On a recent trip to Fernandina Beach, I had lunch with a friend who told me there is no better place on Earth to live than northern Europe.
“They have free healthcare, free college tuition and generous government pensions,” she said. “If you could live anywhere, why would you choose anyplace else?”
Some might answer that any nation that takes most of your income in taxes – especially after you include the 21% value-added tax – is not offering great value for “free.”
But let’s set that discussion aside for a moment.
Is northern Europe a great place to live?
It certainly offers a higher quality of life than many places. And if an individual places high value on economic equality and security, the answer might well be yes.
Those who place a higher value on economic opportunity and financial freedom, on the other hand, will answer with a resounding no.
That’s not just my opinion, by the way.
Britain’s Economist magazine recently published a report on American economic performance over the last three decades.
It concluded that the U.S. economy isn’t just dominant. That dominance is accelerating.
In 1990, the U.S. economy accounted for 40% of the GDP of the G7 nations. By 2022, it accounted for 58%.
In 1990, American income per person was 24% higher than the income per person in Western Europe.
Today it is about 30% higher.
Americans don’t just have higher incomes and lower taxes. They also have greater wealth.
According to Statista, the average financial wealth per U.S. adult is $580,000. The average financial wealth per European adult is less than $94,000.
(It’s also worth noting that the Census Bureau reported that American poverty hit an all-time low in 2021.)
Europeans like to poke fun at all the middle-class Americans touring their continent.
But you don’t see the reverse happening here.
While Americans can afford a trip to Europe, most Europeans cannot easily afford a trip here.
Why do Americans have higher incomes and greater wealth?
It’s true that we work more hours. However, we also do more with less.
American labor productivity increased by 67% between 1990 and 2022, compared with a 55% increase in Europe and a 51% increase in Japan.
Our economic recovery from the pandemic has been the strongest of any major economy. (Meanwhile, the eurozone announced last week that it had slipped back into a recession.)
America is also the world leader in innovation.
The U.S. accounts for 22% of the patents in force abroad, up from 19% in 2004. That’s more than any other nation.
In 1990, the U.S. accounted for a quarter of the world’s economy. Since then, China has risen to become an economic superpower and the world’s second-largest economy.
Yet the U.S. has retained its global preeminence – and still accounts for a quarter of the world economy.
It’s common to hear that millennial and Gen Z Americans are enduring greater hardships today and not living as well as their parents.
According to the U.S. Census Bureau, millennials have household incomes $9,000 higher than Gen X households and $10,000 higher than baby boomer households at the same age, in inflation-adjusted dollars.
The American stock market has generated the world’s highest returns over the last three decades, as well.
If you had invested $10,000 in the S&P 500 in 1990, you would have more than $230,000 today.
If you had invested $10,000 instead in a global equity index that excludes U.S. stocks, you would have about $51,000 today.
In short, Americans earn more income, have more assets and enjoy higher equity returns than Europeans.
That’s because the American brand of capitalism is tilted toward dynamism, with freer markets and smaller welfare states.
While our economy is superior to any real-world alternative, it is under assault from some who argue for more regulated markets, higher taxes and a larger welfare state.
That does create more equality. But that’s because everyone has less. A lot less.
Remember that the next time someone extols the benefits of “the European economic model.”
P.S. I encourage you to join me at FreedomFest July 12-15 in Memphis. I’ll be interviewing investment greats Jeremy Siegel (author of Stocks for the Long Run) and Burton Malkiel (author of the investment classic A Random Walk Down Wall Street). I’ll be speaking about “How to Get Rich… Fast or Slow.” And I’ll be debating various gloom-and-doomers, most of whom have been dead wrong for not just years but decades.
Other featured speakers at this year’s FreedomFest will be former presidential candidate Steve Forbes, bestselling author Mike Rowe, historians Douglas Brinkley and Amity Shlaes, economist Art Laffer, publisher and professional skeptic Michael Shermer, former congresswoman Tulsi Gabbard, national columnists John Fund and Stephen Moore, and many more.
For more information, visit FreedomFest.com. And for new registrants signing up at the attendee rate, use the code OXFORD77 – which expires June 15 – to receive a $77 discount. I look forward to seeing you there!