During my visits in England and Spain — admittedly two of the winners — I was wondering if we haven’t underestimated European growth rates. It is well known that when new commodities are entering the market, measured growth rates can significantly understate the real increase in well-being. (Imagine that the price of an iPod fell from infinity in 1995 to $200 or so today; measuring this gain in terms of "more bundles of $200 in value" is missing some of the very high gains from those people who love iPods but were previously "at a corner" of no purchases, due to unavailability.)
So how does this apply to Europe? I’m not mainly talking about iPods. Rather migration is rampant. When a Pole moves to London he can buy many more goods and services. It’s a big move up in real income plus lots of new goods are introduced to the consumption basket. So when there is lots of voluntary movement from poorer to richer regions, changes in measured income will understate some of the true gains.
Frequently I stressed to Spanish reporters just how big a success their country and economy has been; they almost didn’t believe me. When I said things like: "Spain is in a much better competitive position than China, which still doesn’t have half the per capita income of Mexico" they were truly shocked.