The real threat facing Europe lies in its own economic and technological backwardness. Between 2008 and 2023, GDP rose by 87% in the US, compared to just 13.5% in the EU. Over the same period, the EU’s GDP per capita fell from 76.5% of the US level to 50%. Even the poorest US state – Mississippi – has a higher per capita income than that of several major European economies, including France, Italy, and the EU average.
I usually ignore Nouriel Roubini, a Clinton economist and IMF alumnus with a real anti bitcoin bias, but this was an interesting read IMO.
This gap has gotten so severe that it's hard to ignore.
For my whole life, and I'd imagine yours as well, Europe was basically an economic peer to America. This fall of Europe is one of the more mind-blowing things in recent memory.
I agree. I see it is as a real example of what a soviet style bureaucracy can do to destroy an economy, though that's probably an oversimplification.
It's not the bureaucracy; it's the expenditure, mostly on social security, and I'd not call it soviet style. France's government expenditure was 57% of GDP in 2024, Belgium 55%, Italy 51% and each had a deficit between 4-6%. Whereas for comparison, this was 38% in the US in 2024, despite a massive deficit > 7%. [1]
So you take that GDP number, remove government expenditure from it, and then you can weep about the real issue: productivity. But since social security (incl things like retirement age) are set nationally, it makes no sense to measure EU-wide. The aggregation makes it meaningless and it cannot be steered. If the EU were to decide for the French that the retirement age needs to go up a lot, then the EU will fall faster than that 14h French cabinet earlier this year.
Source for these figures is IMF data: https://en.wikipedia.org/wiki/List_of_countries_by_government_budget#:~:text=%5B13%5D-,International%20Monetary%20Fund ↩
One of the main reasons productivity is so low is that the EU bureaucracy is smothering the private sector, though.
Can you point to a law that Brussels made that hinders the private sector for trillions?
Why would it be a single law?
If there's a different cause of their failure to keep up, I'm open to hearing about it.
Taxes (but those aren't set in Brussels)
Why can't it be both?
The EU has a bunch of environmental, labor, protectionist, and health regulations that make doing business there less profitable.
Also, we were talking about Europe, not specifically the EU government layer. So, all the taxes to fund the bureaucracy and state provided services should be included on this side of the ledger. (I shouldn't have said "EU bureaucracy", when I meant the general amount of bureaucracy in the EU.)
Don't they have some crazy ai safety framework?
Do they have a reasonable enforcement mechanism? The problem with passing all these rules without a streamlined enforcement mechanism is that you chill development
Had assumed so until I worked with a bunch of Euros, the austere mindset of Brits and Germans especially was a big shock.
Then I visited. The understanding I had that Germany was an economic peer was dashed further when I couldn't get decent internet or a cell signal in the heart of a major city of the most wealthy EU country.
Turns out it was always a mirage. They were propped up the entire time by spending basically nothing on defense while hosting US assets, and a currency subsidized by US swap line "EuroDollar" banks and check-valve trade.
The mirage was probably the real asset, luring in tourists.
Apparently restaurant tables on the sidewalk and denser public transit does not an economy make.
Maybe so, but now even the mirage can’t be maintained now.
When you were there the gap would still have been pretty wide but Germany would at least have been on par with some of the poorer US states.
I think that's pretty accurate, a premier European city felt about on-par with a 3rd tier Rustbelt city, just with better baseline food at 3x the cost and window dressed with ornate (old) architecture.
For about the last 25 years, I've traveled to Europe yearly for work conferences (mainly UK, but also Germany / France / Spain as well).
I have no specific knowledge or special insight, just observational comments.
I wonder how much these data points are the result of migration....meaning if you import millions of very very poor immigrants its going to affect per capita numbers dramatically.
When you are in Europe, daily life in the "non migrant" areas of town looks fairly normal and doesn't seem to reflect "mississippi poverty levels" at all. There are lots of high end restaurants, hotels, cars abounding. Most middle-class and above professionals seem more or less on-par with their US counterparts....sure their housing is smaller, their cars are smaller, but daily life seems much closer than these stats indicate.
However, what I have witnessed, is the "migrant areas" have spread significantly over the last 25 years. From what was very small orderly "migrant neighborhoods" to pretty much "half city-sized slums". It really does seem like too-much too-soon....I don't see how these areas are ever going to integrate.
My guess is "Mississippi poverty levels" is also overblown and limited to select areas that have historically been impoverished
Traveling in Europe, watching Youtube videos of daily life in Europe - one thing you run into again and again is that they still use lots and lots of paper instead of electronic documents.
They still have file cabinets. Bureaucracy is mostly paper based.
Where did you travel?
Germany, France.
Also I occasionally watch some German Youtube videos in which one of the incidental features is dealing with bureaucracy. And it looks like it's all paper forms, in triplicate.
Germany has been notoriously bad. I did have some govt interaction there last year, and luckily much more is digitized now. They're working on it (finally.)
All industrialised economies have lost economic advantage over the last 3 decades as Chinas state capitalism and scale has delivered higher productivity. The industrial base ofthe US has also been gutted- but the US had its military and financial sectors to sustain its wealth ahead of China.
Now that US military industrial complex is crippled by Chinas hegemony over refined rare earths the US is headed in the same direction. China is now gradually but steadily moving from US financial protocols to its own and the US decline will continue rapidly as it has in Europe.
Aggregate statistics like EU wide GDP per capita comparisons are useful for broad trends but risk obscuring the reality on the ground. Europe is not a single economic organism in the same sense that the United States is. It is a collection of sovereign states with their own fiscal policies social security systems and productivity profiles.
The migration factor is worth considering but it is only part of the equation. Large influxes of low income migrants can indeed affect per capita figures but the slower productivity growth in many European economies predates recent migration waves. Structural issues such as heavily regulated labor markets slower adoption of new technologies lower rates of capital investment and in some cases shrinking working age populations have been long term drag factors.