Paul Krugman stirred up the blogosphere by praising “Europe’s economic success” in his New York Times column “Learning from Europe,” where he wrote that “taking the longer view, the European economy works; it grows; it’s as dynamic, all in all, as our own.”
That generated an immediate response from Greg Mankiw, who suggested on his blog that readers of Krugman’s column consider that Europe’s five most populous countries (the United Kingdom, Germany, France, Italy, and Spain) have per-capita GDP of between $11,000 and $17,000 below per-capita GDP in the United States (adjusted for difference in prices).
I supplemented Professor Mankiw’s data with a comparison of per-capita GDP for various U.S. states and European countries using 2007 data, showing that even many of our poorest states rank favorably against the average European country. That analysis has now been expanded and updated here using 2008 data, and a summary is presented in the table above (using Bureau of Economic Analysis, U.S. Census, and World Bank data), showing that if European countries were added as American states:
1. Italy ($30,756), Greece ($29,361), and Portugal ($30,756) would rank as the three poorest U.S. states, below even Mississippi in per-capita GDP ($31,233), and Portugal would be 26 percent poorer than Mississippi.
2. Spain ($31,955) would be America’s second-poorest state, ranking between West Virginia ($33,978) and Mississippi ($31,233).
3. France ($34,045) and Belgium ($34,493) would rank No. 48 and No. 49 as U.S. states, just barely ahead of Arkansas ($34,437).
4. Germany ($35,613), the U.K. ($35,445), and Finland ($35,426) would rank among the poorest 15 percent of American states, with per-capita GDP below Alabama ($36,469).
5. Although Switzerland (not an EU country but included here), Netherlands, Austria, Sweden, and Denmark rank among Europe’s wealthiest countries, they would be below average as U.S. states measured by GDP per capita, ranging between 9.5 percent below the U.S. average for Switzerland to 22 percent below the U.S. average for Denmark.
6. Luxembourg is the only EU country that would rank above average and would in fact be the wealthiest American state, but behind the District of Columbia in per-capita GDP.
Bottom Line: Professor Krugman claims that “Europe’s economic success should be obvious even without statistics.” Unfortunately, the economic statistics presented here tell a much different and bleaker story about Europe’s economic performance than Krugman portrays. Most European countries have lower per-capita GDP than even many of the poorest U.S. states, suggesting that Europe has a lot more to learn about economic growth, dynamism, and success from the U.S. than vice-versa.