Whither Europe?

I remember that recently I was reading the comments section to a news article on the Internet where one of the respondents was going on about how great Europe was (free health care, free university, working to live not living to work, etc.) and how America should strive to be more like Europe. It was just one comment among many in one article among many that I have read recently, so I could not go back and find the exact wording of the comment or its context if my life depended on it. So the comment became just one more of the little bits of data floating around in my brain, soon to be lost from memory pushed aside by newer bits of data.

But before that comment was totally lost from memory, I read an article in the Wall Street Journal that asserted that Europeans are getting poorer (Europeans Are Getting Poorer, July 17, 2023). And it is true! Since 2007 the world has been hit by three earth-shattering events, the Great Recession, the Covid Pandemic and now the war in Ukraine. But despite these events, the US economy grew from $14.47 trillion in 2007 to $25.46 trillion in 2022 an increase of 76% according to World Bank data. The GDP of the European Union only grew 13% in the same period. Annualized, the US increase in GDP only had an average growth rate of 2.3% per year during this period, well below the historic average for growth in the US. But Europe fared even worse.

Europeans may be working to live but they are living less well. There are many reasons that Europeans are living less well. One reason, they work less than Americans. In fact, they work less than just about anybody. Germans only work about 1,340 hours a year, much less than the OECD average of 1750 hours a year as well as lower than the US average of 1,810 hours per year. That’s about two hours less work a day. German workers may be very productive but they are not productive enough to offset the longer working hours of Americans. Further, German workers are working 6% less hours in 2022 than they did in 2010 compared to American workers who are working about 2% more hours.

It only makes sense. People react to incentives and the welfare state common in Western Europe disincentivizes work. The Wall Street Journal article quoted a Finnish worker who shortened his work week by 20% as saying, “Who wouldn’t want to work shorter hours?” The 10% pay cut he took would be offset by his welfare benefits.

The Western European welfare states pay for their costly support systems through taxation, very high taxation. And it is not just the rich that pay taxes – everybody pays taxes. Countries in Europe get most of their tax revenue from value added taxes (sort of like sales taxes in the US which are considered regressive taxes because the poor pay more). The value added taxes in Europe average over 20% and up to 25% in Denmark and Sweden. But high taxes are also a disincentive to work. And many ambitious European executives and scientists have relocated to more rewarding climes, such as the United States.

Another way to support expensive welfare programs is to cut back on expensive defense programs. Most European countries in the NATO alliance do not meet their commitments on defense expenditures, relying instead on the United States. President Trump’s threats to leave NATO did not convince many of them to loosen their purse strings, but Putin’s invasion of Ukraine (at least partly motivated by apparent NATO weakness) may have changed their minds a bit - at least temporarily.

These are the countries that President Biden and the Democrats want us to emulate. Countries where the people assume that their fortunes will dwindle. Countries where ambitious people with big ideas move elsewhere. Countries that need a powerful ally to keep the bullies at bay. Who will be our powerful ally if we become more like Europe?

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But although economic strength or weakness is easy to quantify, there is more going on in Europe than taxes and disincentives to working. Europe is more focused on its comfort than its achievements. Its glory is in the past, not the future. Europe is not erecting new monuments, creating new art, building towering buildings but instead has become a tourist center where foreigners come to gawk at the monuments, arts and buildings put there by the ancestors our European friends.

Its population is shrinking. Immigrants are needed to supply the labor unwilling Europeans are not motivated to supply. The European Union is an administration not a vision. So the immigrants cannot be assimilated because there is no vision to which they can aspire. They will always be Africans, Asians and former colonial subjects.

Immigrants come to America because of the economic opportunity but they become Americans because they want to share the same vision of the future as native born Americans. But this is the vision that the Biden Administration is seeking to crush. Perhaps he is well intentioned. Perhaps he believes that all the free goods, handouts, loan forgiveness and other benefits is just how the government is supposed to take care of its people and does not understand the soul crushing effects that such dependency can cause.

Europe once was the center of great powers and it was filled with people that had great ambition and high aspirations. Now it is filled with tour buses of Chinese tourists whose traditionally rude French waiter is Algerian – not French. Perhaps no civilization is truly sustainable. They all seem to have their ascendancy, peak of power and then inevitable decline. The welfare state was invented by German Chancellor Bismarck to placate the masses while he created an industrial empire to dominate Europe. The industrial empire envisioned by Bismarck has passed away but the welfare state remains. The welfare addiction has infected the minds of many political leaders in America. Hopefully we can find the cure for this addiction before we end up just like Europe. Old, feeble and not an actor on the world stage.