European government spending compared to the U.S.

Most people in The United States don’t understand that European governments spend so much more than the U.S. And yet the poor sector of our country actually live better than most Europeans.

Government spending consumes almost half of Europe’s economic output—a full one-third higher than the burden of government in the U.S. Not surprisingly, a large government sector is associated with a higher tax burden and more government debt. Bigger government is also associated with sub-par economic performance. Among the more startling comparisons:

* Per capita economic output in the U.S. in 2003 was $37,600—more than 40 percent higher than the $26,600 average for European Union–15 nations.
* Real economic growth in the U.S. over the past 10 years (3.2 percent average annual growth) has been more than 50 percent faster than EU–15 growth during the same period (2.1 percent).
* The U.S. unemployment rate is significantly lower than the EU–15 unemployment rate, and there is a stunning gap in the percentage of unemployed who have been without a job for more than 12 months—11.8 percent in the U.S. versus 41.9 percent in EU–15 nations.
* Living standards in the EU are equivalent to living standards in the poorest American states—roughly equal to Arkansas and Montana and only slightly ahead of West Virginia and Mississippi, the two poorest states.

There are actually two countries in Europe that have strong economies and they have free market based systems with very limited government control. The first is Estonia and the second is the Netherlands.

Estonia has styled itself as the gateway between East and West and aggressively pursued economic reform and integration with the West. Estonia’s market reforms put it among the economic leaders in the former Communist state areas of Europe. A balanced budget, almost non-existent public debt, flat-rate income tax, free trade regime, fully convertible currency backed by currency board and a strong peg to the euro, competitive commercial banking sector, hospitable environment for foreign investment, innovative e-Services and even mobile-based services are all hallmarks of Estonia’s free-market-based economy.

The Netherlands has the 16th largest economy in the world, and ranks 10th in GDP (nominal) per capita. Between 1998 and 2000 annual economic growth averaged nearly 4%, well above the European average. Growth slowed considerably in 2001-05 due to the global economic slowdown, but accelerated to 4.1% in the third quarter of 2007. Inflation is 1.3% and is expected to stay low at around 1.5% in the coming years. Unemployment is at 4.0% of the labour force. By Eurostat standards however, unemployment in the Netherlands is at only 2.9% - the lowest rate of all European Union member states. The Netherlands also has a relatively low GINI coefficient of 0.326. Despite ranking only 10th in GDP per capita, UNICEF ranked the Netherlands 1st in child well-being.

If you would like to view more where I received the numbers from. Link.

For more information on Estonia. Link.

There is also a great story to read about how Estonia grew from a nation of poverty to a prospering country. Story.

For more information on the Netherlands. Link.

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