There is one very boring, but nonetheless important, factor I feel you left out, and that is supply chain speed and efficiency. As someone who works in manufacturing, I have to say it is hard to overstate what a huge difference this makes. In the US (and to be fair manufacturing centers in China as well), if you break a tool, or need supplies, or have to get a replacement part, you go on a website, order what you need, and it will either be here tomorrow, or if you need it faster than that, you can often drive over to the warehouse and pick it up today.
In most other countries it just doesn't work that way. You have to contact your dealer, who may or may not have an up to date inventory on their website. You tell the sales rep. what you need, and they will get back to you with a quote, which will probably take at least a day, maybe as much as a week to get. Then you approve the quote. They send the order to their distributior, and then they give you an ETA of when you can expect it. All in all, something that is one or two days in the US, can end up taking weeks in many other countries.
This might sound like a simple inconvenience, and not something that is going to make a major difference in GDP, but if you are prototyping a new product, or running a job shop that handles multiple customer orders, this simple issue can dramatically lengthen time tables on production. A project that could realistically a week to turn around a prototype with a modern, responsive, supply chain, can easily stretch out to several months if you have to wait for parts and supplies. Spread that out over the entire economy, and it is a measurable hit to overall productivity.
This does drive me crazy. I work in manufacturing for a business that has factories in Europe, US, China etc.
It’s a business decision - there are “industrial amazons” that you can order like this off in Europe and we used to do it, then in the spirit of cost saving and finance compliance we added the need for a PO and to use our payments schedule. This added 3days internal to ordering a part plus up to 6months supplier onboarding, we insist on 180days payment terms so no partner will let us use the website, we have to use special pricing over email, also adding days. In 24:7 manufacturing days to get a part sitting in a warehouse down the road is crazy.
The Chinese just ignore the requirements, they pay for everything on delivery and get it from anyone willing to sell it. In the US then they use huge contracts with companies to reduce the friction but not remove it - this doesn’t work as well in Europe because each factory is served by a different supplier.
There’s plenty of justification for this process for ordering large machines but for commoditised motors, gearboxes, one off pieces of metal for a specific task it’s madness.
Totally fair call-out — we didn’t touch on supply chain responsiveness, and you’re right: it’s a huge but often invisible factor. Most people outside manufacturing or ops just don’t see how much friction builds up in day-to-day execution.
What you’ve described is something I’ve seen too — not a lack of suppliers or infrastructure, but layers of process and policy that turn a one-click order into a week-long slog. And over time, that delay compounds: prototypes take longer, customer jobs slip, iteration cycles stretch out. It does hit productivity, even if it doesn’t show up in headline stats.
But here’s the real question: is this a systemic problem that actually needs fixing at a policy or structural level? Or is it something individual firms could solve if they were willing to trade a bit of control for speed?
In other words, are we dealing with a cultural preference (for compliance, centralisation, predictability) that’s holding back the whole system? Or just a bunch of isolated decisions that smarter procurement design could fix?
Curious what others think — especially anyone who’s tried to push for faster, more flexible supply chains in big orgs. Is there a path through, or does the system resist?
Cultural preference for absolute safety over any speed I think.
Some of this is understandable - compliance failures can be very expensive but I’m sure there are much better ways around.
Genuinely the attitude from some in finance is that a “speed bump” is a good way of reducing spend. Because it is easier than the hard work of discussing and holding people to account for their spend. Problem is that a speed bump acts on all transactions not just unnecessary ones. It’s also about the financialisation of manufacturing- driving costs down is pretty much the point of manufacturing but it has morphed into tricks like payment delays that look like we’re saving cash flow on paper but mean that our suppliers have to jack up costs to fund the financing themselves. (We also refuse to engage with them if they include the financing in their cost sheet so force them to hide it).
So a cultural dismissal of fast response backed up by the same culture also infecting agencies that regulate companies is the main driver and then tricks of financialisation obscure the issue further.
Except in china which gets a by from all these rules.
Really well said — especially that bit about speed bumps being treated like a feature. Totally agree. What starts as reasonable caution or cost control ends up turning into this slow, clunky default that just gets baked into how things work.
The point about financialisation is spot on too. It all looks clever on paper — stretch payment terms, delay spend, hold tighter controls — but the real cost is pushed onto suppliers, timelines, and ultimately productivity. And because that cost doesn’t show up directly, no one’s really accountable for it.
Honestly, it feels like what’s really needed is a cultural reset. And I keep wondering — what actually drives this mindset? My (possibly cynical) theory is: there’s not much personal risk for poor performance, and not much reward for speed or initiative. So the system just defaults to protecting the downside and avoiding hassle, rather than moving fast and taking smart risks.
Curious if you see it the same way — or if there’s something deeper at play?
I think that’s pretty much it, and the poor performance isn’t in a way even that poor, it’s not worse than last year - but crucially it’s not better and that compounds surprisingly fast. I also don’t think this applies just to individuals but also to companies and perhaps even to countries.
I wonder (but this is a half formed thought) if as a western culture we’ve made that transition from plucky, scrappy, messy but competitive company to one that’s got an established brand & product and is (potentially sensibly at first) more worried about killing the golden goose than hatching another one. So we metaphorically build up walls to protect it as it ages, collecting plenty of eggs but at the same time atrophying and eventually looking over the wall to realise someone else has six shiny new golden geese.
