The Anglo-US economic model was probably invented by polemicists - and was coupled with the names of Thatcher and Reagan - as an awful warning of what to avoid. But then, like so many other originally pejorative terms, it was taken up by others a term of praise: in Britain by Eurosceptics, but also by European political economists who would like their countries to follow a more liberal course.

All this is good clean fun. There are some obvious similarities between US and British economic institutions. The capital markets play a bigger role. There is less guidance by banks; and managers are more subject to the threat of takeover bids. Above all, union influence is now very much less in the two English-speaking countries; and pay and conditions are determined at a local or company level, and not by nation-wide collective bargaining.

But we need to be careful when talking about regulation. The president of the Confederation of British Industries (Sir Clive Thompson) has just listed 22 laws and directives brought in by the New Labour Government, which he maintains contributes to higher business costs and lower flexibility. Some of these, such as the working time directive, come from Brussels; and others, such as the Data Protection Act, are home grown.

The US is very heavily regulated when it comes to environmental effects, health, safety and so on. But the main threat that comes from the courts rather than government. US corporations live in terror of litigation running into billions of dollars from anyone who thinks that he or she has been adversely affected by any product purchase whatever. I do not know if it is due to the lack of classical education, by American lawyers do not seem to have heard of caveat emptor.

Even on the fiscal side, the US and Britain are from identical. Continental countries have traditionally a much higher level of public spending than the US. But the UK comes somewhere in between. In terms of very crude ratios of public spending to GDP, they are 50, 40 and 30 per cent respectively.

Some American financial analysts talk of the "new paradigm". But before getting on to that let us talk look at a few basic facts. Comparisons of growth rates can be extremely misleading, if you do not know the starting point or absolute levels. If you look at national income per head you do not see anything like an Anglo-US economy. What you see is that the United States still well ahead of Europe and that Britain remains behind both France and Germany. There was such a thing as the Thatcher effect in the 1980s. But what it did was more or less to stabilise the gap between Britain and Continental countries which had previously been growing.

The outgoing director of the CBI, Adair Turner, has made a careful analysis in a recent lecture in London. This is based on estimates by estimates of the position in 1996. The best an index with the UK as 100 for purposes of comparison.

If you want to bang the drum for the Anglo-American model of liberalised markets you emphasises real GDP per head. The most comprehensive estimates are for 1996 (made by Mary O'Mahony of the NIESR) with the UK taken as 100. The US, the came out at 137, Germany at 113 , and France at 105. In other words the USA is still well ahead of the field; but the British gap, compared to with Continental European countries has narrowed to modest levels.

On the other hand if you are a left-of-centre supporter of the Continental model you will point to GDP per hour worked - labour productivity. After all a higher level of output is not necessarily a sign of efficiency if it takes far more man hours to produce. And from the point of view of human welfare, extra leisure is normally a gain. Here the picture looks very different. France and Germany, had index numbers of 132 and 129 respectively. They had even overtaken even the US, which was down to 121. The UK at 100 was well and truly bottom

If you just look at numbers unthinkingly, the Franco-German model wins, game set and match. But then pause to reflect. The lower number of hours worked in these countries was not entirely voluntary. It reflect higher unemployment rates, more potential workers priced out of the labour market altogether and shorter working weeks due to state or union enforced directives.

My guess would be that allowance for involuntary idleness would eliminate the apparent French and German lead over the United States, but would still leave Britain with a genuine productivity shortfall.

There is a slightly different way of looking at it. This is to say that German and French workers have been ready to accept a higher risk of unemployment and higher tax deductions so long as they can be sure of enjoying large benefits when out of a job.

The weakness of their position, as my colleague Andrew Balls has eloquently explained (Burden of Unemployment, Financial Times, August 25, 1999) is that the tradeoffs are going to get rapidly worse in Continental Europe because of the impending explosion in the number of elderly people. If in addition, a shrinking labour force has also to pay heavy bills for unemployment and early retirement the system cannot last. It is for this reason rather than because of fashionable talk of new paradigms that Germany and France would be well advised to take a few lessons from American and British practice.

There are indications that this is beginning to happen, although much too slowly. The corporatist model is giving way at the edges; more market-related rates of pay are beginning to take effect and benefits and pensions are being overhauled.

