<p>This is not due to crisis per-se. Mario Draghi recently actually lead <a href="https://commission.europa.eu/document/download/97e481fd-2dc3-412d-be4c-f152a8232961_en?filename=The%20future%20of%20European%20competitiveness%20_%20A%20competitiveness%20strategy%20for%20Europe.pdf" rel="nofollow noreferrer">this</a> report commissioned by EU itself to investigate why GDP growth was so slow in EU and it has very little to do with the 2008 financial crisis or monetary policy.</p>
<p><strong>TL;DR from this official investigation:</strong></p>
<p>First, the overarching reason is that in EU there was slow to none productivity growth. Monetary policy can affect GDP in short term but over decades real GDP per capita is pretty much determined by productivity growth.</p>
<p>However in turn the productivity growth depends on other variables, like investments into R&amp;D.</p>
<p>According to the Draghi’s report to the EU commission the reason for slow EU productivity growth was;</p>
<ul>
<li><p>weak investment in adapting new technologies. EU spends a considerable sums on research but lot of this money is wasted because every country has its own National programs and there is a lot of double work being done. Moreover, EU has problem with deploying new technologies in businesses.</p>
<p>In fact the report shows that the biggest factor that accounts for US-EU productivity, and hence also GDP gap, is the US technological sector. In EU we do not have any native tech giants like in US, EU according to the report missed on digital Revolution.</p>
</li>
<li><p>a lot of regulations, and even often inconsistent regulations, which make commercialization of new technologies difficult.</p>
</li>
<li><p>lack of capital markets. Many startups relocate to US to tap into US capital markets. In EU, especially after UK left, we do not really have many well organized capital markets where firms can raise capital. At least not compared to US.</p>
</li>
<li><p>skill gap. EU has a lack of skilled workers needed by businesses. There is greater mismatch on labor markets compared to US. This is according to the report mainly due to education. This is reinforced by aging population. I dont remember if this was also mentioned in the report itself, but EU also has problem with attracting high skilled migrants compared to US.</p>
</li>
<li><p>De-globalization. The report argues EU was especially hard hit by recent de-globalization trend.</p>
</li>
<li><p>inconsistent industrial policy. EU does not properly cooperate on industrial policy and EU countries often pursue various inconsistent industrial policies.</p>
</li>
<li><p>high energy costs. EU economy is dependent on hydrocarbons that it cannot produce on its own. Traditionally, EU got its hydrocarbons from Russia, but recently that became problematic. Hence the report also argues that to in order to restore economic growth EU will have to decarbonize. US is less exposed to these problems because US is one of the worlds biggest hydrocarbon producers. Hence US energy costs were much less affected by Russian invasion.</p>
</li>
</ul>
<p>I think the above are all the main points identified in the EU report.</p>
<p>Also notably the report doesn’t mention monetary policy much. There is only 1 mention of it in an endnote and it is in connection with decarbonization. The 2008 crisis is also only mentioned twice but once with connection of falling unemployment (which is not bad for economy) and once in connection to gap between private saving/investment which opened between US and EU (in EU people started to invest less). However, it’s unclear what caused this and the report doesn’t attribute this to the 2008 crisis.</p>
<p>Generally, if the hypothesis is that is was due to the worse recovery from the 2008 crisis is true, you would expect that there would be constant gap between US and EU that started at 2008. However, what we see is that there are opening scissors between EU and US. Demand side shocks (e.g. the 2008 crisis) and monetary policy do not have much power over long run growth. The 2008 crisis could only be responsible to the extent it might have contributed to some of the above cases (e.g. anecdotally according to <a href="https://www.weforum.org/agenda/2023/01/deglobalisation-what-you-need-to-know-wef23/" rel="nofollow noreferrer">WEF</a> slow/de-globalization started after 2008 crisis, although, it really accelerated during Covid and Russian invasion. Trump's and Biden's trade wars also contributed).</p>
<p>A crisis that the report mentioned the most is the ‘energy crisis’ in EU. Which refers to the fact that EU has consistently for long periods of time very high energy costs (if you are person living in EU you might know that energy costs are high but your personal bill is still indirectly subsidized by government. Business face much worse energy costs than you as a person). This is a supply side shock that can affect long run growth.</p>

