worse, but because it grows differently, more slowly, or in sectors that are harder to translate into standard productivity metrics.
This matters because productivity is not a neutral yardstick. It systematically undervalues labor-intensive, care-based, and public sectors; it struggles with services where quality matters more than speed; and it largely ignores ecological costs and human limits.
In that sense, the European–US comparison is not only about tech versus non-tech, or about hedonic indices and diffusion effects. It is also about what we choose to count as economic success — and what we allow to disappear from view by doing so.
Especially when competition among tech companies, however imperfect, leads mostly to lower prices for consumers wherever they are located. And increases in GDP, sadly, are neither necessarily good for the environment, or for the real standard of living of producers - we allow GDP growth to be everything that matters. Thus we get no vacations for workers, declining shares of the profits generated, and little if any protection for our natural resources.
The real problem is distribution. Phil Wogamon once wrote to the effect that capitalism is a great producer, butva poor distributor of wealth. Reducing taxes on the highest incomes exacerbates that inequality.
Does tech bring wonderous, marvelous things to my life? Not really. To me it is something that I have to accept. Lived without it for a long time, never made much difference. Europe has such a rich history, I would trade that for all the do-dads tech has brought.
"Yet we don’t see Texans obsessing over why they can’t be like California. Within the U.S., to the extent that people think about this divergence at all, they realize that it’s mainly about composition effects."
That depends on who is doing the thinking. For many Texans, California is a woke hellhole, overrun by illegal immigrants and festering with crime, streets knee-deep in human waste because of the homeless. But at the same time, Texas is envious of California's tech boom and huge economy, thus the push by Texas to recruit/poach as much of that tech economy as possible. (Worth noting that the companies that do move from California to Texas tend to land in . . . Austin, the blue-est city in the state.)
Remember when thinking of Texas, it is a divided state. Cities, like San Antonio, Houston, DFW and El Paso are blue and trying to help their citizens. Rural areas are conservative enclaves of retirees and some corporate employees and corporate farmers. Austin used to be blue, but the tech companies ( looking at you Micheal Dell) have brought more money to GOP causes, and the old motto “Keep Austin Weird” is only a bygone saying.
I believe the growth in solar panels in Texas has been Very significant. What's needed now is to upgrade power grid and continue with the solar installation. It's not about being woke anymore. It's actually more cost effective
Texas, b/c of wind and solar (but esp. wind) actually produces more of its power through green energy than do other states. Here's the AI summary on google: "Texas generates a massive amount of renewable energy, leading the U.S. in total wind and solar generation, with renewables making up roughly three-tenths (around 30%) of its total electricity in 2024, primarily from wind, but with solar rapidly growing. While natural gas remains dominant (around 51%), Texas is a powerhouse in clean energy, producing significantly more renewable electricity than any other state and even surpassing coal output with solar in 2025 for the first time"
While this article focused on Europe it gets to questions I have had for a while. Productivity growth in the US since the 80s has not had a broad based growth in wealth in the US, not only regionally but it has being concentrated in the top 20% ( moreso the top 1%). This rings true with what you discussed here. I do think the US tech lead and productivity lead are valuable but that value seems to be to the Oligarchs. The EU's lag is much more about a lag to local Oligarchs.
These corporations could do better by their employees. I’m a retired CPA and had a client with a manufacturing company. He and his partner gave the employees pay comparable to the area, the usual holidays and generous vacation, but what made their employees so productive was that they bonused 2% of net profits before tax to employees each year. This would usually amount to almost the employees annual salaries. These folks knew that anything spent or time wasted directly affected their pocketbooks so waste was a four letter word. If these big corporations would bonus all the way down the line, productivity would be up, waste would be down and employees would be happy.
Follow where the Tobacco Money went; into general mills and food products. Less risk and the same advertisment genre. Couple that with Walmart type marketing destroying small businesses and Amazon type delivery systems. We have a monopoly infestation in a pretty good govermental model. Not perfect but repairable.
I have lived in the Netherlands for almost 20 years now after spending my first 50 in Canada. It's a tiny country that makes most things work better than I expect. I shop online for everything except food. I only buy from local Dutch businesses. They typically have great websites and you can trust them for refunds or resolution and next day delivery.
I will not buy anything from Amazon anymore. I do not trust Google anymore. Facebook kept me on file for 11 years after I left. I found out when someone tried to hack my account. Facebook can go ... well, you get the idea.
There was this period when the new technology became so remarkable and available to anyone that it was just fun. It became my career. I helped a few startup owners become one of the 0.1%.
That said, the new technologies -- AI, social media, spyware and crypto et al are black box solutions crafted by a billionaire broligarchy that is focused on extracting as much wealth as they can from the only resource they really own, their loyal customers.
I have no use for this latest American technology. And I think life is better here than almost anywhere across the pond. Your mileage may vary.
Tech industry is like a Frankenstein monster. While it creates productivity boom in tech sector, it will also create surging inequalities (on much greater scale than finance capitalism), it will swallow democracy, it will dehumanize common people, it will destroy jobs, it will aggravate regional disparities & even global disparities (which earlier was legacy of globalization), it will create addiction and mental health diseases in children as well as adult, it will promote hate and anger in people just for their profits.
Wake up Americans. The Frankenstein monster of your tech industry has already gobbled your democracy.
I suppose the higher inequality in America is part of this story as well. The data credits the US with higher GDP growth because the profits are going to American entities (in this case corporations).
However in keeping with the single representative agent idea, if the income is all accruing to a single guy, Marcon Zucksmusk, then the higher aggregate income is meaningless for the standard of living of the population at large, who may have identical standard of living to Europeans despite living in the higher GDP nation.
The analysis is beyond me but the spirit resonates. Europe’s investment in its human and cultural capital is mind boggling I make a guess. Let’s measure that somehow. To borrow a term the USA made famous, Europe is now the melting pot and the globe is better for that. Let’s measure it!
Suppose the US and China will grind their workers to dust and Europe will continue to produce a fine quality of life where health care is available and affordable and they take genuine summer vacations.
as someone in higher ed where productivity is often measured as number of students/class and overwork and burnout are real, I think that the impact on quality of life is vastly under rated in the US productivity arguments.
I didn't have a cell phone until 2008. I didn't want one, as, I didn't want to be reachable while outside of my home, or, office. I valued that outside time.
I didn't have a computer until late 2003. I moved up to a house in rural Pa. that had neither high speed internet, nor, cell tower connectivity. It might as well have been a dark zone in Northern Alaska.
