The growing transatlantic prosperity gap
Taking advantage of being in Germany to claim first comment, completely devoid of any substantive contribution.
I think the fact that the EU has very aggressive antitrust and pro-privacy regulations and the fact that basically the only innovation to come from the EU's tech sector in recent years is making us click "Accept Cookies" are not unrelated.
Writing as an American from Sweden, this essay strikes me as superficial, unsubstantiated, and just incorrect on its own terms.
Firstly, it misinterprets the reasons why the United States is uniquely successful in certain key areas (IT, domestic energy) as policy choices rather than just "not screwing up a lucky break." And it points the finger at European for dropping the ball when a lot of what they "did wrong" was just an issue of structural constraints and no-win dilemmas. And granting "the win" to Obama and Biden is granting them too much agency in this process. If anything, the policy choices that had more bearing on those successes in both Silicon Valley and Houston go back WAY further, to the first half of the 20th Century. And that subject deserves a closer examination from you here because Americans tend to think that tech, especially, is some new thing dreamt up by Steve Jobs and Bill Gates, instead of an industry that saw its inception prior to WWII (and scaled out largely because of the war).
But, whatever the origin story, the salient factor for American Big Tech's dominance today has less to do with entrepreneurial genius, government policy, or anything purposeful like that. It's just a matter of size: the United States has Silicon Valley because it, alone, is the world's only rich, single market of sufficient size for an industry that rewards network effects and clustering. Europe (or the EU/EEA) is a single market on paper, but it has structural barriers that create friction for developing scale in financing, talent pipelines, and go-to-market. I can tell you all sorts of anecdotal stories about this as a founder and employee for both American and European tech companies of every size, but just imagine what it's like for a London tech office (still the dominant European tech city even after Brexit) to recruit tech workers from even neighboring France (impossible to get working visas, language barriers, Brexit-driven administrative nightmares, etc.) and compare that to the pool of 330 million Americans that any US tech employer can draw to Silicon Valley or elsewhere without any of that. Germany managed to make a tech giant in SAP right around the time that Microsoft was incubating, but SAP is never going to be able to draw upon a huge, captive domestic market like its tech peers Microsoft, Oracle, or Google. Since IT hardware is simpler to export, you have a different story for Europe there: chipmaker ASML is certainly doing quite well for itself coming out of tiny Netherlands.
China and India are the only two other continent-sized countries with huge population that could scale like this, but both of them are still poor on a per-capita basis, retain significant internal barriers for business even within their own countries, and are extremely difficult to recruit foreign talent into. China has its Alibaba and India its Infosys, but they're likely never going to surpass their American competitors as long as the United States is still the only really big, really rich country.
Energy is an even more obvious area where the United States is just plain lucky. The oil boom started in Pennsylvania and America was the world's largest exporter until the 1970s and now again today. Europe (ex. Russia) basically doesn't have fossil fuels. Norway's production is enough to make Norwegians rich, but nowhere near enough to even feed Scandinavian energy demand, much less the entire EU's. Yes, some European countries could have joined the fracking boom (and you neglected to mention how some like Poland, Romania, and Denmark actually did), but that wouldn't have moved the needle significantly. Europe just doesn't have this option on the table, whatever their qualms. Again, structural factors matter: Sweden transitioned away from oil in the 1970s not for environmental reasons, but purely for pragmatic ones after the various oil crises of the decade threatened to derail their heavily industrialized economy that lacked domestic fossil fuel access. The Swedes quickly built out hydropower and nuclear power at a fast clip because that's what Sweden could do. For France, lacking hydropower, their answer was the world's biggest concentration of nuclear power plants. Germany could have chosen to take after France, but they instead fell back on that Ol' Ruhr Valley Reliable: coal. A fateful decision that continues to haunt them. The UK and Denmark have now been opting for wind because that's what they have a lot of, just like Spain and Italy are going big on solar, and Norway and Sweden continue to enjoy their geographic gift of abundant hydropower. Iceland, famously, leverages its geothermal resources to not only be largely energy-independent, but also to dominate the aluminum smelting market with some of the cheapest electricity and industrial heat in the world.
