Given America and China’s lead in AI and other cutting-edge innovations, it is not surprising that much of the European economic policy debate revolves around the need to emulate and catch up with these two technological superpowers. In fact, neither the US nor China offers a relevant or attractive model for Europe.
CAMBRIDGE—Europe faces a productivity crisis. Over the past quarter-century, its labor productivity has risen only half as rapidly as that of the United States, widening the gap between American and European incomes. Thanks to higher public expenditures, stronger labor-market institutions, and superior safety nets, the benefits of European economic growth are better distributed. But without improved productivity, European economies and democracies will remain at risk.