Sincere question: what other country is laughing at us? Is the EU a model of governance and efficiency? Is Japan growing? is China suddenly allowing alternatives to the Communist party rule? Brazil and Mexico?
I have no idea what the fare of those other countries has to do with it, but I will try to answer.
EU is quite efficient, and more important, a lot more peaceful and democratic than the US, at least in most parts. In those where it isn't, it is because of Trump-like rulers. Especially Hungary, whose Victor Orban created George Soros as a scapegoat to blame for his election.
Is Japan growing? I am not sure which growth you mean, but if you mean economically for the situation it's in, yes. China is very succesful economically and, for their situation, even ecologically. There are other parties. They are negligible, as is any party in the US except the Reps and Dems, who both internally work very similar to the communist party (in deciding who gets to be the person the citizens are allowed to vote on) so I see not much difference.
Brazil is another Trump-like, just with more violence and history of "revolts" of all sorts. Mexico has it's own problems I don't know much about except a bit about the drug gangs and the Zapatistas.
he'd point out that the tradeoff for that lighter state influence is the kind of economic dynamism that makes this a very attractive country to work and invest anyway.
Did I understand that right? You mean that in exchange for a "smaller state" you have a more attractive country to work in?
In that case I strongly disagree. I know not enough to make detailed comparisons, but I am quite sure that having a very small business is easier in the EU. The EU is also a place with far better working conditions (given a comparable level on GDP). Social mobility is way higher.
"Investing" may be more attractive, since less costs are internalized and more of the bad stuff falls on everyone else.