Aside from Germany and their peculiar and paradoxical anti-nuke Green politics and soft-on-Russia Ostpolitik, I don't see a lot of evidence of Europeans lacking pragmatism or making stupid decisions on energy. Yes, I absolutely would have loved to see the EU and ECB itself take a bigger role in facilitating the green transition and maybe even resolving some of the cost and scaling issues of nuclear power with some subsidies, but that's the weakness of a contested federal system, isn't it? We have had the same issue in the US for decades until "Bidenomics" (which, as you have written about, isn't an unmitigated success yet). Mostly I just see Europeans making pretty good choices within some major structural constraints.
But that's not a story that Americans like to hear. Europe is a dark mirror for Americans, either a Utopia or a Dystopia! A shining exemplar or a miserable failure! Maybe both...? But couldn't it be true that Europe isn't perfect but is just... doing fine? And that it's not just a "good place to vacation," but also a great place to live?
And that Europe is arguably even better for the median European than the United States is for the median American, by most objective standards? (Glove thrown!)
You mention (and wave off) the embarrassing issues of the Great American Life Expectancy Deficit, where Europe is clearly wiping the floor with the United States. But you could have mentioned all sorts of other quality-of-life factors, too, even the ones that Americans pride themselves on. We all know that Europeans have it made when it comes to vacation time, paternity leave, healthcare access, public transit, unionization and working conditions, walkable cities, delicious food, non-toxic environment, and joie de vivre-type stuff like that. But what about all the materialist pleasures that Americans ostensibly value? The country where you can get hella rich, even if it kills you, bro! Though Americans do make higher salaries and pay lower taxes, they actually have a much lower household savings rate than Europeans. Which is pretty obvious when you account for all the things that those (slightly) higher salaries are supposed to pay for on the (crazy inflated) private market: a (big, expensive) car for every adult, five-figures in daycare for every child under age 5, thousands out-of-pocket for healthcare (with "good" insurance!), ruinous costs for eldercare for all those Boomers, etc. Stuff that is covered in the (slightly higher) taxes for most Europeans. Also, we tend to assume that workaholic Americans are always working, but it turns out that they're not: the US also has much a lower labor participation rate than "lazy" Europe. A shocking and under-discussed issue that is related to the sorry state of our safety net and healthcare "system." Americans also don't own their homes at the same rate as Europeans, and their experience as renters is far worse than their European peers. They have higher poverty, too, both in relative and absolute terms. So, it turns out that we Americans are not actually so rich, in practice, but we will certainly die tryin!
That type of stuff might not register to well-compensated Substack columnists who experience Europe as tourists, but it is exactly the kind of stuff you should be interrogating when making statements about how the US "beat Europe." This isn't to say that the US is a dystopia or miserable failure, either. Both places house among the luckiest humans alive or dead, living a lifestyle unimaginably abundant for most people who have ever lived. But, in terms of making that abundant life abundant for a wider swath of the population than only the top 20%, Europe still has a lot to teach Americans.
EU-level decision making is an excellent illustration of the “having too many veto points makes you sclerotic” theme that frequently comes up here. It’s incredibly hard to adapt to changing circumstances if any tiny member state can derail any proposed change. Articles of Confrderation-ass governing system.
Politically this seems like a challenge for the Democrats, for whom “we should be more like Europe” had long been a rhetorical North Star. If Europe is increasingly seen as a laggard it is a big challenge to that framework.
So long as we're doing kind of lazy, strictly anecdotal speculating about how Europeans are from Venus and Americans are from Mars or whatever: I am not convinced Americans are pragmatic problem-solvers and Europeans are not. However, it may be true that while Europeans have a superior sense of collective responsibility for problems, they also have a weaker sense of individual responsibility. Just my experience. "I should try to solve this problem" may not come so naturally to them, but the sticking point might be I, not solve the problem. If it's not a specific tradition for individuals or communities to discharge a task, many Europeans may really see it as the state's responsibility to respond to situations.
The WSJ covered this topic today also. Eerie.
