Election Briefing: EUROPE V THE WORLD: American triumph gives food for thought

Why does Europe have no Bill Gates, Steve Jobs or Andy Grove? The question was posed by Jean Claude-Trichet, governor of the Bank of France in a recent interview. The implied answer is that Europe is structurally incapable of this kind of entrepreneurial success - its labour markets are too rigid, its social costs too high and its industrial and economic structure out of date.

These people - Bill Gates, head of Microsoft, Steve Jobs, founder of Apple Macintosh, and Andy Grove, chief executive of Intel - are the high- profile tip of America's present entrepreneurial and corporate renaissance.

Seven years of uninterrupted growth, seven years of job creation and low inflation, seven years of growing competitiveness, a great powerhouse of technological and industrial change. Set against this Europe seems to be failing.

All over Europe, and indeed the world, politicians, industrialists and bankers are looking at America and asking: "Why can't we be like that?".

At the World Economic Forum in Davos, Switzerland, last week there was no disguising the feeling of triumphalism among the large American contingent. They could boast with justification that the US was getting it right, and what is more the Europeans seem to agree.

"Just look at the figures," said Michael Boskin, professor of economics at Stanford University. "Look at the millions of jobs created in our economy in the last 10 years. Then look at Europe. Despite its growing workforce it has failed to create any net new private sector jobs."

The leaders of America's computer and communication revolution went further. "Europe is building up a `technology deficit'," warned Andy Grove. "It is falling behind in the technological revolution and unless it acts urgently, it will be overtaken by fast-growing emerging economies."

Free trade, a flexible labour market, incentive to enterprise, sound public finances - these are the underlying principles of the American model and they are finding an increasingly receptive hearing in Europe.

Hans Tietmeyer, president of the German central bank, was outspoken in his support for reform. And Theo Waigel, Germany's finance minister, conceded that Germany may have something to learn from Britain, the only member of the European Union to have embraced the American model.

But it is not all one way. John Sweeney, president of the American Federation of Labor, likened the spread of American free-market principles to "the export of toxic waste". He points to the growing rift between rich and poor, the collapse of America's inner cities and the need for better health care, training and education.

The dichotomy between the success of the US economy and the idea of a "just society" goes to the heart of the debate of the virtues or otherwise of the American model.

Larry Summers, the US Deputy Treasury Secretary, put it best. While wallowing in the success of corporate America, and as befits a politician taking full credit for it, he stresses the sometimes extreme negative side effects.

"A child born in New York today is less likely to live to the age of five than a child born in Shanghai. A child born in Bangladesh has a better life expectancy than a child born in Harlem. We have to find a more equal society," he said.

But he also highlights the success of the US model when he says that the balance of advantage in the economy has shifted from command and control to motivation and incentives.

Nor is the American triumph confined to Europe. Japan too is being swept up by it. Yutaka Kosai, head of the Japan Centre for Economic Research, summarised a truly global shift when he asked: "Is it really possible to have continued growth, reduced unemployment and progressive cuts in the fiscal deficit all at the same time? Our thinking has changed radically since Keynes. To pull off the trick you need to accompany budget restraint with structural change, deregulation of labour and capital markets and privatisation."

With most of Europe set to follow Britain down the road of labour market and structural reform, the big question is whether a middle way can be found, one that combines the entrepreneurial drive of the US with the social safety net of Europe.