The Two Economic Superpowers Today

1
The Two Economic Superpowers Today How They
Got There

• Larry NealDirector, EU Center at the University
  of Illinois
• Professor of Economics

2
Introduction

• The EU-15 and the US are the two economic
  superpowers in the world
• How did they get there?
• Are they partners? Or competitors?
• What can they learn from each other?

3
The Two Compared

• US has more land
• EU has more people
• Economies about the same size
• Importance in trade the same BUT
• US imports more EU exports more
• Per capita output higher in US
• More people work in US

4
EU US Compared
5
Total Population

• US population has grown more than EU population
• The difference is narrowing

6
(No Transcript)
7
Total Output

• US output has grown faster than EU output
• The gap in output levels has widened

8
(No Transcript)
9
Policy comparisons

• Over the last 40 years, the US has actually
  outperformed the EU-15 in terms of
• Growth
• Inflation
• Employment

10
(No Transcript)
11
(No Transcript)
12
(No Transcript)
13
Lessons of Economic History

• US is the more volatile, risky economy -- also
  more exciting!
• The US began the 20th century as the worlds
  leading economy.
• It begins the 21st as the sole economic
  superpower.
• EU economies are varied and do better when
  competing rather than cooperating.

14
Per Capita Output

• Per capita output in the US was higher to begin
• It is even higher now relative to EU-15
• Why?

15
(No Transcript)
16
(No Transcript)
17
Convergence theory

• If countries have the same conditions of
  institutions, technology, and factor endowments
  of capital and labor
• Then poorer countries should grow faster than
  rich countries in any given period.
• If they dont, some conditions must differ,
  usually policy or institutions.

18
(No Transcript)
19
(No Transcript)
20
(No Transcript)
21
Shocks Tradeoffs
Shocks Tradeoffs

• US figures show more shocks
• EU figures show catchup when political momentum
  is lost
• And fallback when political momentum is regained
• Tradeoff between political and economic union?