New numbers say the European Union has joined Japan in the “lost decades” brigade, with per-person gross domestic product in dollar terms nearly flat since 2008.
According to the Organization for Economic Cooperation and Development, while disposable household income in the U.S. is $51,000, it’s just $39,000 in Germany, $34,000 in France, $29,000 in Italy, and $21,000 in Greece. For perspective, Mexico is about $16,000.
Why is Europe fading? Simple: Government took over. Government spending is nearly half of Europe’s GDP, which hogs physical resources—steel, workers, etc.—while predatory tax rates punish production and welfare tempts workers away. Nobody produces, everybody takes.
Add in mandates from environment to social policy that hike prices and slap straitjackets on companies, and the smart ones leave, the rest grimly soldier on, staying in business till their factories wear out, then it’s lights out.
In short, it doesn’t pay to produce in Europe. Atlas is shrugging.
What’s driving the takeover is a toxic combination of vote-buying welfare and crony handouts to corporations. I’ve mentioned in previous videos Europe’s stream of trillion-dollar “stimulus” bills that went to corporations, while welfare spending consumes 1 in 3 dollars in countries such as France and Italy. In the U.S., it’s still high, at 23%. In South Korea, for comparison, it’s 15%.
While the corporations feast on government handouts, the taxes that sustain Europe’s welfare state come from the small and medium businesses, who are getting wiped out. Today, the U.S. has 33 million small businesses. Europe, with one and a half times the population, has just 24 million. Half as much per capita.
The difference is even greater with new startups. Europe’s venture industry is six times smaller than the U.S., which has just two-thirds of Europe’s population.
Moreover, very little of this European money is actual innovation: Europe has missed every tech revolution since basically 1910, instead either copying U.S. business or exploiting government handouts from climate to so-called national champion mega-corporations. To give a flavor, over 90% of artificial intelligence venture money is happening in America, with Europe straggling along with a couple chatbots.
Tallying it up, governments in Europe spend 49.6% of GDP, roughly a quarter more than the U.S., which spends 40%. Not that 40% is great; traditionally we were closer to 20%. But apparently that last couple trillion breaks the bank.
Incidentally, countries such as Singapore do spend just 18% of GDP on government, but have safe, clean streets and grow at 3%-4% per year. So, it’s not science fiction; stagnation is a policy choice.
Sadly, all of this was predictable. In 2013, the Brookings Institution issued a white paper warning of a lost decade in Europe if they didn’t fix government governments and shrinking private sectors.
Alas, true to form, European bureaucrats didn’t fix it. Instead, they doubled down on the welfare spending, the crony handouts, the tax hikes, and the political mandates. As a result, since 2000, roughly 1 in 5 publicly listed European companies have either left Europe or gone out of business. The 5,500 companies left average just one-third the size of listed firms in America.
Europe is strangling itself. So, what’s next?
In theory, European voters would wake up and demand change. In practice, the political elite in Europe has instead abused democratic institutions to shut out or even censor any criticism of the corporatist welfare state that’s dragging Europe under.
Peter St. Onge is a visiting fellow at The Heritage Foundation.
Reprinted with Permission from The Daily Signal – By Peter St. Onge
The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.
Actually, a very good article outlining why Europe has declined so dramatically in the time frame discussed in the article. This is the type of fact-based article that AMAC should focus on to not only educate the members of AMAC, but also provide depth of details to the issue when AMAC members speak with others to warn them where we are heading.
I can attest to the accuracy of everything the author has laid out in the above article, as I traveled extensively throughout Europe for business for a number of decades and still have friends and family there to update me on how conditions on the ground have only gotten worse over time. EU government policies and regulations have utterly crippled the economies of most western European nations today. Standards of living have fallen across the board, and most of the politicians just basically tell the people that the pain is necessary in the short run, which is never described with any specificity, in order to either “save the planet” or achieve some eventual social or economic justice goal. In other words, the response from the political class is pure BS to try and mollify the increasingly upset populace that is seeing everything they worked for being stripped away.
Watching the EU metastasize from a simple trading block in the 1990’s, in order to facilitate trade across Europe, with the United States and Asia into basically an unaccountable political block that today rules the EU with a near iron fist was fascinating to watch. I would have never believed at the time, that people would sit still for such a naked, political power grab. That was a learning experience. The denial of so much of the public to see what was playing out right in front of them back then is so similar to what is now happening here in the United States. It didn’t help the EU countries that at the time, none of the largest western European countries were headed by a strong and conservatively principled leader. The European leaders of that time were mostly what I would call “go along o get along” types. So no one was watching out of the interest of the masses. If you knew anything about world history and were aware of how the left in the early 20th century leveraged language and policy to manipulate the masses to gain political power in countries around the world, you could see back in the early 2000’s how the leadership of the EU was playing basically the same game with nicer language.
Anyway, the American people have one last shot to try and avoid the exact same fate as the countries that comprise the EU today. Remember, the EU countries are NOT done going down by any stretch of the imagination and we’re just playing catch-up due to the fact we were fortunate enough to have Trump in office for 4 years to break the Democrats’ momentum under Obama. Otherwise, we would already be experiencing much of the same pain as the EU today. If we chose wisely in November, we stand a good chance of getting a reprieve and maybe even an opportunity to reverse some of the more serious damage done to the United States by America’s Socialist Party. If not, then the EU is simply a glimpse of America’s future in the not-too-distant future.