Can Europe create an innovation economy?

[PARIS] In the three decades after World War II, Western Europe caught up with the United States in terms of per capita GDP. But since the mid-1990s, this trend has reversed, with the US growing twice as fast as Europe.

What happened? The explanation is simple: During the Trente Glorieuses (the 30 years until 1975), Western European policies favoured a model of growth based on imitation and accumulation. These countries were playing catch-up, and the process was facilitated by unlimited access to fossil fuels (until the first oil shock of 1973-74); the US Marshall Plan, which helped Western Europeans reconstitute their capital stock; and educational systems favouring the absorption of new technologies from the US.

But there comes a time when the growth potential of imitation and accumulation exhausts itself. Once you have gotten sufficiently close to the technological frontier, innovation necessarily becomes the main engine of growth. That has certainly been the case in the US, where the information-technology revolution, and now the artificial-intelligence revolution, developed quite spectacularly. In Europe, however, policymakers failed to adopt the institutions and policies to promote disruptive innovation.