I’m not a deregulation extremist, I think the culture side is even more important and this being the internet it can be hard to find a middle ground - I think it’s good that we ensure cars are safe for e.g. - but we have to acknowledge that regulations have a cost (in time and finance) and have to judge if they are worth it, if there is a better way to reach the end goal. And that has to be reevaluated occasionally.
The Americans in a way show how that works - their manufacturing sector is in many ways more regulated than us Europeans, with some clearly daft rules and they’re struggling there, but in other sectors like finance, construction and software there are less barriers and they outcompete.
Open societies should be able to outcompete closed ones, but if we add in more barriers than in closed ones we lose our natural edge. Just a dump of my thoughts, needs refining. No idea how to effect that cultural change.
I think it is a mix of both individual and structural issues. Most of my experience is with the US, China and Japan, and it varies widely based on the culture. In Japan, for example, it is almost entirely a structural issue. The manufacturing culture is so risk-averse and relationship based, that there just isn't a faster option available. Wheras in the US, it is exactly as Ed Pethick describes it, where if there is friction, it has deliberately been put there for some reason, be it spending control, compliance, or honestly sometimes straight up graft, because someone is getting a kickback on a contract.
If you look at the extremes, like say comparing the US to Japan, you can see the structural issues at play, but if you are trying to compare productivity between something like a small and a large European manufacturer, it can be really difficult to tell what is a structural issue, and what is just a need to modernize an individual company's supply chain.
Wait... so first you explain how American GDP is a one giant dot.com bubble...and then you claim EUR is "falling off"? It reminds me of articles about 10 yrs ago describing how "rich" Russia is because of its GDP growth. Pathetic.
I get where you’re coming from — but the argument isn’t “America bad, Europe worse.” It’s that the U.S. has serious distortions (tech dominance, financial excess, inflated metrics), and yet Europe is still falling behind on the fundamentals that matter for long-term growth: innovation, capital flows, and productivity.
I don't think anyone can claim that the U.S. model is perfect (I would argue far from it) — and yet Europe hasn’t managed to offer a credible alternative. If anything, both systems are showing different versions of dysfunction. One just happens to be better at monetising it.
Happy to hear where you think I’m off — what do you see as a more grounded view of where things are headed?
I have been struggling with per capita GDP as a measure of quality of life. It doesn't match my own experiences living in the US (SE and NE), UK(London) and Switzerland and many visits to "low" GDP per capita countries in Europe.
One obvious quirk is healthcare and health outcomes. The US spends more than 2ce on average what other OECD countries spend per capita on healthcare. All of that spending gets counted in GDP but the US has far worse health outcomes. If US healthcare costs dropped in half, the US ranking in GDP would drop. But QoL could go up. There are probably other quirks like that.
Totally agree — GDP per capita is a blunt tool, and it gets especially misleading when high spending doesn’t translate into better outcomes, like with U.S. healthcare. All that extra cost inflates GDP but doesn’t really improve quality of life.
Some of that gets smoothed out if you look at GDP per capita in PPP terms instead — it adjusts for local prices and purchasing power, so you get a better sense of what people can actually afford. But even then, it still misses big stuff like health, safety, leisure time, or housing stress. Feels like we need a quality-of-life index that actually includes... quality of life.
Americans spend more and have higher total wages but from visiting the US and living in Europe it often appears that the cost of living in Europe is more affordable then the states (no data to back this up just vibes)
Yeah, I’ve noticed the same. Americans earn and spend more. When I’m in Europe, things like groceries, rent, and even dining out often feel cheaper. A lot of immigrants do prefer the US though because despite this the ability to save money is much higher in the US.
There are studies that try to compare cost of living and purchasing power across countries, but I think how things feel on the ground still counts for something. Sometimes “vibes” are just a shorthand for lived experience that stats don’t fully capture.
Where in Europe and the US were you living? I think comparing NY to Scotland or Ohio to London can throw things off quite a bit!
Definitely US financial system rewards individuals with the ability and delayed gratification of saving + investing more (higher access, information, and cultural norms to financial tooling)
Comparing Europe to the US on costs productivity and other large metrics is like comparing fruits and vegetables for which are healthier it depends on which fruit and which vegetable and personal circumstance.
I’ve visited Raleigh NC, San Fran, San Diego, NYC, Boston so not a large sample of the states and definitely weighted towards cities / tourist locations. Then I live in Ireland and spend lots of time in France and Italy, also have traveled around Eastern Europe in recent years.
Comparing Cost of living is definitely as much of a science as an art as how it “feels” to live somewhere can make similar costs present as very different and purely monetary measures do not include Qualitative data
To highlight 3 things I’ve experienced working in Europe and America
1. The labor market is incredibly restrictive: firms are leery of hiring workers because it can be damn near impossible to fire them, even if they turn out to be a poor fit. It makes it incredibly hard for new businesses to start or scale, or quickly pivot. You can see this show up in the unemployment rate (ie 7.5 in France and 6.3 in Germany), numbers that would be a political catastrophe in the US
2. Slow adoption of technology - I recently was on a work trip in Germany and was a bit struck by how everyone was used cash, and the use of physical paperwork. I literally had to learn how to use a fax machine to fax docs for work. American work culture seems way more keen on adopting new technologies and methods (I’m still a bit surprised by how fast companies are implementing AI)
3. Bureaucratic nightmare - to create a small business or a LLC in the US takes about an hour and can be done on line; the same task in Germany felt like a kafkaesque nightmare. Granted the fractured nature of states in the US can also increase bureaucratic bloat (California) but it’s a lot easier for businesses to just move to Texas.
