The 1950s and 1960s were a period of strong catch-up by Europe on America. It is not that we grew poorly here, but that the Common Market was able to narrow down our technical advantage in a way that had not happened after World War I. Then in the 1970s, productivity suddenly grew less fast all over the advanced world. Even Japan was no exception. Oil, harvest failures, and other supply shocks had, initially, to be part of the new story. But we cannot rule out simply an exogenous global deceleration of productivity growth that has persisted for the last quarter o f a century at the frontier of technology.
Particularly in the 1990s economists in America have been surprised by how good or how lucky has been our macro performance compared to our peers abroad. All this gets overdramatized in the notion of two different macromodels: the Greenspan-Clinton Cadillac versus the EU-Bundesbank Mercedes-Benz.
While Europe has attained and maintained two-digit rates of unemployment, in America there have been created tens of millions of new jobs. And for the most part this has not been bought at the expense of accelerating price inflation and a short-lived full employment.
Address delivered at the Bank of Italy, 2 October 1997.
