Over time, the cost of inflexibility will impact Europe

A recent article in The Wall Street Journal by Christopher Rhoads contrasted growing productivity differences between the U.S. and Europe, and the impact this will have on the standard of living:

Since the mid-1990s, U.S. productivity has risen at an annual rate of about 2 percent, roughly twice that of Europe's. Since [Q4] 2001, U.S. productivity has expanded at an annual rate of more than 5 percent—the fastest pace for a two-year period in more than 50 years. The impressive performance in the U.S, driven largely by the production and diffusion of technology, has attracted a lot of attention—but less so, Europe's underperformance....

It wasn't always this way. For much of the past five decades, Europe's productivity growth outpaced that of the U.S., as Europe rebuilt from the wreckage of the Second World War and began to catch up to the U.S.'s standard of living.

Since the mid-1990s, the trends reversed. After converging for decades, the standard of living—as measured by gross domestic product per capita—between the U.S. and Europe is widening again.