Totally with you on points 1 and 2. The risk aversion in many European labour markets really does make it harder for new businesses to scale or pivot quickly — and that culture bleeds into tech adoption too. It’s one of the big reasons you don’t see as many fast-scaling startups in Europe compared to the U.S. The willingness to try new tools, fail fast, and move quickly just isn’t baked into the system in the same way.
That said, I’d push back a bit on the bureaucracy point. What you experienced in Germany is absolutely real — and it’s one of the worst offenders. But it’s not the norm across all of Europe.
In the UK, for instance, you can set up a company online in minutes, filings are simple and cheap, and most government services are fully digital. I can renew a driving licence with an online form, book NHS appointments, manage taxes — all without speaking to a single human. Most people don’t even need to file a tax return unless they’re self-employed.
So yeah, bureaucracy is a drag in parts of Europe, but it’s not a “European” problem — it’s a patchwork. And ironically, that patchwork is part of the problem: it makes it harder for businesses to scale across borders compared to operating inside a single, unified U.S. market.
Curious if you’ve seen any counterexamples, or was your experience mostly Germany-based?
I had a totally different experience in Switzerland. Setting up the company was a breeze, and unlike the US, paperwork was not high. The Swiss are very pragmatic. To cut audit burdens they offered the company an automatic SFr1k per month deduction if we didn't bother to record and claim business expenses less than SFr50.
The UK is an outlier in Europe and i’d group it into the “Anglo-sphere” (Ireland also has solid bureaucracy and was pretty easy to get a visa for work there!). Some countries are better at bureaucracy (I’ve heard good things about Sweden and Estonia, the Dutch were fine), but my experience in France, Germany and Italy were bad. Italy was so egregious I thought I had been transported to the 1980s.
It’s also important to make a distinction between Europe and the EU. For the EU, it’s hard to sustain productivity when your three biggest economies are wrapped up in regulatory mess
Sadly, the ability to easily set up a company in the UK does not translate into measurable productivity which is pretty poor and stagnating, especially in the public sector.
Europe’s problem is that it doesn’t lead in any frontier technology and really just wants to preserve wealth rather than create it.
Yeah, fair point — and agree on the contrast. But it does make me wonder… isn’t bad bureaucracy part of what’s created entire industries in the U.S.? Think of tax prep, payroll software, compliance tools — whole companies exist just to navigate the mess.
Maybe there’s a version of that in Europe’s future too? Not ideal, obviously, but sometimes inefficiency becomes a market in itself.
Bad bureaucracy definitely exists in the US, it’s just the federal government has significantly less purview over everyday life than that in Europe, and states vary widely
Interesting trends are discussed here. Seems that conditions were ripe for continued economic growth in the US, and attracting talent. I wonder the effect tariffs and anti/immigration efforts by Trump et al will have on some of these trends.
I don't understand Suspect #2. If America produces $100 worth of oil and uses it as an input, in equilibrium I would expect that directly increases output (and therefore, GDP) by about $100. If instead she exported (or consumed) it, it would directly increase net exports (or consumption) by, again, about $100. In other words, I would expect the marginal revenue product of oil-as-an-input to equal the price on the global market -- otherwise, America is using too little (if higher) or too much (if lower).
Meanwhile, if America imports $100 of oil for use as an input, again, in equilibrium, I would expect that it should increase output by about $100, cancelling out the effect on net imports. So the question of energy consumption seems like a red herring; I would expect energy production to be the real issue.
Great question — and I get where you're coming from. But I think the issue is that you're viewing energy purely as a dollar-for-dollar input, where $100 of oil = $100 of output. In reality, though, energy isn’t just a cost — it’s a productivity multiplier.
That $100 of energy powers machines, logistics, server farms, heating, cooling, transport — all the infrastructure that lets a worker or business produce far more than the value of the input itself. So in practice, $100 of energy might enable thousands of dollars in GDP, depending on how it's used.
That’s why high per-capita energy use in the U.S. helps explain higher GDP per hour. It’s not that energy is mispriced — it’s that having more of it available per worker enables more output, especially in energy-intensive sectors.
So the point isn’t about net exports or national accounts, but about how input intensity shows up in productivity metrics — and why the U.S. might look more “productive” partly because it's burning more fuel per person.
And the British response to all this was Brexit (step one of leaving inefficient Europe, only to replace it with even more inefficient isolation that lacks even the benefits of low-friction trade), and now to consider voting Reform whose populist promise is to end all immigration and boost the welfare state. You couldn’t make it up.
Yeah, it does feel like a political loop of frustration and short-term fixes. But if this really is the direction we're heading — isolation, anti-immigration, populist promises — what actually comes next? What's the endgame here?
True — and it actually fits the broader pattern. High U.S. health expenditure inflates economic metrics like GDP and productivity (since healthcare is a massive sector with high dollar flows), even if the actual outcomes — like life expectancy — are worse.
In a way, it's the same story as finance and real estate: the system generates a lot of “measured” economic output, but not necessarily more value in human terms. So the U.S. looks more productive on paper because it's spending (and charging) more per treatment, per drug, per hospital visit — even if that spending isn't buying better health.
It’s a reminder that GDP per hour worked tells you how big the economic pie is, not whether the slices are being used wisely.
Eh, that’s mostly the product of choices. It’s true healthcare costs more, but Americans also use healthcare substantially more than their European counterparts.