"Europe’s current predicament has been long in the making. An aging population with a preference for free time and job security over earnings ushered in years of lackluster economic and productivity growth. Then came the one-two punch of the Covid-19 pandemic and Russia’s protracted war in Ukraine. By upending global supply chains and sending the prices of energy and food rocketing, the crises aggravated ailments that had been festering for decades."
Great piece. As a small business owner since 1995, I still think the most important thing we did was pass the Affordable Care Act. It still needs to improve and expand, but, in my opinion, it did the most to free up average, middle class folks to bet on themselves--to start new businesses and join new small businesses. With the advent of the Affordable Care Act, we could both take a real chance on creating real economic freedom and prosperity for ourselves and our families without taking on the horrible prospect of bankrupting our families, or losing the family home, if one of us got sick.
While I think Brexit was a huge mistake that will make the UK economic situation worse, it is still the case that the EU hasn't covered itself in any glory. I don't know the extent to which this is structural and something very hard to fix, or something that can be fixed by better management. I do think that the US benefits by being one nation.
For example, it has one military commanded by one Federal government. It has a much wider pool of talent to select from and a wider pool of contractors to buy things from, and so can do so much more with the same percentage of GDP. Another example, Apple completely destroyed Nokia in a few years when it entered the smartphone market, which I think does have a lot to do with Apple hiring employees from across the US and Nokia mainly being Finnish with more limited operations elsewhere.
The US is also now a net exporter of petroleum, and most of our imported crude now comes from Canada and Mexico, not overseas. Those are major shifts since 15 years ago as well.
If you are a wealthy American, you enjoy a life expectancy equal to other developed countries. It is the life expectancy and health gap between the American rich and everyone else that explains a lot of the statistic you quote.
Fifteen year gap between the richest and poorest 1%. Five year gap between the median income and the richest 1%.
I'm glad you highlighted overall average life expectancy as a problem for us, and I think it's worthwhile digging in to the specifics behind it and the tradeoffs between (1) GDP and income statistics and (2) life expectancy and the moral implications of the gaps between rich and poor.
I'm a lifelong believer and beneficiary of American free enterprise, but I've started to challenge myself on these questions of tradeoffs.
If interested in the topic, below is a short post I wrote.
>We got back in the van, and she said to the driver very definitively, “that’s the American spirit!”
Perhaps revealing a little too much Yglesias content consumption on my own part but you told this story before, and this new version is a tad sanitized. Last time the lady said "see, this is why you guys lost the war!" Which is funnier but also potentially meaner, so I can't blame you for changing it.
I always feel somewhat tenuous about these international comparisons having worked abroad. It seems to me a lot of American wealth is just wasted. I’ve never lived in Europe but I make more money at least as a direct conversion teaching stateside than I did in Seoul and Shanghai but my quality of life was worse especially as a bachelor.
So much of us wealth seems to go to cars and big homes and healthcare.
I’ve worked in the tech sector for the last 15+ years. This is both anecdotal and my opinion but I’ve definitely had an easier time getting jobs since the H1-B visas were reduced during COVID. The India-to-tech job pipeline was well laid and entrenched and could be very difficult for older American workers to break into some tech jobs. Why hire an opinionated older American worker when you can have 3 young Indian guys who won’t question anything and who will work 20 hours a day for lower pay? I’m not anti-immigration at all, but I’ve definitely found myself questioning some facets of immigration given my job searching over the last 5 years specifically.
Not for me to come to the defence of the European Union, but I do think there is a big thing being missed here - enlargement. Let's say America decide in the mid-noughties to take over a big chunk of Mexico and the Caribbean, and invest in bringing these elements of its near abroad closer to its standard of living. And meanwhile let's say Europe decide against enlargment to Eastern Europe, and instead continued to invest its money in further developing the economies of Western and Southern Europe. I'd imagine these gaps would be a lot less stark.
I feel like the commentary on Fracking in Europe is misguided: Europe does not have vast open plains where you can sink tens of thousands of Fracking Wells. Smaller denser countries make that economically and politically unviable: northern England is not West Texas.
However the continent should definitely have weaned itself off oil via renewables and nuclear, and its paying the price for not doing so