"Probably the leaders in innovation in Europe would be the UK with Denmark and, maybe, Sweden high on the list."

Phelps, who speaks in a very slow drawl and whose main role is director of the Center on Capitalism and Society at Columbia University, does not predict a collapse in living standards in the West as a result because its citizens remain wealthy but he does believe there is now more energy in Asia and particularly in China.

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"I think Asia is the opposite. It has discovered a business spirit and it is flowering," he says.

Phelps, who grew up in New York and has been at Columbia for more than 40 years, is best known for his work on the "natural rate of unemployment" in the 1960s, which was seen as a challenge to then Keynesian orthodoxy, and won him the Nobel Prize considerably later.

"Like 37 or 38 years after," he says.

Many Keynesian policymakers of that time believed that you could control levels of employment through monetary policy but Phelps challenged this.

"This was never the view of the sober, thoughtful and highly intelligent Keynesians I knew in the 1960s," he says somewhat modestly.

"They were never in favor of 5 or 10 percent inflation just to get employment up."

His work in this area is often associated with that of Milton Friedman, one of the founding fathers of modern monetarism.

"We did our two papers separately. He was unaware of mine and I only became aware of his when I was dotting the i's and crossing the t's. The ideas behind our work go back to the continental theorists of the 1940s."

He actually had only a few personal encounters with Friedman, who died in 2006 aged 94.