As for as life expectancy, most of that is due to America having significantly higher excess deaths (car accidents, murders) and being more unhealthy than European counterparts. Much of that is just choices people make
Fair points — individual choices do play a role, no doubt. But then the question becomes: if a system consistently channels more money into services without better outcomes, and that spending props up productivity stats, what exactly are we measuring?
At what point do we stop calling it "efficiency" and start calling it "expensive dysfunction"?
It depends on which outcomes. The US performs about the same as European nations in mortality rates within 30 days of acute hospital treatment and patient safety. The biggest difference is preventative care and rationing. The European system is focused on *preventing problems before the arise* while the US is geared to treating after the sickness exists. Combined with generally less healthy population, and you get significantly higher costs in the US.
The other big, and often unspoken thing, is that European systems often ration care and are pretty aggressive about not approving new procedures/“unnecessary” operations. I remember this being a big issue for me and I ended up having to travel back to the US to get a procedure done.
I agree that it’s expensive dysfunction. I don’t think Americans actually would go for a universal system like Britain or France, but one like the Swiss or Dutch would be doable and help with costs
Yeah, and to be fair, it’s not that U.S. healthcare intends to wait until things break — it’s that people often delay seeking care because of cost. High deductibles, surprise billing, and patchy insurance mean a lot of Americans avoid going to the doctor until a minor issue becomes a serious one. It’s not a system failure in capability — the quality of acute care can be excellent — it’s a failure in access and affordability.
That’s part of what drives the “expensive dysfunction” we’re talking about: the system’s designed to deliver high-end treatment, but too many people can’t or won’t engage with it early on. In contrast, European systems do more to get ahead of problems because people don’t have to worry as much about the cost of seeing a GP or following up on symptoms.
Totally agree with you on the Dutch/Swiss models — they strike a more pragmatic balance. Would love to hear your take: if you could import just one policy lever from those systems into the U.S., what would it be?
Ooohh. Probably allowing the government (through Medicare and Medicare) to set and negotiate prices for specifically defined benefits. It’s funny because the ACA effectively put the US in the path of being like the Swiss/Dutch model and you could theoretically get there with a few tweaks. The real big sticking point would be that states manage Medicaid and I’m not sure the constitutionality of the federal government determining what price a state can set for specific benefits
Yeah, that makes a lot of sense — especially the idea that the ACA laid the groundwork, but state-by-state Medicaid control makes it hard to finish the job. Feels like one of those areas where the structure just resists clean reform.
Appreciate the exchange — really insightful points.
But these choices are themselves problematic. Wealthy, happy countries generally do better on these criteria. Why, for example, has the US had a catastrophic opioid epidemic (following similar episodes with methamphetamine and crack cocaine) while other countries have not had anything comparable? And even looking at countries with high gun ownership, US murder rates are much higher.
Actually, Canada and Scotland, for example, suffer from comparable opioid issues as the US, despite their different systems, so it’s safe to assume that it’s not solely a system issue.
As for the gun and murder issue, it really isn’t an apple to apple comparison here. If we try to compare, say, Maine, with a homicide rate of 1.5, with its right to keep and bear arms, vs France, with a homicide rate of 1.3 and a tightly regulated firearms framework, at which point can they converge? The US and Maine differs too much from France, with other factors thrown in, to make a direct comparison meaningful.
I wasn’t aware of the Scottish case, which looks really bad. Canada also surprising.
I take your point on non-comparability, but I’d push it further to encompass the GDP and productivity comparisons. Even pre-2025, very few people from other wealthy countries desired a permanent move to the US, and (also pre-2025 at least) vice versa. EU and US really offer very different bundles of goods and services, broadly defined.
If I remember correctly from one of those datasets, the only country with more American-born people living there than the other way around is Australia.
Numbers are tiny relative to population, and most of these moves aren’t permanent. International students are a big group, though that may not continue
“These choices are problematic” maybe to you. But countries are entitled to make choices and trade offs, and have different cultures. America has always been a more violent society than Europe (since we have recorded), and the yanks have made the decision that they are ok with the violence if it means they keep guns. *You* may not like that choice, but it’s one society gets to make!
It’s true the US has had catastrophic opioid epidemic, but other countries have had comparable issues. Which ones are you talking? Because I can think of 5 countries off the top of my head.
Never mind in Europe, crime has been rising and drug addiction and usage has skyrocketed, particularly cocaine and opioids. Cocaine usage is higher in Europe than the States. Of course, having a universal system helps people with addiction, but having said system is a *choice*
I sometimes wonder if the US exemplifies the kind of power law found, for example, in the VC world in which a small number of enormous winners more than compensate for a long tail of mediocrity. In contrast, for the median individual, Europe, with its welfare state may be (or more accurately) may have been a better bet.
I agree. I think the point of this article tho, is that European choices will increasingly be harder to sustain if productivity and growth remain low. Indeed, France has been dealing with a political and financial crisis the last 6 months for exactly this reason: deficits are too high, and economic growth hasn’t kept up with the growth of the pension system. Macron tried to offer a fix (raising the retirement age from 62 to 64) but it’s deeply unpopular
There is one very boring, but nonetheless important, factor I feel you left out, and that is supply chain speed and efficiency. As someone who works in manufacturing, I have to say it is hard to overstate what a huge difference this makes. In the US (and to be fair manufacturing centers in China as well), if you break a tool, or need supplies, or have to get a replacement part, you go on a website, order what you need, and it will either be here tomorrow, or if you need it faster than that, you can often drive over to the warehouse and pick it up today.
