Brexit forces us to think about the future of the EU. We have presented a series of posts analyzing economic growth in selected countries using one invariant - constant annual increment in the real GDP per capita. This invariant defines the inertial part of real economic growth as observed in all large developed economies since the 1950s (no accurate data before). Statistical analysis demonstrates that this invariant is actually a constant for a given country but varies between the countries. Therefore, it might be used to evaluate the relative performance of a given country.

Figure 1 compares several EU countries and splits the period from 1960 to 2018 into three sub-periods: 1960-1979, 1980-1999, and 2000-2018. Statistically, variations in the annual increment in the GDPpc between these periods are important for the estimates of the linear regression, i.e. the long-term behavior. For example, France and Italy demonstrate a significant decrease in the average increment from around $600 in the first period to $330 in France and $160 in Italy between 2000 and 2018. We have formulated this decay in terms of the gradual loss of economic competitiveness (efficiency) compared to Germany within the EU. This situation is likely fixed and neither Italy nor France is able to get back to the pre-EU level. The case of the UK, which is also demonstrating lower performance than Germany and the Netherlands, gives a reasonable solution – to leave the EU and fight for the efficiency out of the EU bureaucratic framework which they actually do not control. Portugal and Spain should probably join such a move. If the EU is a multi-speed union then Italy and Portugal are driving in first gear.

(Click on image to enlarge)

Figure 1 Real GDP per capita (2011 prices) in selected EU countries. Data are obtained from the Maddison Project Database.