Falling Behind

Europe's in big trouble.

No, I'm not speaking of its imminent demographic implosion or the many security threats along its borders. We're talking about its woefully laggard economy.

Only five years ago, Europe had high hopes of blowing right past us rubes to become the world's economic Goliath.

In fact, the idea was enshrined in the Lisbon Strategy, a 2000 document that envisioned reforms that would catapult the 25-nation bloc ahead of the U.S. by 2010.

It hasn't happened that way. A year ago, the EU was forced to abandon its ambitious plans for a far less dramatic goal of merely fixing some of the many things that are wrong with its economy - like taxes that are too high, labor that can't compete and rules that put companies in straightjackets. And if a new report is any guide, the EU still has its work cut out.

The good news, according to the Innovation Scoreboard released by the European Commission, is that America's lead in economic innovation is "stable." The bad news is it'll take Europe 50 years to catch up. Fifty years. Only four EU nations - Sweden, Finland, Denmark and Germany - can compete with the U.S. and Japan, the study found. This has led to talk about Europe turning to something called the "Nordic model" as a solution.

Nordic model? I'm not even sure such a thing exists. Even if it did, it probably wouldn't work. Europe's real problem is that its leaders and top bureaucrats see markets as a necessary evil - not as a means to a greater good.

Europeans can't quite grasp that improvement begins with competition. Those who are challenged will innovate; those who are coddled, subsidized and protected will stagnate. Instead, they spend time and money trying to take down Microsoft, for one example, or set up Airbus as a heavily subsidized alternative to Boeing, or - most recently - spend $2 billion to create Quaero, an alternative to Google.

Getting bureaucrats involved is no cure for a lack of imagination. Instead, it usually leads to waste, inefficiency and loss. Which leads to the situation Europe faces today. Its people are far poorer than Americans simply because they can't keep up.

R&D as a share of GDP, for instance, is 36% higher here, and productivity grows twice as fast. The average U.S. worker turned out $80,200 in real GDP in 2004; the average European managed about $63,500.

I'm not gloating. These are statistical facts that come straight from the EU itself. After years of welfare statism and excessive taxation, Europe is in relative decline. If it wants to survive the 21st century, it had better get to work on the real problems - and leave grand "plans" and "strategies" to centuries past.