In most other countries it just doesn't work that way. You have to contact your dealer, who may or may not have an up to date inventory on their website. You tell the sales rep. what you need, and they will get back to you with a quote, which will probably take at least a day, maybe as much as a week to get. Then you approve the quote. They send the order to their distributior, and then they give you an ETA of when you can expect it. All in all, something that is one or two days in the US, can end up taking weeks in many other countries.
This might sound like a simple inconvenience, and not something that is going to make a major difference in GDP, but if you are prototyping a new product, or running a job shop that handles multiple customer orders, this simple issue can dramatically lengthen time tables on production. A project that could realistically a week to turn around a prototype with a modern, responsive, supply chain, can easily stretch out to several months if you have to wait for parts and supplies. Spread that out over the entire economy, and it is a measurable hit to overall productivity.
This does drive me crazy. I work in manufacturing for a business that has factories in Europe, US, China etc.
It’s a business decision - there are “industrial amazons” that you can order like this off in Europe and we used to do it, then in the spirit of cost saving and finance compliance we added the need for a PO and to use our payments schedule. This added 3days internal to ordering a part plus up to 6months supplier onboarding, we insist on 180days payment terms so no partner will let us use the website, we have to use special pricing over email, also adding days. In 24:7 manufacturing days to get a part sitting in a warehouse down the road is crazy.
The Chinese just ignore the requirements, they pay for everything on delivery and get it from anyone willing to sell it. In the US then they use huge contracts with companies to reduce the friction but not remove it - this doesn’t work as well in Europe because each factory is served by a different supplier.
There’s plenty of justification for this process for ordering large machines but for commoditised motors, gearboxes, one off pieces of metal for a specific task it’s madness.
Totally fair call-out — we didn’t touch on supply chain responsiveness, and you’re right: it’s a huge but often invisible factor. Most people outside manufacturing or ops just don’t see how much friction builds up in day-to-day execution.
What you’ve described is something I’ve seen too — not a lack of suppliers or infrastructure, but layers of process and policy that turn a one-click order into a week-long slog. And over time, that delay compounds: prototypes take longer, customer jobs slip, iteration cycles stretch out. It does hit productivity, even if it doesn’t show up in headline stats.
But here’s the real question: is this a systemic problem that actually needs fixing at a policy or structural level? Or is it something individual firms could solve if they were willing to trade a bit of control for speed?
In other words, are we dealing with a cultural preference (for compliance, centralisation, predictability) that’s holding back the whole system? Or just a bunch of isolated decisions that smarter procurement design could fix?
Curious what others think — especially anyone who’s tried to push for faster, more flexible supply chains in big orgs. Is there a path through, or does the system resist?
Cultural preference for absolute safety over any speed I think.
Some of this is understandable - compliance failures can be very expensive but I’m sure there are much better ways around.
Genuinely the attitude from some in finance is that a “speed bump” is a good way of reducing spend. Because it is easier than the hard work of discussing and holding people to account for their spend. Problem is that a speed bump acts on all transactions not just unnecessary ones. It’s also about the financialisation of manufacturing- driving costs down is pretty much the point of manufacturing but it has morphed into tricks like payment delays that look like we’re saving cash flow on paper but mean that our suppliers have to jack up costs to fund the financing themselves. (We also refuse to engage with them if they include the financing in their cost sheet so force them to hide it).
So a cultural dismissal of fast response backed up by the same culture also infecting agencies that regulate companies is the main driver and then tricks of financialisation obscure the issue further.
Except in china which gets a by from all these rules.
Really well said — especially that bit about speed bumps being treated like a feature. Totally agree. What starts as reasonable caution or cost control ends up turning into this slow, clunky default that just gets baked into how things work.
The point about financialisation is spot on too. It all looks clever on paper — stretch payment terms, delay spend, hold tighter controls — but the real cost is pushed onto suppliers, timelines, and ultimately productivity. And because that cost doesn’t show up directly, no one’s really accountable for it.
Honestly, it feels like what’s really needed is a cultural reset. And I keep wondering — what actually drives this mindset? My (possibly cynical) theory is: there’s not much personal risk for poor performance, and not much reward for speed or initiative. So the system just defaults to protecting the downside and avoiding hassle, rather than moving fast and taking smart risks.
Curious if you see it the same way — or if there’s something deeper at play?
I think that’s pretty much it, and the poor performance isn’t in a way even that poor, it’s not worse than last year - but crucially it’s not better and that compounds surprisingly fast. I also don’t think this applies just to individuals but also to companies and perhaps even to countries.
I wonder (but this is a half formed thought) if as a western culture we’ve made that transition from plucky, scrappy, messy but competitive company to one that’s got an established brand & product and is (potentially sensibly at first) more worried about killing the golden goose than hatching another one. So we metaphorically build up walls to protect it as it ages, collecting plenty of eggs but at the same time atrophying and eventually looking over the wall to realise someone else has six shiny new golden geese.
I’m not a deregulation extremist, I think the culture side is even more important and this being the internet it can be hard to find a middle ground - I think it’s good that we ensure cars are safe for e.g. - but we have to acknowledge that regulations have a cost (in time and finance) and have to judge if they are worth it, if there is a better way to reach the end goal. And that has to be reevaluated occasionally.
The Americans in a way show how that works - their manufacturing sector is in many ways more regulated than us Europeans, with some clearly daft rules and they’re struggling there, but in other sectors like finance, construction and software there are less barriers and they outcompete.