I bought the computer mostly to be able to use PhotoShop as an editing tool in my artwork.
A very large portion of people alive today have no idea how good life was, when we were free from that "connectivity".
I'm so happy I was born earlier, so that I experienced that less technologically connected world.
I loved it.
We just started using smart phone a few years ago because we don't get cell service at our house. Apple allows you to use the internet to use the phone, so now we do that. Imagine people's shock when I said we didn't get text messages because all we had was a landline.
We've been very selective about what tech we adopt. Yes mRNA vaccines, No, for chatbots.
You and me both Barth. I loved getting lost. The danger in it, testing your survival skills, the freedom.
When I started working for Bellcore, the company would never contact people when they were on vacation. Later, the company was sold to SAIC and renamed Telcordia, and things changed. After a few years, we began to take vacations in or near the Smoky mountains; sometimes on the Carolina side, sometimes Tennessee. In most cases, there was no cell coverage and I had no wireless phone in those days. Even when the cabin we rented had a phone, I never told my employer. A few months before I was laid off, the policy became that you had to take your vacation to get it off of their books, but employees weren't allowed to go anywhere and had to call in to all scheduled meetings. Essentially working from home. Just before I left, upper level management announced that they were scheduling a mandatory all hands meeting for Saturday mornings. I'm sure the idea was that they could pressure people to put in a full day's work "as long as you're here."
People like Kyle Rhysdahl of NPR's "Marketplace" talked about "higher productivity" as if more work was being done per hour. All that was actually happening was that people were working longer hours.
Or sitting in the office and daydreaming in endless meetings.
My husband was in one of those highly paid high tech sectors. Most of the people working in it didn't have a very high quality of life. Long hours, no home life, very stressful as higher ups pushed for more, more, more.
The high pay is also an illusion. Not only do 'they', the well paid worker bees, have no life out of work, they live in places where their high pay is really a basic income because of the high cost of housing. You get taxed the same as if you lived in a place with a lower cost of living.
It is not just the high tech workers who are squeezed by the high cost of housing and everything else. Workers particularly within commuting distance of the high tech hubs are as financially stretched and time stretched as any other area. If you lose your job you have to move from the area.
I recall one guy, this was like a decade ago, who made $130k a year in Silicon Valley and lived in a garage and shit in a bucket.
There was one guy in central New Jersey who lived in an aircraft hanger at a small airport because the rent was about half that of an efficiency apartment. He did have access to a toilet. The airport was sold and the new owner kicked him out.
Having taught as adjunct prof in a small tech college international management bachelor's degree program for 20 years, also in US colleges in small business mgmt, I saw a lower tech, extraordinarily higher EQ based curriculum in German higher education.
Additionally, or because of their wider global student base... representing usually representing Asian, African, Middle East, So America, No America (sometimes from the US), Australia, India, Europe, former East block Slavic countries (all till Russia invaded Ukraine, then no Russians came).
These students were required to have 3 language(English is req) proficiency to graduate, plus study abroad somewhere outside national boundaries for a semester and a paid internship just to graduate,plus testing that had no "American easy grading". When I heard and read 'West Virginia analagous'... I coughed, tried not spray while writing that here. These students have no Placement center. They develop effective networks and rarely graduate without a job or 'plan'. That changes a bit when the economy is thrown off... more go onto graduate school, almost free till they are 27...and it's cheap even for Americans!!
Please, Prof Krugman... figure a way to translate EQ into macroeconomic equations! We use metrics in my Global Professional HR sector... something might apply here.
Thanks for this column!!
This is what I don’t understand.
Supposedly Europe is doing terrible and at the same time Americans and Chinese would much rather live in most European countries rather than the opposite.
Most Americans have no clue about the standard of living in European countries.
I know a thing or two about there standard of living! Europe is a third world country, I tell you. For xample there radical left-wing marxist lunatics outlawed the Cybertruck, taking away your free speach rights to make a statement of freedom on the road!
Can't even buy an AR15, there globalist anti-freedom stooges dont want you to become a real man! Can't buy no bulletproof backpack neither, its not for sale anywhere.
And real backwater too, most people never even heard of John Galt over there, and Ayn Rand is not teached at university. Its suppressed cuz there afraid of the Truth!
So thats the standard of living in Europe I kid you not. You dont wanna be there.
Could not agree more ! If you own a cybertruck, an AR15, a bullet-proof backpack, books by John Galt (Who he???) or Ayn Rand, please stay away from Yurp for your own sake!
Your from Europe, amirite? THX for agreeing to my point! To your question, a Wise Man told me John Galt is to Ayn Rand what sockratease is to playtoe!
I confess I had to look up John Galt on Wikipedia...and yes, I am from Europe and resident there. I once tried to read Ayn Rand. Could not go beyond one or two pages, if that. It is to litterature what spam is to caviar.
“There are two novels that can change a bookish fourteen-year old’s life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs."
lol.
Thanks for the laugh. You’ve made my day!
Good satire my friend.
Assuming this is a joke, but these days who knows??
It's a joke - but you're right. There are right-winger types who would read this and be nodding vigorously in agreement.
It was interesting watching a Tesla driver at a dead end trying to back down a Spanish cobblestone street from medieval times...their cab & shuttle drivers are amazing trying to turn corners without dinging the edge of buildings. One of the places I stayed required rolling my suitcase through alleys to the entrance, as not accessible by car.
go away troll back to the MAGA koolaid
I take that as a compliment. Thanks :)
Don't forget you lose the excitement of mass killings at the local elementary school. Why you have to ban birth control !!!
And as Prof. Krugman points out, the rest of the U.S. (not-California) is growing much more slowly – yet benefits from that higher tech productivity growth, similar to how Europe does...
So what makes us in Not-California so different, except that we don't have that more humane and balanced European standard of living?
The point of showing the numbers between CA and the rest of the U.S. is that obviously the standard of living is largely the same so the productivity numbers based on tech aren't a good measure of the latter.
Exactly – which makes the point that the rest of the U.S. is not much different from Europe in that regard, yet we are very different in terms of qualities of life they benefit from like universal healthcare, affordable childcare and college, paid family and medical leave, better public transportation, etc.
Doesn't sound like Mississippi or West Virginia to me, or anywhere in the U.S. for that matter.
Maybe? Arguably the standard of living *for equivalent jobs* is the same between California and the rest of the US, but the standard of living for people working in tech is better than for people working in the service industry. If you have more high paying jobs, your people are doing better--even if that's because of compositional effects.
