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Western Europe is the quintessential convergence club. In 1950, real labor productivity in some of its richest countries was more than three times that of some of its poorest. By the end of the century, all Western European labor-productivity ratios were well below two. One aspect of this decline in cross-country European inequality is, of course, the catch-up by the Southerners: Italy first, then Spain, Greece, Portugal, and eventually Ireland (a Southerner in spirit) all had their spurts of above-average productivity growth. Spain's experience is emblematic and inspiring: In less than 15 years between the late 1950s and the early 1970s, its labor productivity relative to France's (our benchmark for the" average" European experience) went from roughly 65 percent to over 90 percent.

On May 1, 2004, the European Union (EU) admitted 10 new members, primarily from Eastern Europe. To varying degrees, the Eastern-ers' …