Yascha Mounk, May 15th, 2025. Published in The Dispatch
When I recently spoke to Paul Krugman on his interview show, for example, I casually mentioned the astonishing economic divergence between Europe and the United States. Whereas both continents were similarly affluent a few decades ago, America is now nearly twice as rich as Europe.
Largely unnoticed by the general public on both sides of the Atlantic, America has pulled away from Europe. The average American is now vastly more affluent than the average European. And this difference in life quality is not only reflected in the overall size of the economy; it is also evident in much more practical metrics such as the disposable income, the living space, or the services accessible to the average person.
GDP per capita
When I was a teenager, the United States and the richest large countries in Europe, such as Germany and the United Kingdom, were similarly affluent. In 1995, Germany’s nominal GDP per capita was a little higher ($32,000) than that of the United States ($29,000), with the United Kingdom lagging behind at a noticeable distance ($23,000)
When I was in graduate school, the United States and the richest countries in Europe remained similarly affluent. In 2007, on the cusp of the financial crisis, for example, Britain was in the lead ($50,000), with the United States ($48,000) and Germany ($42,000) following closely behind.
Since then, the two continents have markedly diverged. To an extent that few people have fully internalized, an economic gulf has opened up between America and Europe. On average, Americans are now nearly twice as rich as Europeans. According to the latest available data for GDP per capita, the United States stands at $83,000, with Germany at $54,000 and the United Kingdom at $50,000.
The contrast to less affluent European countries is even more striking. The GDPs per capita of France ($45,000) and Italy ($39,000) have fallen to about half of America’s level. Those of Portugal ($27,000), Greece ($23,000) and Poland ($22,000) are less than a third that of the United States.
GDP per capita is of course vulnerable to many of the critiques made by those who deny the existence of the great economic divergence. If America is vastly more unequal than Germany or the United Kingdom, then it is indeed possible that the lion’s share of that economic pie is captured by a very small number of people; in that case, America’s greater GDP simply wouldn’t translate into notably more affluence for the average person.
Gini and median income
The problem with this seemingly plausible explanation is that it doesn’t hold up to empirical scrutiny. America is indeed somewhat more unequal than Europe. But the difference is not nearly as stark as some people on both sides of the Atlantic seem to assume. Indeed, America’s GINI coefficient, at 0.39, is only modestly higher than that of Britain, at 0.36, and only moderately higher than that of Germany, at 0.29. As a result, metrics that aren’t skewed by outsized wealth at the top, like household income at the median, still show a vast divergence between the two continents.
Take the official figures for median disposable income. These figures aren’t influenced by outliers at the top; colloquially, we might say that they represent a typical income. They also account both for the taxes that citizens pay and for the transfer payments they receive from the state; they thus reflect the fact that European countries tend to redistribute more between their citizens.
One reason why differences in median disposable income on both sides of the Atlantic more closely mirror GDP per capita than some might expect lies in how tax systems are structured. While top marginal tax rates are often somewhat higher in Europe, many European countries impose significant taxes starting at relatively low income levels, and heavily rely on regressive sales taxes. By contrast, the United States has lower sales taxes and levies comparatively modest taxes on low-income earners while taxing high earners at rates that are broadly comparable to those in Europe.
As a result, the U.S. tax system is, by most metrics, actually more progressive than its European counterparts. Even so, the American lead remains clearly in evidence on this metric. According to the OECD, the median disposable income in 2023 was $51,000 in the United States, that in Germany $39,000, and that in the United Kingdom a strikingly low $33,000.
Living standards
When it comes to living in a nice apartment or going out to a delicious restaurant, the comparison between your wage and that of people in faraway countries matters much less; so perhaps Europeans are just as able to afford those crucial amenities. Most of the figures I have shown so far already try to correct for this mechanism; absolute differences in income, for example, are much larger than the ones I have presented, which were expressed in purchasing power parity-adjusted dollars.
To test this hypothesis, I compiled a lot of data about day-to-day material amenities. How spacious are the houses and apartments of people on each side of the Atlantic? How often can they afford to eat out or to order takeout? And what kind of digital goods can they afford to access?