Most Europeans live in houses or apartments, and drive cars, that Americans would find impossibly cramped. They pay very high taxes, which of course goes towards universal affordable healthcare, "free" education and great public transportation. Americans don't know enough about this to make informed choices, either way.
Paul Krugman said in previous posts that taxes in Europe are not much higher, considering the benefits.
Here in Canada, our taxes are a little higher (considering the public + private health costs) for what I consider a much better quality of life.
Well, of course, if you think of health insurance extortion payments as taxes, or college tuition as taxes, then Americans probably pay higher taxes than Europeans
I think impossibly is an exaggeration. I worked in NYC for decades and people adapt - so out of towners adapt to apartment life. And re space, i have a garage devoted to the tools I need to help maintain my house. The apartment dweller needs less space and if they can walk to a store that sells milk, eggs and bread - then they don't need to store so much in their kitchens. When my wife and I were firat married we walked to a small store and we were fine. Weekends were for fun, not cutting the grass
"Weekends were for fun, not cutting the grass."
----
Take it from another homeowner: Get rid of the lawn. It's high maintenance and thirsty. Put in well-behaved shrubs and ground cover (the critters will love you for it). No more mowing or worrying about it looking patchy.
This is not about me. My yard is small and most is just plantings. My front lawn is less that 10 x 30. I don't water either (never did except for new seedlings). But we waste a lot of space as a people.
In the mid 70s, I spent time in so called 3rd world countries. There are places where I live that look as bad as or worse than those in countries in the 70s. On my infrequent visits to local stores, I don’t see happy people. They look tired, stressed, and obviously they are eating a terrible diet. What is so f-ing great here I wonder? These are trump voters.
and they are lied to about Europe by MAGA and the corporate media
They know even less about the standard of living in China, which has been getting more modern and prosperous over the last two decades.
Still nowhere near the standards of Western Europe.
For people, happiness is less tied to their current status than the direction they're heading. In China right now they're seeing reductions in poverty, improvements in public services, political stability, improvements in climate change adaptation, and improvements in agriculture. Yes, they are struggling with climate climate change (peak demands of air conditioning during more frequent and worse heat waves is chasing their grids' rapidly increasing gigawatt capacity), but they are a country that pays attention to infrastructure maintenance and improvement.
Bear in mind that four decades ago ~80% of the population of China was in "extreme" poverty, while today < 4% are below the World Bank poverty line.
Economists work with aggregate statistics, which are heavily weighted in favor of the wealthiest. And the rate of increase isn't linear, it's exponential. So the averages tend to grossly overestimate how well those of us below the top 1% are doing.
California has some of the highest child poverty rates in America.
The “ average “ gains to the top
haven’t trickled down to most of us .
BTW - looks to me like the new
Trump Doctrine ( formerly Monroe )
pushes hegemony over South America ( especially oil resources)
and tosses Europe under the bus .
Pretty soon the leaders in Europe
will be looking at alternative trading
partners .
And Canada. Lots of trading prospects outside North America.
Exactly! Spot on.
"averages tend to grossly overestimate"
I guess that's why median incomes get published.
Yes, exactly. It's a subtle form of propaganda.
And even with that, if you look at the actual cost of living, the median isn't doing so hot.
I personally *loathe* the metric GDP per capita.
The cognitive dissonance of the view point of average Americans has alot to do with media social/mainstream not doing comparisions on lifestyle difference between the socially responsible societies of Europe versus the States irresponsibility to its Citizens. No food or shelter assurance or health regulation stabilites or affordable educational opportunities.
Media will say ooh look at the high taxes they pay in Europe without showing or telling what people get for their tax dollars.
bingo
Residents of other States do the same thing about New Jersey.
New Jersey model is as close the US can get to a European model.
That is exactly why we in Europe got millions of poor immigrants/refugees looking for a better quality of life with free healthcare etc.. But I guess you can imagine this is not sustainable, somebody needs to pay for it. And this becomes a problem in an aging continent with increasing state pension and healthcare costs.
But times are changing, you increasingly need to bring a big bag of money, have a high pension or a good income job offer to emigrate to Europe.
"...this is not sustainable, somebody needs to pay for it"
Livy - what do you think happens to the taxes paid by immigrant workers to these countries?
I employ a skilled immigrant worker. He pays income tax, national insurance, and pension contributions into the UK revenue. And he had to buy 5 years worth of NHS dues for himself and his wife before his visa was granted.
Why is there always an assumption that immigrants don't work, and just want to live off benefits?
It is very similar in Canada. Immigrants don't get a free ride, but long term they (usually) get a better life.
And they help make a better life for Canadians.
In Murica, our immigrants also pay all federal state and local taxes but benefit from NOT one social program. That’s hundreds of billions of their tax dollars into coffers but with no benefit to them
I did not mention benefits, though too many people that got asylum are still unemployed after several years.
I am not against skilled migration up to a certain point, the issue is more about the European welfare state that is based upon the principle of higher tax payers supporting lower tax payers. If you get too many low skilled, low tax jobs immigrants you put too much pressure upon the costs of the welfare state to be paid for by higher earning people. Employers might actually like it, but society will bear the costs. Welfare states are expensive and not all jobs benefit our welfare states!
As said, the times anybody could come are changing, as there are now more rules in my country who we accept as migrant (similar to typical immigration countries, like you mention yourself). But we want more skilled immigrants with high earning jobs as this brings in more tax money.
Asylum seekers is a different category than skilled migrants. Many come from poor countries, too many are low skilled, and would never get a work permit, that is why they try their luck as a refugee. As these numbers have been unsustainable high, basically all European countries are taking measures to bring them down.
If a European country's considerable wealth is distributed in such a way that everyone, including immigrants, has at least a survival standard of living, most of them will be productive and the rest won't be a problem. Providing that the unreasonably rich are not buying and plundering small businesses and not siphoning off all profits out of the national economy.
to be fair there are very good statistics on unemployment rates amongst immigrants in most European countries
There are, but then also look at the laws around employing them - especially asylum seekers, who are not allowed to with until their status is settled...
Think how much better and more productive Europe would be if we said, "Welcome! Here's a list of areas where we have significant skills shortages (like agriculture and social care). Which would you like to work in? Here's your NI number and you'll be paying taxes straight away."
You can't get good statistics in the US about this, since undocumented people can't legally work here.
