This paper considers the implications of falling transport and communications costs for the spread of economic activity around the world. The evidence suggests that location has been and continues to be an important determinant of income levels. The Information and Communications Technologies (ICT) Revolution has not eliminated the benefits of agglomeration. It has permitted a significant increase in international trade in services but has not made all locations equally attractive. The ‘death of distance’ has been greatly exaggerated and the European welfare state is not being undermined by a ‘race to the bottom’ as capital seeks tax havens in distant locations.

Productivity growth in virtually all west European countries exceeded that of the United States throughout the period 1950 to 1995. Since then American productivity performance has strengthened and that of the EU has weakened. The most important reason is contrasting experiences with Information and Communications Technology (ICT). The article argues that this may reflect a failure of European countries to update their ‘social capability’ to the requirements of a new technological epoch and points in particular to weaknesses in human capital formation and to excessive employment protection as obstacles to rapid realization of the productivity potential of ICT.

This article reviews Britain’s experience of economic growth in the twentieth century. It argues that average living standards have risen much more rapidly than is generally appreciated. The main reasons for this include increased life expectancy which is highly valued by the public and downward bias in conventional estimates introduced by traditional price deflators which do not measure the true cost of living. The main policy implication of this analysis is the need to think about the value of outcomes if appropriate public expenditure policies are to be implemented.