Disputing the oft-asserted claim that Europeans work less than Americans because they have perfected the art of living, Messrs. Alesina and Giavazzi contend that European idleness is the predictable result of stultifying labor market regulations, high taxation, and the excessive power of Europe's labor unions. In France, Germany, and Italy especially, shortened work hours are now coupled with diminished productivity and lack of technological innovation. In 1970, the authors note, Italy's gross domestic product per capita was 68% of America's; by 1990, it had reached 80%. Today it is back down to 64%. At current rates of relative decline, Italian GDP per capita will in 25 years time be one third that of America.
And why is this a problem? After all, a country with one-third the GDP per capita of America is still a rich country. It is a problem because relative decline tends to become absolute decline.