Those immigrants may eventually save the aging population, because they will work and pay taxes.
only with high enough salary & taxes, otherwise they cost more than they contribute
Lower income workers will pay less taxes, but they provide services needed by higher income workers and industry, which is a definite benefit to the country.
For example, a large part of health care workers are low paid (since relatively less skilled), often provided by immigrants. That is win-win for the host country.
That is correct but you need to keep the right balance. With work visas you can control this, with refugees you cannot.
Second issue is that the relationship between kind of work and immigrants is not one way, when you get a lot of low skilled workers in your country as happened in some West European countries from Eastern Europe, it suppresses wages (the new arrivals are prepared to work for less) and low value industries expand because they make use of the new low skilled work force. This results in low productivity growth, not something you want in (Western) Europe.
That is for sure possible. Do you happen to have any links to statistics or research that shows the proportion of “productive” immigrants (as in those paying enough taxes) and “non-productive” (as in those relying on social safety net)? Any country would do.
this is a study done in The Netherlands
https://docs.iza.org/dp17569.pdf
Chinese?
China has clean, modern cities, great public transit, improving energy infrastructure, rapidly improving air quality, and emotionally stable—if restrictive—government policy.
I don't know which is suffering worse from climate change (rain-bombs, droughts, heat waves), or which has greater housing challenges, or which has higher youth unemployment, but I don't think the difference is enough to attract a great many Chinese to Europe...except where all the new Chinese factories are being built (EVs, batteries, solar panels).
Visit some youtube channels comparing USA lifestyle with Europe.
As an example -
https://youtu.be/v9WLhD-1aVM
That was the first thing I thought reading this: there’s such a thing as “enough” productivity, with a competing interest in “having a life.” It’s a rational choice to have a life beyond cranking out more economic widgets.
As a family, we chose to not live in the Bay area of CA where my husband would easily have a steady high income. We chose to have a family life instead. The cost was uncertain high paid gig work.
Our home in S. Oregon on a hundred acres, would cost tens of millions of dollars in the Bay area. All we would have been able to afford would have been a small tract house in a subdivision with a 2 hour plus commute.
Yup. I did used to live in Fremont, near San Jose, and back in the mid 80s our dumpy little tract house was about $137,000. It's $1.3M now. No freaking way...
But they still would have to improve their productivity, wouldn't they? Things aren't as bad as it seems for Europe, at least for now. However, declining population and reduction in working age population will take its toll.
Without immigration, the U.S. is effectively at zero population growth—and we’re approaching that point quickly. This demographic squeeze is shared by most advanced economies, with countries like South Korea, China, and Japan already feeling it acutely. While productivity gains may soften the impact on GDP, they are no cure-all for living standards. As Paul Krugman has noted, in the U.S., those gains—particularly in highly concentrated tech sectors—are rarely passed on to the public. In that sense, firms like Meta may impose greater social costs through monopoly power and externalities than through higher prices alone.
We’re actually shrinking sans immigration. Replacement rate is considered to be about 2.1 live births per woman. The US, last time I looked, was around 1.6 to 1.7.
To be fair, most of the developed world is in about the same condition. There will absolutely be a war for talent over the next few decades and a lot of that talent will come from countries where people have black or brown skin. A welcoming immigration policy isn’t just the moral thing to do, it’s also in our economic self-interest.
I don't think immigration will ever effectively stop in America. Assimilation process of new immigrants, all things considered, still works. Yes, I can easily see a rough patch of 10-15 odd years, but it is bound to pick up again. America's established advantages like Geography, stable geopolitics, and vast expanse of land will continue to attract immigrants over the course of this century.
I reckon what's happening today is a last ditch attempt by White Nationalists to keep the semblance of White majority nation. They can't withstand the tide of multi-racial, multi-ethnic groups in America. When that threshold is crossed, the US won't be the same ever again.
I hope you’re right. However, in today’s environment, I’ve personally seen several legal immigrants on work visas fail to secure renewals as a result of the current climate. Most were already uncertain about returning. While this is anecdotal, it reflects a pattern I’m hearing from colleagues across multiple industries.
This will continue for over a decade. But recently I have become hopeful even in the short run. Despite the entrenched hatred in our political system, the positive sentiments towards immigrants has reached an all time high since the 80s. America endured the destruction of civil war. All things considered, I believe, figure like Trump is just a blip.
However, I do agree that the current environment is very ugly, perilous and replete with uncertainty. But I am hopeful for America. The things we can achieve if we become a multi-ethnic, multi-racial society. Right now, I am not in the US but I have spend a considerable period of time there.
The stable geopolitics advantage may not last much longer.
All I suggest is that maybe Europe is off the rat race. And I read those reports that had European GDPs as similar to WV and Mississippi. Do Europe feeds itself, has adequate fresh water and the towns don't lose electric power like some third world powers. Maybe they shouldn't panic and we in the US should not gloat.
"maybe Europe is off the rat race."
You can't tar all of Europe with the same brush, but some of them seem to be, yes.
Portugal comes to mind. When we were vacationing there 20+ years ago, I was struck by two things: (1), many of the houses in Lisbon looked downright decrepit, and (2) a dazzling selection of ham in ordinary supermarkets, including _porco preto_ for 300+ € per leg. I have never seen anything like that in Germany, but in Portugal there must've been a market, obviously, in spite of the fact that Portugal's GDP per capita was only 2/3 of Germany's at the time.
These two observations put together seemed to indicate to me that the priorities people have down there are very different from those in many capitalist countries. And IMHO saner priorities too.
Our cruise ship put in at Porto and Lisbon a few years ago. We saw mainly the inner cities, which were mostly rental housing. Those areas were much improved over what you describe. We did see laundry hung out to dry, and I can't remember seeing a dryer vent anywhere. Our walking tour guide in Lisbon pointed out a fairly simple older building there. IIRC, he said one of the apartments there would rent for about 1,000 Euros. That area may have been one of the higher priced sections of town.
The funicular that crashed a few months ago is the one we took to the fancy part of town.
BTW - a one-bedroom apartment near me in a house similar to that one goes for $2,200/month. That's a bit more than 1,800 Euros.
Portugal was hit hard by the crash of 2008 but in last 14 years has improved significantly now one of the fav tourist and resident destinations
Europeans definitely do not panic because of lower productivity . Some in the US though do gloat too much.
This is also a country by country issues. Countries like Poland and Ireland look much more like the US with regards to population. EU is improving productivity, just not as much tech specific productivity whose benefits are primarily going to mega wealthy Californians.