What has happened since 1996? This brings us straight away to the new paradigm. The basic contention of those who believe in it is that there has been a shift in underlying US productivity growth which has put the economy onto a much faster track. If you want to be safe you should look at productivity growth over at least a whole economic cycle. In the post-92 US business cycle the average growth of business output per hour has been less than in earlier cycles. The American exponents of the new paradigm therefore concentrate on roughly half an economic cycle. Since the mid-1990s the growth of both total output and productivity has indeed far exceeded that of the core European countries.

This growth spurt is usually attributed to the revolution in electronic communications and other technological breakthroughs. The Federal Reserve chairman, Alan Greenspan, is characteristically hedging his bets. He obviously believes that there is something in the productivity miracle; and he refuses to base monetary policy on any mechanistic extrapolation of past trends. His difference with the supply side optimists on Wall Street is that he stresses the possibility that we have seen a once-for-all productivity jump over half a decade or so, which may not translate itself into a lasting long term movement.

But here we come to a decisive parting of the ways between the US and the UK. Even on the basis of half a business cycle there is no statistical evidence of a UK productivity spurt. There are optimists who point to the high levels of UK investment especially in information technology, as the basis for claiming that such a productivity spurt has taken place; and such people tend to blame the official Statistical Office for not being able to measure it. All I can do here is to return a verdict available to Scottish courts of law, which is "not proven".

The new paradigm is also supposed to justify stratospheric levels of Wall St. prices. I do not want to spend too much time on this, as almost everyone else knows more about stock exchange prices than I do; I simply follow those financial commentators who appear to make most sense. I will just say two things.

First the shape and dimensions of the Wall St boom of the 1990s is remarkably similar to the 1920s. History does not repeat itself exactly. But the parallels are ominous. Secondly, the breed of American investors known as "conviction bulls" envisage equity profits increasing at near double digit rates almost indefinitely. But, on the basis of compound interest alone, they could not continue for very long without swallowing the whole of the US economy and bringing about just that revolution which Marx vainly predicted.

There is in any case a macroeconomic time bomb ticking away. The very rapid rise in US domestic spending far exceeds any conceivable productivity miracle. Since 1995 US private spending has been rising by over 5 per cent per annum, while real growth has averaged 4 per cent. Some 1 percentage point of that growth represents increasing utilisation of resources as unemployment falls and more workers are taken into the labour force. This cannot continue indefinitely. Another 1 percentage point of the rise in spending can be traced to an ever-widening personal sector deficit.

Private net saving is now running at MINUS 5 per cent of US GDP. The whole process is only viable because people believe that their wealth is increasing. This in turn depends on Wall Street where the involvement of the ordinary citizen is far higher than it was 10 years ago and far higher than it is in Europe, including Britain.

Wall St. prices do not need to slump. They merely need to stop growing for retrenchment in private spending to occur. The Federal Reserve is clearly terrified of a Wall Street crash which it would have to meet by slashing interest rates. This in turn would encourage a so-called recovery of the euro against the dollar. The outlook for European and world economies will then vitally depend on whether the euro countries will by then be able to sustain self-generating growth which can survive a disappearance of the surplus on net trade.

The biggest danger to the British expansion comes from the backwash of any big Wall Street setback. But there are more specifically domestic factors as well. The press has been full of reports of the problems of individual corporations, especially in the retail sector. But Peter Warburton (analyst of the merchant banker Robert Fleming) makes a good case that these are indicative of what used to be called profitless prosperity on a wider scale.

He cites evidence of a squeezing of profit margins and lack of an adequate liquidity cushion to sustain corporations during a dry season. (One straw in the wind is the 20 per cent annual increase in corporate failures compared with a year ago). Warburton attributes these difficulties to a rise in the corporate tax burden, an enhanced institutional appetite for dividends and a high exchange rate. Moreover, the cost of corporate borrowing, for say 7 years, has risen by much more than the very short term rates determined by the Bank of England.

There are those who use some of these very same facts as a sign of competitive health. They say that in the national economy there is now an inverse relationship between sales and price corresponding to the conventional demand curve for a particular product. Maybe. But if the pressure on margins becomes too large corporations will have to retrench and any miracle proved short-lived.

Just as the virtues of the Anglo-US model are being oversold during a non-sustainable bubble, they are likely to suffer an unwarranted backlash opinion when the bubble bursts. The safest ground on which to advocate a more liberalised and decentralised economy is the extension that this gives to personal choice, including choice in the labour market; and this is what I would concentrate on if I were fighting the battle from Paris, Frankfurt or Rome.