CC BY-SA 4.0
2024-10-24T21:54:01.807Z
This was a great answer, thanks!
df df
CC BY-SA 4.0
2024-10-28T08:54:08.267Z
+1 in general, but can you give an explanation or a quote on what you mean by 'Business face much worse energy costs than you as a person'? If I look at say electricity costs than small businesses have the same prices as private individuals, larger businesses benefit from some whole-sale pricing and some especially energy intensive businesses have special tax benefits. No business pays higher electricity prices than a private person.
quarague
CC BY-SA 4.0
2024-10-24T13:25:09.457Z
2024-10-24T14:56:20.183Z
2024-10-24T14:56:20.183Z
1muflon1
<p>When looking at the GDP and GDP/capita graphs for the US and EU since 2008, there appears to be a clear divergence. What caused this? Is it due to better American fiscal / monetary policy? Another possible conclusion is brain drain - a European with any talent or ambition will be much more successful in the US, but I can't really think of anything else.</p>

CC BY-SA 4.0
2024-10-23T18:31:55.077Z
European immigration is steadily declining and there are less Europeans living in the US in 2022 compared to 2010, source https://www.migrationpolicy.org/article/european-immigrants-united-states-2022.
AKdemy
CC BY-SA 4.0
2024-10-25T21:44:36.300Z
Sure, but the fact remains that a European of talent and ambition will do far better in the US than Europe.
df df
CC BY-SA 4.0
2024-10-26T04:57:45.263Z
That's last comment is a silly generalization that vastly exaggerates. Do you know any engineers in the automotive industry in Europe? Finance professional in London. Health care in Switzerland,....
AKdemy
CC BY-SA 4.0
2024-10-26T18:41:43.350Z
Is this a sensitive topic or something? Just think about why Europe is so geopolitically insignificant compared to the US, and for the average person, so much poorer - this brain drain is the main reason. So yes, definitely any European of talent or ambition can make far more in the US. Far more Europeans move to the US than vice versa.
df df
CC BY-SA 4.0
2024-10-28T08:47:06.327Z
You wrote 'a European of talent and ambition will do far better in the US than Europe' that is a heavily politiced opinion, not a fact. But more importantly, regardless of whether this is true or not, the link by @AKdemy shows that the brain drain does not happen in practice. So if people are not in fact migrating than migration will not have an effect on economics.
quarague
CC BY-SA 4.0
2024-11-02T17:49:10.633Z
But it does happen in practice...why do you think far more Europeans move to America than vice versa, even though the EU has 4/3rds the population of the US? The provided link only confirms my argument. It is not a "politiced" opinion, it is simply a fact. American median disposable incomes, adjusted for cost of living, are much higher than Europe. This disparity widens even more above the median. Source: https://en.wikipedia.org/wiki/Disposable_household_and_per_capita_income
df df
<economic-growth>
Why has the US recovered from the financial crisis much more successfully than Europe?
df df
# Why has the US recovered from the financial crisis much more successfully than Europe?

(Asked by: username_0 on 2024-10-23)

When looking at the GDP and GDP/capita graphs for the US and EU since 2008, there appears to be a clear divergence. What caused this? Is it due to better American fiscal / monetary policy? Another possible conclusion is brain drain - a European with any talent or ambition will be much more successful in the US, but I can't really think of anything else.

**Tags:** economic-growth

> **Comments:**
> **username_1**: European immigration is steadily declining and there are less Europeans living in the US in 2022 compared to 2010, source https://www.migrationpolicy.org/article/european-immigrants-united-states-2022.  
> **username_0**: Sure, but the fact remains that a European of talent and ambition will do far better in the US than Europe.  
> **username_1**: That's last comment is a silly generalization that vastly exaggerates. Do you know any engineers in the automotive industry in Europe? Finance professional in London. Health care in Switzerland,....  
> **username_0**: Is this a sensitive topic or something? Just think about why Europe is so geopolitically insignificant compared to the US, and for the average person, so much poorer - this brain drain is the main reason. So yes, definitely any European of talent or ambition can make far more in the US. Far more Europeans move to the US than vice versa.  
> **username_2**: You wrote 'a European of talent and ambition will do far better in the US than Europe' that is a heavily politiced opinion, not a fact. But more importantly, regardless of whether this is true or not, the link by @username_1 shows that the brain drain does not happen in practice. So if people are not in fact migrating than migration will not have an effect on economics.  
> **username_0**: But it does happen in practice...why do you think far more Europeans move to America than vice versa, even though the EU has 4/3rds the population of the US? The provided link only confirms my argument. It is not a "politiced" opinion, it is simply a fact. American median disposable incomes, adjusted for cost of living, are much higher than Europe. This disparity widens even more above the median. Source: https://en.wikipedia.org/wiki/Disposable_household_and_per_capita_income  

