U.S. President Donald Trump boards Air Force One to depart Haneda Airport for South Korea, in Tokyo, Japan, October 29, 2025. REUTERS Evelyn Hockstein
President Donald Trump and Republicans enjoy bashing the European economy as a foil to America’s awesome growth, but Nobel laureate economist Paul Krugman says the party really doesn’t have much to brag about.
“When comparing the US and the EU, uncritical use of real GDP numbers can lead to the conclusion that Europe is getting poorer relative to America. But it isn’t,” said Krugman on his substack.
A lazy glance at growth in real GDP between the U.S. and the EU might suggest the U.S. is growing substantially more than the EU, but “not so fast,” said Krugman. A third comparison adjusting for differences in the overall price level goods in the U.S. and EU puts the rate of growth between the two economies extremely close to one another between 2007 and 2024.
“One says that in real terms the U.S. economy has grown much faster than the EU economy. The other says that in real terms the two economies have stayed roughly equal in size,” said Krugman, adding that the contradiction appears to exist “because the concept of real GDP is often misunderstood.”
It can certainly lead you astray when “comparing nations that produce different mixes of goods because they have staked out different positions in the global economy,” said Krugman.
The U.S. conceivably produces more tech than the EU, and this spurs rapid technological progress, but that progress gets “passed on to everyone in the form of lower prices. … The relative size of the economies measured [while adjusting for differences in the overall price level] doesn’t change.”
And should Europe envy the United States for its tech sector? No, said Krugman. Big tech makes big money for big tech billionaires.
”Aside from the fact that Europeans are living well, tech generates a big negative externality, because among other things it generates tech-bro billionaires, who are corrupting our politics,” Krugman said, likely referring to Elon Musk putting his finger on Trump’s re-election, and his more recent failed endeavor to win a Wisconsin Supreme Court seat for Republicans.