Open societies should be able to outcompete closed ones, but if we add in more barriers than in closed ones we lose our natural edge. Just a dump of my thoughts, needs refining. No idea how to effect that cultural change.
I think it is a mix of both individual and structural issues. Most of my experience is with the US, China and Japan, and it varies widely based on the culture. In Japan, for example, it is almost entirely a structural issue. The manufacturing culture is so risk-averse and relationship based, that there just isn't a faster option available. Wheras in the US, it is exactly as Ed Pethick describes it, where if there is friction, it has deliberately been put there for some reason, be it spending control, compliance, or honestly sometimes straight up graft, because someone is getting a kickback on a contract.
If you look at the extremes, like say comparing the US to Japan, you can see the structural issues at play, but if you are trying to compare productivity between something like a small and a large European manufacturer, it can be really difficult to tell what is a structural issue, and what is just a need to modernize an individual company's supply chain.
Wait... so first you explain how American GDP is a one giant dot.com bubble...and then you claim EUR is "falling off"? It reminds me of articles about 10 yrs ago describing how "rich" Russia is because of its GDP growth. Pathetic.
I get where you’re coming from — but the argument isn’t “America bad, Europe worse.” It’s that the U.S. has serious distortions (tech dominance, financial excess, inflated metrics), and yet Europe is still falling behind on the fundamentals that matter for long-term growth: innovation, capital flows, and productivity.
I don't think anyone can claim that the U.S. model is perfect (I would argue far from it) — and yet Europe hasn’t managed to offer a credible alternative. If anything, both systems are showing different versions of dysfunction. One just happens to be better at monetising it.
Happy to hear where you think I’m off — what do you see as a more grounded view of where things are headed?
I have been struggling with per capita GDP as a measure of quality of life. It doesn't match my own experiences living in the US (SE and NE), UK(London) and Switzerland and many visits to "low" GDP per capita countries in Europe.
One obvious quirk is healthcare and health outcomes. The US spends more than 2ce on average what other OECD countries spend per capita on healthcare. All of that spending gets counted in GDP but the US has far worse health outcomes. If US healthcare costs dropped in half, the US ranking in GDP would drop. But QoL could go up. There are probably other quirks like that.
Totally agree — GDP per capita is a blunt tool, and it gets especially misleading when high spending doesn’t translate into better outcomes, like with U.S. healthcare. All that extra cost inflates GDP but doesn’t really improve quality of life.
Some of that gets smoothed out if you look at GDP per capita in PPP terms instead — it adjusts for local prices and purchasing power, so you get a better sense of what people can actually afford. But even then, it still misses big stuff like health, safety, leisure time, or housing stress. Feels like we need a quality-of-life index that actually includes... quality of life.
Americans spend more and have higher total wages but from visiting the US and living in Europe it often appears that the cost of living in Europe is more affordable then the states (no data to back this up just vibes)
Yeah, I’ve noticed the same. Americans earn and spend more. When I’m in Europe, things like groceries, rent, and even dining out often feel cheaper. A lot of immigrants do prefer the US though because despite this the ability to save money is much higher in the US.
There are studies that try to compare cost of living and purchasing power across countries, but I think how things feel on the ground still counts for something. Sometimes “vibes” are just a shorthand for lived experience that stats don’t fully capture.
Where in Europe and the US were you living? I think comparing NY to Scotland or Ohio to London can throw things off quite a bit!
Definitely US financial system rewards individuals with the ability and delayed gratification of saving + investing more (higher access, information, and cultural norms to financial tooling)
Comparing Europe to the US on costs productivity and other large metrics is like comparing fruits and vegetables for which are healthier it depends on which fruit and which vegetable and personal circumstance.
I’ve visited Raleigh NC, San Fran, San Diego, NYC, Boston so not a large sample of the states and definitely weighted towards cities / tourist locations. Then I live in Ireland and spend lots of time in France and Italy, also have traveled around Eastern Europe in recent years.
Comparing Cost of living is definitely as much of a science as an art as how it “feels” to live somewhere can make similar costs present as very different and purely monetary measures do not include Qualitative data
To highlight 3 things I’ve experienced working in Europe and America
1. The labor market is incredibly restrictive: firms are leery of hiring workers because it can be damn near impossible to fire them, even if they turn out to be a poor fit. It makes it incredibly hard for new businesses to start or scale, or quickly pivot. You can see this show up in the unemployment rate (ie 7.5 in France and 6.3 in Germany), numbers that would be a political catastrophe in the US
2. Slow adoption of technology - I recently was on a work trip in Germany and was a bit struck by how everyone was used cash, and the use of physical paperwork. I literally had to learn how to use a fax machine to fax docs for work. American work culture seems way more keen on adopting new technologies and methods (I’m still a bit surprised by how fast companies are implementing AI)
3. Bureaucratic nightmare - to create a small business or a LLC in the US takes about an hour and can be done on line; the same task in Germany felt like a kafkaesque nightmare. Granted the fractured nature of states in the US can also increase bureaucratic bloat (California) but it’s a lot easier for businesses to just move to Texas.
Totally with you on points 1 and 2. The risk aversion in many European labour markets really does make it harder for new businesses to scale or pivot quickly — and that culture bleeds into tech adoption too. It’s one of the big reasons you don’t see as many fast-scaling startups in Europe compared to the U.S. The willingness to try new tools, fail fast, and move quickly just isn’t baked into the system in the same way.
