America’s states should beware of copying Europe too much
The Economist
February 26, 2026
AI-Generated Deep Dive Summary
Europe’s economy faces significant challenges as it trails behind the United States in growth and competitiveness. While welfare systems are becoming more generous, issues like regulatory fragmentation, high energy costs, and inflexible labor markets hinder progress. The European Union’s GDP per capita growth lags significantly behind America’s, with just 1% annual growth compared to 1.8%. This disparity highlights the need for reforms that could boost productivity and innovation.
The euro area lacks a unified market for services and struggles with energy costs, which are higher than in the U.S. Additionally, Europe’s rigid labor laws make it harder for businesses to hire and fire workers, reducing flexibility and discouraging investment. These factors contribute to slower growth and limit opportunities for businesses operating within the region.
For businesses, understanding these challenges is crucial. The fragmented regulatory environment can complicate market entry and operations across European countries. High energy costs and inflexible labor markets also increase operational expenses and reduce competitiveness. Companies looking to expand in Europe must navigate these obstacles carefully, while policymakers work to address structural issues that weigh down the economy.
Ultimately, addressing these issues could unlock significant potential for growth. Streamlining regulations, reducing energy costs, and improving labor flexibility are key steps that could help European economies catch up to their American counterparts. For businesses, this means opportunities to operate more efficiently and effectively in a reformed economic landscape.
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Originally published on The Economist on 2/26/2026