Housing
Let’s start with housing. Since home prices are very expensive in the United States, many American readers might imagine that Europeans can, despite their nominally lower incomes, afford to live in much nicer apartments. But the figures paint a different picture. The average home size in the United States is about 2,200 square feet. In Germany, it is 1,200 square feet. In the United Kingdom, it is 800 square feet. This extra space translates into all kinds of everyday amenities: Americans, for example, have about double the number of bathrooms per resident, enjoy much bigger refrigerators, and are much more likely than Europeans to have a dryer or a dishwasher in their home.
Dining out
Dining out tells a similar story. The numbers are a little less exact, but estimates suggest that Americans eat out at a restaurant, have food delivered to their home, or order takeout about twice a week on average. According to a 2022 Gallup poll focusing exclusively on takeout food, for example, about 3 in 5 Americans say that they order food for pickup at least several times a month. Eating out is far less common in Europe, where there is a smaller number of restaurants per capita, and the percentage of income people are able to devote to eating out is significantly lower.
Computers
These differences in standard of living are even evident in many aspects of the digital economy. The United States and the United Kingdom both have about 80 personal computers for every hundred residents, making this one of the rare metrics on which Britain has kept up with its former colony. But Germany has only 66 computers for every hundred residents, with countries like Italy (37) and Poland (17) even further behind.
The discrepancy is even more striking regarding the most basic currency of the digital age: access to the internet. According to Data Pandas, the median speed of a broadband connection in the United States is currently estimated at 280 Mbps. In Britain, it is 136 Mbps. In Germany, it is 96 Mbps. In fairness, some European countries do better on this metric. France slightly beat the United States, with median speeds of 291 Mbps. Spain also did relatively well, with median speeds of 248 Mbps.
Why not admit it?
It is true that America’s economic model has very significant drawbacks. Average Americans are much better off than average Europeans; but thanks to a more generous welfare state and stronger community ties, the poorest Europeans probably get to lead a more dignified life than do the poorest Americans. And of course, there are unique annoyances and indignities that even comparatively affluent Americans suffer. For the most part, for example, I receive much better medical care in the United States than I ever have in Europe—but every time I have to deal with my insurance company, I wonder whether the increase in quality is worth the stress.
Indeed, it is striking that my American friends who dream of moving to Europe usually do so because they can tele-work for U.S. companies or are about to retire; my European friends who dream of moving to the United States do so because they are frustrated by a lack of economic opportunities and fear that they won’t ever find an adequate outlet for their talents.
When a development as striking as the economic divergence between Europe and America is so little known or discussed by the broader public, the reason is usually that it discomfits the narrative of all kinds of different constituencies. That is clearly true in this case: Europeans and Americans, the left and the right, each have reasons of their own to ignore or downplay this fact.
Europeans don’t like to recognize how far they have fallen behind the global economic leader. Meanwhile, Americans on all sides of the political spectrum have become so consumed with the negativity bias of social media that they don’t want to admit that there might be any good news about their own country.
This refusal to face the facts is now a bipartisan phenomenon. The American left, for example, is singularly focused on the inadequacies of the welfare state and the legacy of “structural racism.” To point out that, wealth inequality and the disparity between different ethnic groups notwithstanding, the average African-American is now much richer than the average European would seem like sacrilege to many progressives.
According to Pew, the median income for black U.S. households was $54,000 in 2023. According to Eurostat, the median income for all EU households was about $23,000 (€20,416) in 2023. Even the incomes of average households in the richest EU countries, such as Germany at $29,000 (€26,274) and Denmark at $38,000 (€33,900), was markedly lower than that of black U.S. households. Out of 27 EU countries, only the average household in Luxembourg enjoys similar income to that of the typical African-American household. (These figures may moderately overstate the extent of the difference in median household incomes since European figures are adjusted for household size and composition, whereas the U.S. figure is for unadjusted household income.)
Meanwhile, big parts of the American right have become convinced that the global system built by the United States has turned to its disadvantage. They see the country, as Trump did in his first inaugural address, as the land of American carnage, with “mothers and children trapped in poverty in our inner cities [and] rusted-out factories scattered like tombstones across the landscape of our nation.”
But for all of America’s problems, what’s truly striking about the last decades is just how successful the United States has been. As China rose, Europe’s share of global GDP cratered; America’s share held up astonishingly well. As a result, two regions that had until quite recently been similarly affluent have undergone a remarkable divergence. Gradually but seemingly inexorably, America has become vastly richer than Europe.