That said, I’d push back a bit on the bureaucracy point. What you experienced in Germany is absolutely real — and it’s one of the worst offenders. But it’s not the norm across all of Europe.
In the UK, for instance, you can set up a company online in minutes, filings are simple and cheap, and most government services are fully digital. I can renew a driving licence with an online form, book NHS appointments, manage taxes — all without speaking to a single human. Most people don’t even need to file a tax return unless they’re self-employed.
So yeah, bureaucracy is a drag in parts of Europe, but it’s not a “European” problem — it’s a patchwork. And ironically, that patchwork is part of the problem: it makes it harder for businesses to scale across borders compared to operating inside a single, unified U.S. market.
Curious if you’ve seen any counterexamples, or was your experience mostly Germany-based?
I had a totally different experience in Switzerland. Setting up the company was a breeze, and unlike the US, paperwork was not high. The Swiss are very pragmatic. To cut audit burdens they offered the company an automatic SFr1k per month deduction if we didn't bother to record and claim business expenses less than SFr50.
Yeah I mean the Swiss are one of the few countries that rival the US in wealth and productivity so not surprised
The UK is an outlier in Europe and i’d group it into the “Anglo-sphere” (Ireland also has solid bureaucracy and was pretty easy to get a visa for work there!). Some countries are better at bureaucracy (I’ve heard good things about Sweden and Estonia, the Dutch were fine), but my experience in France, Germany and Italy were bad. Italy was so egregious I thought I had been transported to the 1980s.
It’s also important to make a distinction between Europe and the EU. For the EU, it’s hard to sustain productivity when your three biggest economies are wrapped up in regulatory mess
Sadly, the ability to easily set up a company in the UK does not translate into measurable productivity which is pretty poor and stagnating, especially in the public sector.
Europe’s problem is that it doesn’t lead in any frontier technology and really just wants to preserve wealth rather than create it.
Britain’s productivity slump is mostly due to the lack of investment by the government and biz
Yeah, fair point — and agree on the contrast. But it does make me wonder… isn’t bad bureaucracy part of what’s created entire industries in the U.S.? Think of tax prep, payroll software, compliance tools — whole companies exist just to navigate the mess.
Maybe there’s a version of that in Europe’s future too? Not ideal, obviously, but sometimes inefficiency becomes a market in itself.
Bad bureaucracy definitely exists in the US, it’s just the federal government has significantly less purview over everyday life than that in Europe, and states vary widely
Interesting trends are discussed here. Seems that conditions were ripe for continued economic growth in the US, and attracting talent. I wonder the effect tariffs and anti/immigration efforts by Trump et al will have on some of these trends.
I think we will find out soon!
I don't understand Suspect #2. If America produces $100 worth of oil and uses it as an input, in equilibrium I would expect that directly increases output (and therefore, GDP) by about $100. If instead she exported (or consumed) it, it would directly increase net exports (or consumption) by, again, about $100. In other words, I would expect the marginal revenue product of oil-as-an-input to equal the price on the global market -- otherwise, America is using too little (if higher) or too much (if lower).
Meanwhile, if America imports $100 of oil for use as an input, again, in equilibrium, I would expect that it should increase output by about $100, cancelling out the effect on net imports. So the question of energy consumption seems like a red herring; I would expect energy production to be the real issue.
What am I missing?
Great question — and I get where you're coming from. But I think the issue is that you're viewing energy purely as a dollar-for-dollar input, where $100 of oil = $100 of output. In reality, though, energy isn’t just a cost — it’s a productivity multiplier.
That $100 of energy powers machines, logistics, server farms, heating, cooling, transport — all the infrastructure that lets a worker or business produce far more than the value of the input itself. So in practice, $100 of energy might enable thousands of dollars in GDP, depending on how it's used.
That’s why high per-capita energy use in the U.S. helps explain higher GDP per hour. It’s not that energy is mispriced — it’s that having more of it available per worker enables more output, especially in energy-intensive sectors.
So the point isn’t about net exports or national accounts, but about how input intensity shows up in productivity metrics — and why the U.S. might look more “productive” partly because it's burning more fuel per person.
And the British response to all this was Brexit (step one of leaving inefficient Europe, only to replace it with even more inefficient isolation that lacks even the benefits of low-friction trade), and now to consider voting Reform whose populist promise is to end all immigration and boost the welfare state. You couldn’t make it up.
Yeah, it does feel like a political loop of frustration and short-term fixes. But if this really is the direction we're heading — isolation, anti-immigration, populist promises — what actually comes next? What's the endgame here?
Yet the opposite story applies for health expenditure and life expectancy
True — and it actually fits the broader pattern. High U.S. health expenditure inflates economic metrics like GDP and productivity (since healthcare is a massive sector with high dollar flows), even if the actual outcomes — like life expectancy — are worse.
In a way, it's the same story as finance and real estate: the system generates a lot of “measured” economic output, but not necessarily more value in human terms. So the U.S. looks more productive on paper because it's spending (and charging) more per treatment, per drug, per hospital visit — even if that spending isn't buying better health.
It’s a reminder that GDP per hour worked tells you how big the economic pie is, not whether the slices are being used wisely.
Eh, that’s mostly the product of choices. It’s true healthcare costs more, but Americans also use healthcare substantially more than their European counterparts.
