I can't find a good chart for this but the GDP of the EU and the US were almost at par until 2008, after which there was a massive decoupling. The main difference in the EU's and US's response is the level of austerity each engaged in. The US's response, while certainly not ideal, was significantly better than the EU's response.
>> The tax system and other incentives lead people to not really work their hardest and best, and this propagates all the way to the stock indexes
I used to be a believer in this. But I recently moved from Sweden to UK, from a very socialist country to a very capitalist one.
In capitalist societies people live in survival mode. This doesn't work well in every profession, especially managerial roles become very predatory. It does work well in tech/individual contributor roles though.
Some mundane tasks that are needed for tech development to go smoothly over long periods of time, is easier to manage in socialist Sweden. Whereas in UK, I suspect in US too, people tend to gloss over mundane managerial processes/goals like scrum, roadmap planning, business goals etc.
The tax system and other incentives lead people to not really work their hardest and best, and this propagates all the way to the stock indexes.