Europe in Decline

I was blissfully unaware of this story. Perhaps you have also missed out on it. According to the Financial Times Europe is becoming an also-ran in the clash of civilizations. 

Over the course of the past fifteen years the European economy has gone from being on a par with America to being an also-ran. From being somewhat larger than America’s economy, Europe has gotten to the point where the United States economy is nearly a third larger:

As Jeremy Sha­piro and Jana Puglierin of the European Coun­cil on For­eign Rela­tions point out: “In 2008 the EU’s eco­nomy was some­what lar­ger than Amer­ica’s: $16.2tn versus $14.7tn. By 2022, the US eco­nomy had grown to $ 25tn, whereas the EU and the UK together had only reached $19.8tn. Amer­ica’s eco­nomy is now nearly one-third big­ger. It is more than 50 per cent lar­ger than the EU without the UK.”

Europe is now losing out when it comes to technology, energy and military hardware. It no longer even dreams of autonomy. It increasingly depends on the United States.

The US eco­nomy is now con­sid­er­ably richer and more dynamic than the EU or Bri­tain — and the gap is grow­ing. That will have an impact well bey­ond rel­at­ive liv­ing stand­ards. Europe’s depend­ence on the US for tech­no­logy, energy, cap­ital and mil­it­ary pro­tec­tion is stead­ily under­min­ing any aspir­a­tions the EU might have for “stra­tegic autonomy”.

In 2008, the EU and the US eco­nom­ies were roughly the same size. But since the global fin­an­cial crisis, their eco­nomic for­tunes have dra­mat­ic­ally diverged. As Jeremy Sha­piro and Jana Puglierin of the European Coun­cil on For­eign Rela­tions point out: “In 2008 the EU’s eco­nomy was some­what lar­ger than Amer­ica’s: $16.2tn versus $14.7tn. By 2022, the US eco­nomy had grown to $ 25tn, whereas the EU and the UK together had only reached $19.8tn. Amer­ica’s eco­nomy is now nearly one-third big­ger. It is more than 50 per cent lar­ger than the EU without the UK.”

When it comes to technology, Europe has lagged. In truth, it seems incapable of doing anything beyond regulating and punishing the great American tech firms. It has none of its own. Dare we mention that China is hard at work competing against America in technology.

The European tech­no­logy land­scape is dom­in­ated by US firms such as Amazon, Microsoft and Apple. The seven largest tech firms in the world, by mar­ket cap­it­al­isa­tion, are all Amer­ican. There are only two European com­pan­ies in the top 20 — ASML and SAP. Whereas China has developed domestic tech giants of its own, European cham­pi­ons are often acquired by Amer­ican com­pan­ies. Skype was bought by Microsoft in 2011; Deep Mind was bought by Google in 2014. The devel­op­ment of AI is also likely to be dom­in­ated by Amer­ican and Chinese firms.

With the exception of Great Britain, the world’s great universities are not in Europe:

The lead­ing uni­versit­ies that feed the pipeline of tech start-ups in the US are lack­ing in the EU. The Shang­hai and THE rank­ings of the world’s top uni­versit­ies both have only one EU insti­tu­tion in the top 30. (Bri­tain does bet­ter — cour­tesy of Cam­bridge, Oxford, Imper­ial and oth­ers.)

Compare and contrast the work of building semiconductors. Europe lags both America and China. Note that China is building many more facilities than we are:

In 1990, Europe made 44 per cent of the world’s semi­con­duct­ors. That fig­ure is now 9 per cent; com­pared with 12 per cent for Amer­ica. Both the EU and the US are rush­ing to build up their cap­ab­il­it­ies. But while the US is expec­ted to see 14 new semi­con­ductor plants come on stream by 2025, Europe and the Middle East will add just 10 — com­pared with 43 new facil­it­ies in China and Taiwan.

When it comes to energy, we have plentiful supplies, but Europe does not. 

Unlike Europe, the US also has plen­ti­ful and cheap domestic sup­plies of energy. The shale revolu­tion means that Amer­ica is now the world’s largest pro­du­cer of oil and gas. Mean­while, energy prices in Europe have soared. The Ukraine war and the loss of cheap Rus­sian gas mean that European industry typ­ic­ally pays three or four times as much for energy as their Amer­ican com­pet­it­ors. Gloomy European bosses say this is already lead­ing to fact­ory clos­ures in Europe.

Europe still leads the world in one area. Call it luxury goods, from LVMH to fashion brands to wine and cheese and tourism.

Europe does out­per­form in “life­style” indus­tries. Almost two-thirds of the world’s tour­ist arrivals are into Europe. The lux­ury goods mar­ket is dom­in­ated by European com­pan­ies. Foot­ball, the world’s most pop­u­lar sport, is dom­in­ated by European teams — although many of the biggest clubs are now owned by Middle East­ern, Amer­ican or Asian investors.

Europe’s dom­in­ance of life­style indus­tries under­lines that life in the old con­tin­ent is still attract­ive for many. But per­haps that is part of the prob­lem. Without a greater sense of threat, Europe may never sum­mon the will to reverse its inex­or­able decline in power, influ­ence and wealth.

So, Europe is losing power, influence and wealth. But, it is hard at work promoting green energy. Could it be that Europe, for turning away from capitalism and toward socialism, is now paying a price for its dereliction? Anyway, for those who seek a consoling thought, Europeans seem to have better work/life balance.