As for as life expectancy, most of that is due to America having significantly higher excess deaths (car accidents, murders) and being more unhealthy than European counterparts. Much of that is just choices people make
Fair points — individual choices do play a role, no doubt. But then the question becomes: if a system consistently channels more money into services without better outcomes, and that spending props up productivity stats, what exactly are we measuring?
At what point do we stop calling it "efficiency" and start calling it "expensive dysfunction"?
It depends on which outcomes. The US performs about the same as European nations in mortality rates within 30 days of acute hospital treatment and patient safety. The biggest difference is preventative care and rationing. The European system is focused on *preventing problems before the arise* while the US is geared to treating after the sickness exists. Combined with generally less healthy population, and you get significantly higher costs in the US.
The other big, and often unspoken thing, is that European systems often ration care and are pretty aggressive about not approving new procedures/“unnecessary” operations. I remember this being a big issue for me and I ended up having to travel back to the US to get a procedure done.
I agree that it’s expensive dysfunction. I don’t think Americans actually would go for a universal system like Britain or France, but one like the Swiss or Dutch would be doable and help with costs
Yeah, and to be fair, it’s not that U.S. healthcare intends to wait until things break — it’s that people often delay seeking care because of cost. High deductibles, surprise billing, and patchy insurance mean a lot of Americans avoid going to the doctor until a minor issue becomes a serious one. It’s not a system failure in capability — the quality of acute care can be excellent — it’s a failure in access and affordability.
That’s part of what drives the “expensive dysfunction” we’re talking about: the system’s designed to deliver high-end treatment, but too many people can’t or won’t engage with it early on. In contrast, European systems do more to get ahead of problems because people don’t have to worry as much about the cost of seeing a GP or following up on symptoms.
Totally agree with you on the Dutch/Swiss models — they strike a more pragmatic balance. Would love to hear your take: if you could import just one policy lever from those systems into the U.S., what would it be?
Ooohh. Probably allowing the government (through Medicare and Medicare) to set and negotiate prices for specifically defined benefits. It’s funny because the ACA effectively put the US in the path of being like the Swiss/Dutch model and you could theoretically get there with a few tweaks. The real big sticking point would be that states manage Medicaid and I’m not sure the constitutionality of the federal government determining what price a state can set for specific benefits
Yeah, that makes a lot of sense — especially the idea that the ACA laid the groundwork, but state-by-state Medicaid control makes it hard to finish the job. Feels like one of those areas where the structure just resists clean reform.
Appreciate the exchange — really insightful points.
But these choices are themselves problematic. Wealthy, happy countries generally do better on these criteria. Why, for example, has the US had a catastrophic opioid epidemic (following similar episodes with methamphetamine and crack cocaine) while other countries have not had anything comparable? And even looking at countries with high gun ownership, US murder rates are much higher.
Actually, Canada and Scotland, for example, suffer from comparable opioid issues as the US, despite their different systems, so it’s safe to assume that it’s not solely a system issue.
As for the gun and murder issue, it really isn’t an apple to apple comparison here. If we try to compare, say, Maine, with a homicide rate of 1.5, with its right to keep and bear arms, vs France, with a homicide rate of 1.3 and a tightly regulated firearms framework, at which point can they converge? The US and Maine differs too much from France, with other factors thrown in, to make a direct comparison meaningful.
I wasn’t aware of the Scottish case, which looks really bad. Canada also surprising.
I take your point on non-comparability, but I’d push it further to encompass the GDP and productivity comparisons. Even pre-2025, very few people from other wealthy countries desired a permanent move to the US, and (also pre-2025 at least) vice versa. EU and US really offer very different bundles of goods and services, broadly defined.
On net, more Europeans moved to America than the other way around (with the rate being about 4 to 1). http://www.pewglobal.org/2018/02/28/global-migrant-stocks/?country=US&date=2017
If I remember correctly from one of those datasets, the only country with more American-born people living there than the other way around is Australia.
Numbers are tiny relative to population, and most of these moves aren’t permanent. International students are a big group, though that may not continue
“These choices are problematic” maybe to you. But countries are entitled to make choices and trade offs, and have different cultures. America has always been a more violent society than Europe (since we have recorded), and the yanks have made the decision that they are ok with the violence if it means they keep guns. *You* may not like that choice, but it’s one society gets to make!
It’s true the US has had catastrophic opioid epidemic, but other countries have had comparable issues. Which ones are you talking? Because I can think of 5 countries off the top of my head.
Never mind in Europe, crime has been rising and drug addiction and usage has skyrocketed, particularly cocaine and opioids. Cocaine usage is higher in Europe than the States. Of course, having a universal system helps people with addiction, but having said system is a *choice*
I sometimes wonder if the US exemplifies the kind of power law found, for example, in the VC world in which a small number of enormous winners more than compensate for a long tail of mediocrity. In contrast, for the median individual, Europe, with its welfare state may be (or more accurately) may have been a better bet.
Depends. The median American has, in general, a higher quality of life than Europe.
It’s the bottom 25% that do significantly worse
Sure, each society makes collective choices, and, AFAICT, each prefers the result to what the other offers them.
I agree. I think the point of this article tho, is that European choices will increasingly be harder to sustain if productivity and growth remain low. Indeed, France has been dealing with a political and financial crisis the last 6 months for exactly this reason: deficits are too high, and economic growth hasn’t kept up with the growth of the pension system. Macron tried to offer a fix (raising the retirement age from 62 to 64) but it’s deeply unpopular
Surprised to see healthcare accounting not included here. 5% of American GDP is a statistical mirage caused by massively overpaying for healthcare.