….excerpts from the WSJ:
On May 13, Elon Musk’s SpaceX launched 28 satellites into orbit in a single day, one of over 100 successful U.S. orbital launches this year. China has sent more than 40 rockets into space since January. Russia, bogged down by war in Ukraine, has launched 10 rockets.
Europe, by contrast, has launched four. Even that is an improvement: For over a year, the continent relied on SpaceX to launch critical infrastructure.
Falling behind in the space race is just one example of how Europe has lost its way. This extraordinary continent occupies just 4% of the planet’s landmass (not including Russia), yet it has shaped human history, for good and ill, more than any other region in the past 500 years. European nations conquered and administered as much as 80% of the planet, often violently. Their wars killed millions and redrew the global map. Europe was also the birthplace of modern capitalism and the industrial revolution, giving us cars, trains, the telegraph and penicillin. Its art and music still fill museums and concert halls around the world.
But today Europe, particularly Western Europe, finds itself adrift, an aging continent slowly losing economic, military and diplomatic clout. “Europe shaped history, but the risk now is that we are simply bystanders to history going forward,” says Jérémie Gallon, a former French diplomat. The continent’s economies have been largely stagnant for about 15 years, likely the longest such streak since the Industrial Revolution, according to calculations by Deutsche Bank. Germany’s economy is 1% bigger than it was at the end of 2017, while the U.S. economy has grown 19%.
Europe’s share of global economic output, measured in current dollars, fell from roughly 33% to 23% between 2005 and 2024, according to World Bank data. Much of that relative decline is due to the rise of China and India (and is less drastic using other measures of output), but the U.S. share of global output held up much better. Europe’s proportion of the global economy is now likely the lowest since the Middle Ages, according to the Maddison Project, a database that tracks economic history at the University of Groningen in the Netherlands.
The long stretch of weak European growth has opened up a big gap in incomes between the U.S. and Europe. European household wealth has grown by a third as much as Americans’ since 2009. Per capita GDP in the U.S. is now $86,000 a year, versus $56,000 for Germany and $53,000 for the U.K.
“Europe needs to wake up, or it’s dead in so many ways,” says Tracy Blackwell, the retiring CEO of Pension Insurance Corporation, a U.K. asset manager. Or as JP Morganchief Jamie Dimon said at a recent speech in Dublin, “You’re losing.”
Bad luck and bad policy
In the past 15 years, a key engine of European growth—manufactured exports—has been hobbled by events beyond its control, including U.S.-led trade wars, China’s mercantilist policies and Russia’s invasion of Ukraine, which sent European energy prices skyrocketing. “What was the status quo? The Americans provide our security, the Russians provide our energy, and the Chinese provide our export market. Guess what? It’s all gone,” said British historian Niall Ferguson in March.
Energy is another problem. In Germany, industrial electricity costs three times as much as in the U.S.; in the U.K., four times as much. Britons now consume less electricity per person than the Chinese, and Germany’s overall electricity consumption is lower than it was before the Berlin Wall fell. Yet Germany has banned nuclear energy, and the U.K. has scrapped new offshore oil and gas exploration. Policymakers across Europe have laid out ambitious renewable energy plans that they say will eventually lower costs, help fight climate change and create green jobs. But the transition is proving painful.
Europe’s economic slide has been accompanied by shriveling military prowess. The continent’s share of the world’s military power is also at its lowest since the Middle Ages, after decades of focusing on welfare spending instead of defense. Though European leaders are now vowing to take defense more seriously in the face of a revanchist Russia, they are struggling to build up their forces. Britain’s entire army can fit comfortably inside Wembley Stadium.
There are exceptions. Sweden has quietly spurred economic growth by cutting back its welfare state—tightening government spending, revamping the pension system and slashing corporate and personal tax rates. Per capita incomes are now climbing, and the country has seen a burst of entrepreneurship. Sweden even moved ahead of the U.S. in the number of billionaires per capita, thanks to a thriving tech startup scene and a video-game industry that has produced hits such as Minecraft and Candy Crush.
But in most of Europe, such reforms are proving to be a big ask. Europeans consistently vote for politicians who protect the status quo and expand the welfare state. In France, which hasn’t balanced its national budget in more than 50 years, government spending is around 57% of GDP, compared with 36% for the U.S. The state subsidizes everything from vacations to back-to-school equipment for children, and cities from Dunkirk to Montpellier have made public transit free for residents.
Attempts to cut spending often lead to mass protests. In May, French taxi drivers gathered for a strike in Paris after a proposal to cut the amount they are paid by the state for ferrying patients to and from medical appointments.
British historian Andrew Roberts gives Europe a one in five chance of acting to head off a crisis. “Things were pretty rotten in the 1970s, and then we got Reagan and Thatcher and things turned around,” he said. “But it requires will and guts and the ability to tell people they can’t have free stuff, and there’s not anyone saying much of that at the moment.”