A long-awaited report on European Union competitiveness that was published to considerable fanfare earlier this month makes sober reading for European Commission President Ursula von der Leyen. More than a year in the making, the Draghi Report—after its author, former Italian Prime Minister and European Central Bank President Mario Draghi—affirms the long-held conventional wisdom that Europe has fallen far behind the U.S. on a host of economic indicators, from productivity to GDP, over the past few decades.
During the second half of the 20th century, while dependent on Washington for its security, Europe engaged in a decadeslong battle with the U.S. for global economic primacy. In the immediate aftermath of World War II, with Europe in ruins, the U.S. enjoyed a substantial advantage in terms of productivity. But as Nicolas Crafts of the Stanford Institute for Economic Policy Research, or SIEPR, pointed out in a 2003 working paper, that “was quickly reduced by rapid European catch-up growth during the Golden Age” of the 1950s and 1960s.
The oil crisis of the 1970s, which put an abrupt end to the abundant supply of cheap energy, saw growth in both regions slow considerably. But it disproportionately affected Europe due to its relative lack of domestic energy reserves. By the mid-1990s, the U.S. had overtaken Europe again, and according to conventional economic analysis the gap has grown even wider since the financial crisis of 2008, after which European GDP stagnated “at around 15 trillion dollars while the US has soared to almost 27 trillion dollars.”