It’s not like the Europeans can’t take advantage of the advances in technology even if they didn’t create those advances.
Especially when competition among tech companies, however imperfect, leads mostly to lower prices for consumers wherever they are located. And increases in GDP, sadly, are neither necessarily good for the environment, or for the real standard of living of producers - we allow GDP growth to be everything that matters. Thus we get no vacations for workers, declining shares of the profits generated, and little if any protection for our natural resources.
Why.?
In Murica too
Depends on the country - France and Germany are in a lot of trouble if they can't improve productivity
it is naive to think that in a world where (productivity) growth is happening outside Europe, and stalling in Europe, we can continue to produce a fine quality of life where health care is available and affordable.
A fine quality of life..if you can afford it..and Golden visas are golden..The prices are going up…Bargains of old have long gone..
AND when the differences between EURO and the Bullies become unmistakable, they will invade and steel it.
Doesn’t this analysis imply that Europe is free-riding off technological improvements minted in the United States? When you put this together with the free-riding Europeans have done on drug development and defense, aren’t we extensively subsidizing their celebrated low-work, artisanal, chill lifestyles?
Between very high immigration levels and the varied damages of climate change record drought, heat flood), Europe can't hope to skate on policies that gave them a good quality of life twenty years ago.
They unfortunately will likely have spend more on defense in the near future which may erode the quality of life.
(Oops, I thought I was replying to a comment about China. I deleted it.)
That's kind of true, but Americans can also spend more than Europeans on their summer vacations because they're more productive and have more money! It's hard to take a great vacation on a 35k euro salary.
Well a European can take a train from Berlin to Paris. I would not overestimate the value of our supposed wealth. And denizens of WVa may be lucky to earn 35k
I obviously think the US should build more trains.
I'm just making the empirical point that a much larger share of Americans (about 50%) than Europeans (about 20%) are over the threshold where they can really enjoy the benefits of consumerism (let's say 70k USD, 60k EUR). I'm not trying to hit at Europeans--I want them to succeed and be better off.
But most people don't live in WV. It's a failed state. I used to live in Boston metropolitan area, and my experience was substantially better than living in Ireland. But then again most people don't live in Boston metropolitan region either. US offers a myriad of experiences based on the geography of your location.
I am starting to love NYC too. It's more culturally diverse than, say, Dublin. Racism against Indians is also a factor in Ireland nowadays.
Great vacation does not need to be expensive. You though never have a good one if you are forced (or cannot help your yourself) to partially work.
I would certainly recommend not working on vacation.
We don't have to suppose, that's what's actually happening.
This concept in
Admittedly I'm not a Nobel laureate economist. My degree was an undergraduate one (one of like 6, but that's another story) that's been coupled with an MBA from a top 20 school and 35 years of consulting to most of the industries out there across the globe. That said, it'd seem to me after all this, and a lifetime of studying people, politics and life in general, that this focus on productivity may not be the best way to look at things. Shocking, I know. Instead wouldn't it be better to focus on the translation of that improvement of productivity into better living standards for the greatest number of people? Hear me out - here in the US we've made policy choices to take that productivity gain and let it accrue to the broligarchs (Paul's term I believe) - allowing them to amass unbelievable fortunes and power - to the point we more resemble some medieval suzerainty of a foreign power with no control over our own country or destiny than a Democracy, while in Europe they've made the choice to ensure a more fair proportion has accrued to the common man - ensuring better living standards, education, healthcare etc. Perhaps it's time to develop a new standard to evaluate general output and improvement in economies that evaluates true impact on humankind, rather than continued amassing of material goods and services and lower human factor input. Just saying
That seems right to me. Thev Rawls’s test: Your place in a society will be randomly assigned ; which one would you chose to be in? In US, you have a tiny chance of being unbelievably rich, but a significant chance of being quite poor. In most of Europe, you’re very likely to be in pretty decent shape and in some of Europe’s, that chance is extremely high.
That's it, exactly. My wife's family formed a lifelong bond with a Danish exchange student who lived with them while finishing high school here, and we remain friends to this day. We visited each other, even vacationing in Hawaii together. That gave me the opportunity to compare-and-contrast our social values.
Short summary: The typical Dane has it much better than we Americans do. The Danes have a more balanced society, while we Americans are more competitive and unequal: for us it's about the Benjamins. The result is that Danes value a broader spectrum of human values while we are much more unequal. A couple of examples: our capitalist-based healthcare system is more expensive and produces worse outcomes than most of Europe. Another example: The children of my Danish friends graduated with advanced degrees, debt-free. Middle class Americans often spend decades paying off student loan debt.
Denmark is also statistically wealthier than the US and far far wealthier than the rest of Europe. It is not at all indicative. But yes it's an incredible country.
I live in an Eastern European country! When young I have valued US for their standard of life, for democratic values! Couple of years ago, I visited US! The shock was big, never ever I would have thought I would see infrastructure so down, lots of people marginally broke! My country is not so reach as Denmark, or Germany but even us can afford more than 2 weeks holiday per year! For us, is mandatory to take 21 days leave at least per year! If you work, you have medical insurance (minimum services, but you do not die or get swamped by medical invoices), education is free .. not the best but there is ! So, i do believe that EU as a society did not fail its citizens! I do fail to understand how people educated in a democracy failed to choose a normal president! If US will continue on this path, not only it will fail its citizens, but you will lose all your values only in favor of the few not so good man!
Maybe they are wealthier because they don’t pay for higher ed, healthcare, daycare, gouging by tech, etc etc
If that's all it took, France would be paradise!
Well said! Denmark is too small. It's not indicative of its other European counterparts, let alone a juggernaut like America.
Joe Stiglitz has been saying that for years.
One of my favorite economists - been to numerous lectures of his. Love his description of the IMF as a group of nations that have taken their wealth, climbed into the clouds and pulled the ladder up behind them so the poor nations can't follow.
Europe and the US in general have amassed massive and disproportionate benefits: monetary and social owing to these institutions
100%. The prof of my intro to microeconomics for public policy PhD students at a top tier university proudly proclaimed that we don’t do “allocative” questions here, ie we don’t address whether and how wealth is spread throughout society. And that was it. A whole generation of future business and public policy leaders, academics who even might care about this told really not to.
I actually thought Paul was going to talk about this very distributional question in his thought experiment. That to me is the most salient difference between the US and Europe. Eg some of the profit that a European firm might derive from worker productivity gains might end up in public coffers to distribute to the rest of society.
