The Draghi report warns of stagnation, but does Europe need more growth—or a new economic vision?
The recent Draghi report on European Union competitiveness highlights the structural weaknesses that have contributed to the bloc’s relatively low economic growth and the urgent need for reform. A significant portion of the report compares the EU with the United States, pointing out that the disparity in GDP growth between the two is largely due to lower productivity growth in Europe. One of Draghi’s starkest conclusions is that the standard of living for both current and future generations of Europeans is at risk.
But should Europe seek to emulate the economic “success” of the United States, or should it pursue an alternative path?
This debate predates the current US administration, but the election of Donald Trump has made the question even more pressing. His presidency has ushered in a wave of executive orders that have reshaped the US government, presenting new challenges for European policymakers.
Trump’s international policies have been even more disruptive. His withdrawal from the Paris climate agreement and the World Health Organization, as well as his initiation of trade wars, have sent shockwaves across the global stage. More troubling still are his attempts to assert control over Canada, Greenland, and the Panama Canal, his controversial approach to the Middle East, and his ambition to broker peace between Russia and Ukraine without serious European involvement.
Regardless of Trump’s actions, Europe must continue debating its own future. Comparing the EU with the United States purely on the basis of macroeconomic indicators like GDP growth is misleading. While the US boasts a GDP per capita almost 40 percent higher than the EU average, a closer examination reveals stark inequalities. The vast majority of Europeans enjoy a higher standard of living than their American counterparts due to a more equitable distribution of income. For instance, among the half of the population with the lowest earnings, income levels in the EU are, on average, 19 percent higher than in the US, according to research by Hans Stegeman of Triodos Bank.
Other figures by Jessica Roberts of the Economic Policy Institute illustrate the growing divide in US society. Since 1978, the salaries of chief executives at the 350 largest US companies have soared by 1,085 percent, while overall wage growth has been a mere 24 percent.
Today, the average American CEO earns 290 times the salary of a typical worker. Meanwhile, the US public sector—excluding defence—remains severely underfunded, with critical deficits in infrastructure, education, healthcare, and social support.
Another key observation is that the productivity gap between the US and the EU is largely concentrated in a single sector: information technology. When excluding the manufacture of computers and electronics, European productivity has been broadly on par with that of the US over the past two decades.
While it is true that economic growth in the US has outpaced that of Europe, the benefits have accrued to a small elite—primarily in the technology sector. This is an industry where a handful of dominant firms wield monopoly-like power, and influential figures such as Elon Musk have leveraged their wealth to gain outsized political influence.
Should Europe seek to replicate the US model? The answer should be clear. The European vision of economic and social development is fundamentally different from that of the United States. Imitating the American approach would undermine Europe’s most valuable assets.
The EU has charted its own course, drawing inspiration from economist Mariana Mazzucato’s concept of a long-term, “mission-oriented” public policy. This strategy—of which the Green Deal is a core component—prioritises coordinated, goal-driven policies that place the wellbeing of citizens and the environment above GDP growth for its own sake.
Draghi acknowledges the importance of reducing Europe’s dependence on fossil fuels and speaks generally in favour of the Green Deal. However, his approach remains strikingly conventional. His report overlooks the potential of reducing energy and material consumption to meet these challenges. Instead of fixating on conventional economic expansion, Europe could focus on curbing overconsumption and meeting people’s needs more efficiently—placing wellbeing above the pursuit of maximum GDP growth. The waste in the system is staggering: most materials are used only once before being discarded.
Innovation policy should also prioritise “regenerative” systems. Public investment and tax incentives should promote circular production models, renewable infrastructure, eco-industrial parks, smart mobility, regenerative agriculture, and low-carbon housing.
Some policymakers on the right have used the Draghi report to argue against the EU’s climate and environmental policies, claiming they are too costly. Christian Democrats, for instance, have pushed for delaying or diluting the Green Deal. But this would be a mistake. A half-hearted transition will not succeed.
Europe faces major challenges, and only by thinking beyond traditional frameworks and embracing transformative solutions can the continent secure its future. The “European dream” is fundamentally distinct from the “American dream.” This must be reflected in Europe’s choices on innovation, competitiveness, environmental and climate policy, and the protection of citizens’ wellbeing.
