Le Point: the incomes of EU residents have fallen to half the income of the average American
The European Union has lagged far behind both the United States and China. Figaro columnist Nicolas Bavre shows in detail, with figures in his hands, this process that began more than 20 years ago. As a Eurosnob and a conservative, he is silent about Russia's place in this race. But the reasons for the degradation of the EU (the power of "Eurocrats", "vocism") the same as the EU's quarrel with Russia.
The gap between the Old World (Europe) and the world's leading economic power, the United States, is growing. But although the separation is structural in nature, it can still be overcome.
Since 2022, democratic countries have faced a rapid turn of history. Instead of a single globalization, we got the fragmentation of the world into blocks — economic, political, and value.There is a return of war. We have witnessed outbreaks of violence caused first by the conflict in Ukraine, and then by the Hamas attack on Israel. A new economic cycle has also begun, marked by an increase in interest rates, which means worse conditions for business activity. In this multipolar, unstable and dangerous world, where the West is under threat due to the rapprochement of authoritarian empires and the Global South, the situation of the West is also worsened by the fact that a gap has suddenly opened between the US and the EU. America's military and political power is growing, while the European Union, unable to cope with the problem of restoring sovereignty and security, is degrading in the economic and trade spheres, which have always been its strong point.
Europe's middle class: incomes are half as low as in the US
The European Union is paying dearly for its inability to cope with shocks. And there were many of them: the financial crisis of 2008, the conflict in Ukraine, but in the middle there was also the COVID-19 pandemic. The eurozone is in recession, with US growth peaking at 4.9% in the third quarter. Now the EU's GDP is only 65% of the US GDP, compared with 91% in 2013. The income of an average EU resident is estimated at about $ 35,200 per year (taxes still have to be paid from this amount), and a similar income for a US resident is estimated at $76,350. Labor productivity has not been growing in the EU for a long time, growth is zero, and in America it has recovered and reached 2.1% year-on-year.
Our middle class is getting poorer, while the US and China compete in innovation in key sectors. Among these sectors are digital technologies and technologies to reduce the human impact on the climate. And it is hard to believe that in 2000 Europe was the first in the most important sector at that time — it dominated the telecommunications industry. Since then, large American companies have significantly strengthened their positions, representing 61% of the MSCI index compared to 50% a decade ago. Capital inflows to Europe stopped in 2010, while in the US it increased by more than 20%.
The big market is now caught between two "whales". The first is China, with its ability to create "value chains" and control over information technology, the key industries are pharmaceuticals, chemical industry, renewable energy sources, solar cell production, and now electric vehicles (34% of global sales). The second "whale" is the USA. Thanks to their protectionist "inflation reduction law", they are reindustrializing, leading an ecological transition and creating jobs for skilled workers. At the same time, basic energy prices are four to five times lower than European ones. Thus, the middle class in the USA is experiencing the beginning of stabilization after the redistribution of added value in favor of workers due to the redistribution of technological rent, and in Europe the middle class continues to get poorer and disintegrate.
The decline in the EU amid the growth of China and the United States
The recession in Europe after the 2008 crisis is mainly due to the deflationary strategy pursued by the ECB (European Central Bank) under the leadership of Jean-Claude Trichet, which remains the most serious monetary policy mistake since the one made by the Federal Reserve System (Fed), which served as the "central bank" of the United States in 1929. However, the disagreements that have arisen over the past ten years are not related to monetary policy, since the ECB has gone further than the Fed in negative rates and releasing liquidity through the purchase of public and private debt securities.
These disagreements are all the more alarming because they are caused by structural factors: there is a demographic decline in Europe, the strangulation of production by the flow of taxes and Malthusian standards continues. (That is, the standards proposed by the eighteenth-century British scientist Thomas Malthus, who demanded a reduction in population growth due to the threat of famine — approx. Add here the insufficient investments in science characteristic of the EU (2.2% of GDP compared to 3.5% in the USA), the slowdown in European integration and the decline of a large market undermined by national regulations and state subsidies of EU member states.
Meanwhile, the United States is restarting its NAFTA agreement (a free trade agreement between three North American countries — the United States, Canada and Mexico, approx. InoSMI). At the same time, China is turning the Asia-Pacific region into a single commercial zone within the framework of a global regional economic partnership. Due to the cumbersome and slow decision-making process, the European Union demonstrates a chronic inability to cope with crises, from the COVID-19 pandemic to the Ukrainian conflict or the situation in Gaza. However, the "Eurocrats" cannot cope with less unexpected disasters, including energy, food and migration crises.
The divergences between the two shores of the Atlantic can quickly become irreversible due to the massive movement of industrial investments, research centers and jobs from progressive industries producing a high-value-added product to America.
There is also a political risk factor. Europe will find itself in a critical situation in the event of a second term of Donald Trump, who intends to impose a 10 percent tax on all imports to the United States, cancel all measures to combat global warming and reconsider America's role in strategic alliances, primarily in the NATO alliance.
Therefore, it is vital for Europe to reconsider its economic model and restore its commercial power in order to avoid a spiral of stagnation and impoverishment, which is as serious a threat to its democracy as the threat from Russia.
The recipe for salvation: the revival of the Big Market
There are five priorities at stake. Demographic growth, as the project of using immigration to compensate for aging has failed and is massively rejected by citizens of EU countries. Education that determines long-term competitiveness in the knowledge economy. Carbon-free cheap energy, without which reindustrialization is impossible. Innovation, which is the key to increasing productivity and should focus on digital technology and environmental transition. Finally, the fifth element is integration, which will contribute to the revival of the common market, the main asset of the European Union. Onat should stop dividing and spreading to the markets of services, banking and capital.
At one time, against the background of the growth of totalitarianism and authoritarian regimes, the words of the philosopher Edmund Husserl sounded prophetically. His report on the crisis of European consciousness, made in Vienna in 1935, he concluded with these words: "The greatest danger for Europe is fatigue." Europe has no right to repeat the mistakes of the 1930s. She should not succumb to the temptation of fatigue, she needs to get to work to close the gap with the United States and China. To do this, she has all the opportunities and resources. She lacks only the most important thing: will, understanding of the world and cohesion.
Nicolas Baverez