And European corps have to support daycare and stock buybacks illegal and limits to boards greed
I believe stock buybacks were illegal in the US prior to Reagan
Indeed they were and with the whores in congress who work for their Wall Street masters I don’t see it ever being changed
I don't think stock buybacks per say is the source of American illness
Stock buybacks are definitely not the only source of inequality in the US and not even the most important one. They are just one aspect of the US economic system that is plain wrong in.
What is the justification of stock buybacks? Seems like a deeply unfair manipulation of one’s share price. Since most owners of capital are compensated by equities which can provide untaxed wealth it seems to be a form of tax evasion?
I remember my fascination with Rand in my early 20’s. I was all black-and-white then. It was very appealing to someone like me who had no philosophical background and eschewed religion. But, as with you, I came to be unhappy with her philosophy; it felt false after experiencing more of life.
There are some things she wrote that still stick with me, mainly that ideas matter, the notions we adopt guide our actions for better or for worse.
Ha. Same. My dad, an FDR/Jimmy Carter Democrat, asked me why I was reading that “reactionary writer” when I was in the throes of Atlas Shrugged. I came of age in the shadow of Si Valley and its ahistorical crypto-libertarianism. A bachelor of science degree in engineering requires only 18 semester units in humanities and social sciences out of a total of 120 units to graduate. The rest are all STEM. So you’d be lucky to have much exposure to philosophy, history, sociology, Econ, poli sci, lit., etc etc.
How ironic it’s this portion of the post-secondary STEM education that hasn’t kept up with the times.
Education is the driving force behind our technology superiority. The current administration is doing all they can to cripple the best of higher education. How dumb is that? I continue to be amazed at how given two choices, they seem to constantly choose the one with the wort outcome.
Have you read Neal Stephenson's "Snow Crash"? An early work of his, he postulates a dystopian, yet now frightfully recognizable future world of corporate cities with techno serfs. This is what the oligarchs and Trump as their muse are designing and setting up, and what Project 2025 is really all about in my estimation. Putting in place the structures and military / police controls to rule over the "mudsills" (look it up if the term is unfamiliar) and return us to feudal times / indentured servitude. In this model, an educated populace is actually a threat to their power and control. Reagan and the Republicans recognized this ages ago and set about destroying our education system in the early 80s. And now the chickens are coming home to roost.
Better living standards for the greatest number of people is keynote. We have an ability that we could excercise as a species that we have used to advance to this messa we currently contemplate. Overseers and minions of control have not worked in the past, only care of the weak and old; the keepers and disspersers of knowledge are key.
Have you read Kim Stanley Robinson's Mars Trilogy? Science Fiction modeling a positive future at its best IMHO.
Seems to me that's what Paul is saying.
You took the words right out of my … fingers. I had started a response to this PK post asking “what is an economy for”, but you’ve asked essentially that same question and provided a perfectly reasonable answer, one I happen to agree with.
It's funny. As a teenager and young man I was an ardent reader of Ayn Rand. The whole dog eat dog, capitalism reigns supreme mantra made so much sense. Then I grew up. Studied economics. Ran intel ops against the Soviet Union. Realized Ayn Rand had plagiarized her basic works from Soviet authors of the 20s (Anthem is a complete gloss of Zamyatin's "Мы"). Then started really thinking, what is the purpose of society? Of economy? Of politics? And came to the realization that it's (in economic terms) to maximize utility for the maximum number of people possible.
That's it. Nothing more.
And that then dovetailed into my growing spirituality - I refuted Christianity and adopted Buddhism. Studied yoga extensively. Traveled to India to study with His Holiness the Dalai Lama. Went on numerous retreats with Thich Naht Hahn. Joined a Transgender / Gay / Lesbian Sangha in San Francisco's Castro District. Began working with the homeless. All while still serving the "man" as a high paid consultant.
I now understand. The meaning of life is really nothing more than the golden rule folks, and that rule is consistent across all major religions, an integral component of Marx and Engels works (bought my first copies in Russian and German wearing my dress greens in East Berlin in the 80s by the way, used to read them in the SCIF running intercept operations,) and needs to serve as the basis of all things going forward:
Do unto others as you would have others do unto you.
That's it.
Well, and First Nations' call to plan to the Seventh Generation, that's a good one too.
Absolutely the point. GDP is just an average. It doesn’t state how the wealth is distributed. We really need to know what population quintiles are benefitting in order to compare living standards.
I don’t disagree. But my impression is that decades ago (the eighties) the political right captured the self image of the American aspirational worker and convinced them that voting for the interests of the rich few made sense because they (the majority non rich) hoped to join them soon and enjoy the fruits of their labour. To vote against the interests of the few rich thus became un-American and therefore - for those dreaming the American dream - against one’s own interests. The UK right have been trying to create the same mood music for a while and not without some success.
Anyway I don’t see that culture changing soon
Goes back way further than that - it's not a matter of party so much as of class.
"Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires." - John Steinbeck
Thanks for that quote. Never seen it before. Had to study a Steinbeck novel at school. Didn’t read him again after that. ;-)
One possible standard to measure quality of life for any geographical region or demographic group is longevity.
US longevity peaked in 2014 and has only increased a bit toward pre-pandemic levels.
The gold study for US longevity reports that females in the southeastern US added three years to their longevity between 1900 and 2000. The women clearly lacked access to vaccines, antibiotics, and reproductive healthcare. We suspect, too, that the rest of y'all hate us. And that takes its toll.
https://ysph.yale.edu/news-article/study-reveals-stark-differences-in-life-expectancy-across-us-states-over-the-past-century/
Well said
What the Europeans aspire to is much more equitable. The average resident has a much better shot at having a balanced life. What good is having that one extra dollar? Not much value if you have to run on the treadmill that much faster. Hard to enjoy your gains that way.
JiSK, you must be completely deluded. Have you been to the average European home? No washers/dryers - really? Really? No dishwashers - really? You're nuts. And the range of fresh food in the average European supermarket is broader and healthier than the average US equivalent. I have experienced both. What is true is that average US homes are larger in square footage, because there is more land. But that does not translate in Europe to a lower quality of life. In the intangibles too, Europe certainly wins. I think you should get on a plane and have a look for yourself.
Ah ... sixty years. That's the giveaway.
Really.
Have you been to Europe?
Have you eaten the food or actually shopped there?
Have you looked at the Happiness Indices? Europeans have more vacations, shorter work weeks, better food, cleaner water, cleaner air, longer life spans, healthier lives.
