With tensions between the Trump Administration and the United States' longtime European allies soaring, many MAGA Republicans are claiming that the European Union (EU) is in disarray economically. But according to economist Paul Krugman, Europe is doing much better economically than U.S. President Donald Trump and his allies are claiming.
"The productivity numbers aren't wrong, exactly, but they are misleading," Krugman writes in a Monday column posted on Substack. "America's faster growth reflects its dominance of a narrow sector, IT, and has not translated into lagging European productivity measured in terms of the value of the goods an hour's labor can produce."
Krugman notes that using World Bank data, he has argued against "the widespread depiction of Europe's economy as moribund because its productivity growth has lagged America's."
"I am, however, fairly sure that the picture I derived from World Bank data is right, partly because the story fits together, but also, because it turns out that a third source, the Paris-based Organization for Economic Cooperation and Development — which is good for many kinds of data! — has estimates of exactly the variables I've been talking about," Krugman explains. "Namely, productivity per hour at constant prices, which is what the misleading numbers focus on, and PPP in current prices, which is actually the relevant variable. The source is the OECD Data Explorer."
Krugman stresses that using the "current prices" in the OECD Data Explorer, one doesn't see a "trend" of ongoing economic decline in Europe.
"Again, I am not saying that all is well with Europe," Krugman argues. "But the common diagnosis of the continent as a museum, unable to keep up with modern technology, rests on bad data analysis."