---

## 1 answers

### Answer by username_3 on 2024-10-24. Score: 5 | Accepted answer

This is not due to crisis per-se. Mario Draghi recently actually lead [this](https://commission.europa.eu/document/download/97e481fd-2dc3-412d-be4c-f152a8232961_en?filename=The%20future%20of%20European%20competitiveness%20_%20A%20competitiveness%20strategy%20for%20Europe.pdf) report commissioned by EU itself to investigate why GDP growth was so slow in EU and it has very little to do with the 2008 financial crisis or monetary policy.

**TL;DR from this official investigation:**

First, the overarching reason is that in EU there was slow to none productivity growth. Monetary policy can affect GDP in short term but over decades real GDP per capita is pretty much determined by productivity growth.

However in turn the productivity growth depends on other variables, like investments into R&D.

According to the Draghi’s report to the EU commission the reason for slow EU productivity growth was;

* weak investment in adapting new technologies. EU spends a considerable sums on research but lot of this money is wasted because every country has its own National programs and there is a lot of double work being done. Moreover, EU has problem with deploying new technologies in businesses.

  In fact the report shows that the biggest factor that accounts for US-EU productivity, and hence also GDP gap, is the US technological sector. In EU we do not have any native tech giants like in US, EU according to the report missed on digital Revolution.
* a lot of regulations, and even often inconsistent regulations, which make commercialization of new technologies difficult.
* lack of capital markets. Many startups relocate to US to tap into US capital markets. In EU, especially after UK left, we do not really have many well organized capital markets where firms can raise capital. At least not compared to US.
* skill gap. EU has a lack of skilled workers needed by businesses. There is greater mismatch on labor markets compared to US. This is according to the report mainly due to education. This is reinforced by aging population. I dont remember if this was also mentioned in the report itself, but EU also has problem with attracting high skilled migrants compared to US.
* De-globalization. The report argues EU was especially hard hit by recent de-globalization trend.
* inconsistent industrial policy. EU does not properly cooperate on industrial policy and EU countries often pursue various inconsistent industrial policies.
* high energy costs. EU economy is dependent on hydrocarbons that it cannot produce on its own. Traditionally, EU got its hydrocarbons from Russia, but recently that became problematic. Hence the report also argues that to in order to restore economic growth EU will have to decarbonize. US is less exposed to these problems because US is one of the worlds biggest hydrocarbon producers. Hence US energy costs were much less affected by Russian invasion.

I think the above are all the main points identified in the EU report.

Also notably the report doesn’t mention monetary policy much. There is only 1 mention of it in an endnote and it is in connection with decarbonization. The 2008 crisis is also only mentioned twice but once with connection of falling unemployment (which is not bad for economy) and once in connection to gap between private saving/investment which opened between US and EU (in EU people started to invest less). However, it’s unclear what caused this and the report doesn’t attribute this to the 2008 crisis.

Generally, if the hypothesis is that is was due to the worse recovery from the 2008 crisis is true, you would expect that there would be constant gap between US and EU that started at 2008. However, what we see is that there are opening scissors between EU and US. Demand side shocks (e.g. the 2008 crisis) and monetary policy do not have much power over long run growth. The 2008 crisis could only be responsible to the extent it might have contributed to some of the above cases (e.g. anecdotally according to [WEF](https://www.weforum.org/agenda/2023/01/deglobalisation-what-you-need-to-know-wef23/) slow/de-globalization started after 2008 crisis, although, it really accelerated during Covid and Russian invasion. Trump's and Biden's trade wars also contributed).

A crisis that the report mentioned the most is the ‘energy crisis’ in EU. Which refers to the fact that EU has consistently for long periods of time very high energy costs (if you are person living in EU you might know that energy costs are high but your personal bill is still indirectly subsidized by government. Business face much worse energy costs than you as a person). This is a supply side shock that can affect long run growth.

> **Comments:**
> **username_0**: This was a great answer, thanks!  
> **username_2**: +1 in general, but can you give an explanation or a quote on what you mean by 'Business face much worse energy costs than you as a person'? If I look at say electricity costs than small businesses have the same prices as private individuals, larger businesses benefit from some whole-sale pricing and some especially energy intensive businesses have special tax benefits. No business pays higher electricity prices than a private person.  

---