By all objective standards their lives are better than ours on almost every parameter you could measure or think of.
US standards of living have been decreasing for the past decade at least. And that decrease has accelerated under Trump.
But please, provide us with objective information from credible sources that refute my assertions.
I am French, I live in the UK, and , result of 2 world wars , and associated movement of population (which the Brits never understand) I have relatives in several European countries. France, of course, Belgium, Poland, and Germany. The numbers have constantly shown (at least according to the UK media) that France is always behind on the economic side compared to the UK. Yet, with family in France, with similar earnings, similar number of children, I can see that in spite of that, over the last 50 years, my family members (and there are a lot of them, 90 at the last family reunion) have a much better standard of living than us. Their kids were educated in a system that seemed to work. Their Health service was and still is better. Their cars a more expensive models than ours, their holidays, even with young kids at home, are longer and spent in more exotic places, winter and summer (we could only afford summer, in wet Wales). The education and Health system are starting to show the strain in France. Because the neo con con trick of low taxes and small government has reached the Continent's shores sadly, and been adopted by many politicians.
I say this with a great amount of respect for the UK and its working class people, but conditions for the average person seem quite miserable for the average person, especially when compared to European peers like France or Germany. I lived in London for a few years and loved the city, but I couldn’t imagine settling down there given the cost of everyday life.
The neo con con is a pernicious lie that needs to be strenuously debunked at every opportunity. Simon Kuper in the Financial Times in October says “It’s easy to mock the French … most of them expect the state to fund their 25 year retirement and everything else” He goes on to say “their anger is partly justified. France today is an underfunded social democracy, crossed with an oligarchy. More than any other Western European country, it’s dominated by powerful billionaires paying relatively low taxes…Oligarchs (people who possess both wealth and power, and use one to acquire the other) tend to keep their wealth in holding companies. Because corporate tax (cut by Macron) is lower than income tax they pay an effective rate that is about half that of the average French person.” Gabriel Zucman the economist Prof Krugman was talking about has a book coming out “whose title translates as The Billionaires Don’t Pay Tax on Revenues and We’re Going to Put a Stop to that. “ It’s a really good article. I love the line “This annoys many French people. France isn’t the US, where the rich are admired.” My mother was from the Cotswolds, which is very pretty. London is an amazing city, but the locked gardens, which you never see in Paris, drive me crazy. Kuper obviously thinks the French people could compromise a bit on their generous welfare state. I think Britain, which is a great country, could stand to be a lot more like France, (obviously never admitting to it) with its Oligarchs paying their fair share of taxes.
We need to bring back the French guillotine!
With basically zero (productivity) growth in the past years in the big 4 (France, UK, Italy, Germany), do you think the quality of life in Europe will still be as good in 10-20 years?
Not if they follow the busted flush that is the neo con low tax small government mantra.
Yes
Climate Change and Heat domestic will be the ruin of that. That's a bigger problem than productivity.
Hi Catherine. Just a short note from me - I think your observations are on the correct points, and that you have drawn the correct conclusions. What Paul Krugman has argued in this, and in previous, post is that traditional economic measures of ‘productivity’, the measure used as measure of a populations wealth in disposable income, has limitations. Other measures of well-being, you and I might even say ‘our human productivity’, are not measured. Consequently the examples of well-being which you cite are left out of the economic analysis, but are very important for human satisfaction and happiness. I’m Irish, Republic of Ireland, but resident in Scotland for almost all of my adult life. GDP in Ireland is exceptionally high, and choice for Irish citizens has improved enormously. However, Irish people face huge challenges in areas like the cost-of-living, housing costs, insurance (across all areas, including health), and ever more pressure on essential services without apparent answers. In short, GDP growth - the difference which Paul Krugman addresses - between the US and Europe is both factual and also misleading when you look at people’s lives. And, of course, it is used in political polemics! Yours, Anthony.
How much do you think being a tax haven for ill-gotten gains contributes to that? It seems to be the major industry of the UK--protecting wealth. Inequality as high as the US with only the NHS as a benefit?
I agree with all the quality of life comments, I moved to the Netherlands for a work project for a US company in 1995, left that company in 2000, and haven’t worked for Americans since. I’m now semi-retired, but during my executive years with several companies, I can tell you that most European countries (here I exclude the UK) have quality of life for all the workers, not just management; might have been better a few years ago (has been 10 years since I’ve led a company over here), but you can take your GDP growth powered by tech and leave it in the US — I’d rather have a country which still has Saturday markets with real farmers selling their produce, with independent shops in the town centre, restaurants that aren’t big chains, the ability to drink a really decent cup of coffee which isn’t from a chain, and have a piece of apple tart with it for around $5. I remember the Economist’s Cheeseburger index (or was it a hamburger index) which gave us an idea of comparative prices around the world. But of course, they lack any kind of relevance or usefulness without a comparison to the average wage of a non-management worker in that country. What I can say, is I have a fairly unimpressive pension income and I manage here, something that would be impossible in the US. And I have great healthcare, green spaces, the ability to walk to all the things I need (stores, doctor, pharmacy, physio, churches, parks, restaurants, cafes) and I still live in my own house - and my mortgage, bought in 2018, is a paltry 250 euros a month. You can keep my home country, the US, with its “great” economy and GDP growth. I’ll happily stay here.
Haven't lived in the States since 1989. Tottally agree.
Yet we still follow their news. If America weren't so destructive for the broader world, it would've been in the interest of the world for America to die down or collapse.
Very well said
They hate Europe for its freedom!! Any examples of well functioning governments that answer to everyone and try to live by rule of law are a threat and must be attacked … Trump is the enemy within.
Productivity growth is not just primarily a measurement problem and a distribution problem.
Those are important questions. Yet they leave intact a deeper assumption that remains largely unquestioned: that productivity growth itself is the natural benchmark against which economic success or failure should be judged.
Once productivity growth becomes the implicit norm, stagnation automatically appears as economic failure — even when living standards, institutional robustness, social cohesion, or ecological sustainability may be holding up comparatively well.
Europe is then framed as “lagging” not because outcomes are worse, but because it grows differently, more slowly, or in sectors that are harder to translate into standard productivity metrics.
This matters because productivity is not a neutral yardstick. It systematically undervalues labor-intensive, care-based, and public sectors; it struggles with services where quality matters more than speed; and it largely ignores ecological costs and human limits.
