The World Bank has just published a new report, “Golden Growth: Restoring the Lustre of the European Economic Model.” The European growth model has been an engine for economic convergence during the past few decades and has delivered prosperity to hundreds of millions of people in the continent.
The study looks at long-term growth in Europe, paying special attention to the last two decades, and identifies what needs to be done to assure continued prosperity in the decades ahead.
It assesses the six main components of the European growth model: trade, finance, enterprise, innovation, labor, and government. Its main findings: most countries in Europe are doing well in trade and finance, many in enterprise and innovation, but few are doing well in labor and government.
Hence Europe needs many changes to make governments and labor markets work better, fewer changes to foster innovation and productivity growth in enterprises, and fewer changes still to reform finance and trade. Stalled productivity, declining populations, and unsustainable fiscal imbalances have made many changes urgent.
To revitalize the European growth model, the report makes three sets of recommendations:
-Restart the convergence machine that has allowed poorer countries become high income economies.
-Rebuild “brandEurope” that has helped the region, with one-tenth of the world’s population, account for a third of the global economic output.
-Reassess what it takes to remain the world’s lifestyle superpower, with the highest quality of life on the planet.
The report is available online.