What makes the US economy more resilient than Europe’s?

global financial crisesThe global financial crisis that erupted in full force in 2008 affected both Europe and the United States in a very similar way. At least in the beginning. On both sides of the Atlantic, economic performance fell drastically in 2009 and started to recover in 2010.

But, as the financial crisis mutated into the euro crisis, an economic gulf opened between the United States and the Eurozone. Over the past three years (2011-2013), the US economy grew by about six percentage points more. Even taking into account the increasing demographic differential, which now amounts to about half a percentage point per year, the US economy has grown by about 4.5 percentage points more over these three years on a per capita basis.

The World Economic Forum wrote today in an analysis that the main reason for the gap is the difference in private consumption, which grew in the United States but fell in the Eurozone, especially in its periphery.

Public sector spending in the Eurozone has de facto remained fairly constant over the last three years, whereas it has declined substantially in the United States. The same is true of public investment, though this constitutes such a small proportion of GDP that transatlantic differences could not have had a large impact on growth over a three-year horizon.

This year the troubled economies of the Eurozone have begun to show some improvement, although the changes come, in some cases, from very low levels. The charts below from an article in the New York Times reflect three indicators — employment, economic growth and new car sales — and show changes from the end of 2007. For comparison, figures for Britain and the United States are also shown.


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