In that sense, the European–US comparison is not only about tech versus non-tech, or about hedonic indices and diffusion effects. It is also about what we choose to count as economic success — and what we allow to disappear from view by doing so.
Especially when competition among tech companies, however imperfect, leads mostly to lower prices for consumers wherever they are located. And increases in GDP, sadly, are neither necessarily good for the environment, or for the real standard of living of producers - we allow GDP growth to be everything that matters. Thus we get no vacations for workers, declining shares of the profits generated, and little if any protection for our natural resources.
Super analysis, thanks Luuk.
Very well said.
The real problem is distribution. Phil Wogamon once wrote to the effect that capitalism is a great producer, butva poor distributor of wealth. Reducing taxes on the highest incomes exacerbates that inequality.
Does tech bring wonderous, marvelous things to my life? Not really. To me it is something that I have to accept. Lived without it for a long time, never made much difference. Europe has such a rich history, I would trade that for all the do-dads tech has brought.
"Yet we don’t see Texans obsessing over why they can’t be like California. Within the U.S., to the extent that people think about this divergence at all, they realize that it’s mainly about composition effects."
That depends on who is doing the thinking. For many Texans, California is a woke hellhole, overrun by illegal immigrants and festering with crime, streets knee-deep in human waste because of the homeless. But at the same time, Texas is envious of California's tech boom and huge economy, thus the push by Texas to recruit/poach as much of that tech economy as possible. (Worth noting that the companies that do move from California to Texas tend to land in . . . Austin, the blue-est city in the state.)
Remember when thinking of Texas, it is a divided state. Cities, like San Antonio, Houston, DFW and El Paso are blue and trying to help their citizens. Rural areas are conservative enclaves of retirees and some corporate employees and corporate farmers. Austin used to be blue, but the tech companies ( looking at you Micheal Dell) have brought more money to GOP causes, and the old motto “Keep Austin Weird” is only a bygone saying.
And Texas leans heavily on what exactly, petrochemicals?
Texas is an environmental hell hole.
I believe the growth in solar panels in Texas has been Very significant. What's needed now is to upgrade power grid and continue with the solar installation. It's not about being woke anymore. It's actually more cost effective
Texas, b/c of wind and solar (but esp. wind) actually produces more of its power through green energy than do other states. Here's the AI summary on google: "Texas generates a massive amount of renewable energy, leading the U.S. in total wind and solar generation, with renewables making up roughly three-tenths (around 30%) of its total electricity in 2024, primarily from wind, but with solar rapidly growing. While natural gas remains dominant (around 51%), Texas is a powerhouse in clean energy, producing significantly more renewable electricity than any other state and even surpassing coal output with solar in 2025 for the first time"
Yes it’s ironic isn’t it. But in terms of gdp I was wondering if petrochemicals and oil were the main drivers. I doubt space x counts for that much
While this article focused on Europe it gets to questions I have had for a while. Productivity growth in the US since the 80s has not had a broad based growth in wealth in the US, not only regionally but it has being concentrated in the top 20% ( moreso the top 1%). This rings true with what you discussed here. I do think the US tech lead and productivity lead are valuable but that value seems to be to the Oligarchs. The EU's lag is much more about a lag to local Oligarchs.
That's the "trickle down effect" in action.
"Trickle down on"
These corporations could do better by their employees. I’m a retired CPA and had a client with a manufacturing company. He and his partner gave the employees pay comparable to the area, the usual holidays and generous vacation, but what made their employees so productive was that they bonused 2% of net profits before tax to employees each year. This would usually amount to almost the employees annual salaries. These folks knew that anything spent or time wasted directly affected their pocketbooks so waste was a four letter word. If these big corporations would bonus all the way down the line, productivity would be up, waste would be down and employees would be happy.
Follow where the Tobacco Money went; into general mills and food products. Less risk and the same advertisment genre. Couple that with Walmart type marketing destroying small businesses and Amazon type delivery systems. We have a monopoly infestation in a pretty good govermental model. Not perfect but repairable.
I have lived in the Netherlands for almost 20 years now after spending my first 50 in Canada. It's a tiny country that makes most things work better than I expect. I shop online for everything except food. I only buy from local Dutch businesses. They typically have great websites and you can trust them for refunds or resolution and next day delivery.
I will not buy anything from Amazon anymore. I do not trust Google anymore. Facebook kept me on file for 11 years after I left. I found out when someone tried to hack my account. Facebook can go ... well, you get the idea.
There was this period when the new technology became so remarkable and available to anyone that it was just fun. It became my career. I helped a few startup owners become one of the 0.1%.
That said, the new technologies -- AI, social media, spyware and crypto et al are black box solutions crafted by a billionaire broligarchy that is focused on extracting as much wealth as they can from the only resource they really own, their loyal customers.
I have no use for this latest American technology. And I think life is better here than almost anywhere across the pond. Your mileage may vary.
Costco does all that too.
Tech industry is like a Frankenstein monster. While it creates productivity boom in tech sector, it will also create surging inequalities (on much greater scale than finance capitalism), it will swallow democracy, it will dehumanize common people, it will destroy jobs, it will aggravate regional disparities & even global disparities (which earlier was legacy of globalization), it will create addiction and mental health diseases in children as well as adult, it will promote hate and anger in people just for their profits.
Wake up Americans. The Frankenstein monster of your tech industry has already gobbled your democracy.
(read book Technofeudalism by Yanis Varoufakis)
Thank you for the reading tip. Will definitely read this book.
I suppose the higher inequality in America is part of this story as well. The data credits the US with higher GDP growth because the profits are going to American entities (in this case corporations).
However in keeping with the single representative agent idea, if the income is all accruing to a single guy, Marcon Zucksmusk, then the higher aggregate income is meaningless for the standard of living of the population at large, who may have identical standard of living to Europeans despite living in the higher GDP nation.
Or considerably lower.
Very nice post! In this paper https://crei.cat/wp-content/uploads/2025/10/TTH.pdf, we present a simple model that captures some of these effects, and relate it to trade wars. We wrote it for the last IMF Jacques Polak conference https://www.imf.org/en/news/seminars/conferences/2025/11/06/2025-jacques-polak-annual-research-conference.
America! The land of declining life expectancy and rising infant immortality.
The analysis is beyond me but the spirit resonates. Europe’s investment in its human and cultural capital is mind boggling I make a guess. Let’s measure that somehow. To borrow a term the USA made famous, Europe is now the melting pot and the globe is better for that. Let’s measure it!