For Emmanuel Macron, the European way of life is in danger, besieged by multiple enemies and victim of the end of circumstances that will not return. Mario Draghi and Enrico Letta have been called upon to restore lost confidence.
Europe is less hard-working, less ambitious, more regulated and more risk-averse than the United States, Nicolai Tangen, chief executive of the Norwegian Petroleum Fund, told the Financial Times. “Simply, Americans work harder” he concludes.
One imagines Norwegians as peaceful people who think about whales and winning Eurovision. But then he walks around the buildings in the center of Oslo and what he sees there is a steep, vertical capitalism. A country of military and bankers. Or bankers trained as soldiers. Like Tangen himself, who before becoming a fund manager in London, studied interrogation techniques at the Norwegian Intelligence Service.
Norwegians have built a powerful welfare state thanks to Atlantic oil. But they want to be on the side of history. On the side of the one who wins it. And the Oil Fund, the fourth largest investment fund in the world, invests less and less in European companies and more and more in American ones. Because that’s how they see the future.
European financial elites feel a chronic fascination with the United States. For their employers, direct and informal like cowboys. For the labor market, less protected. For low taxes. In contrast, life expectancy in Europe is five or six years higher; so is the quality of life. Europeans have more vacation days, work an hour less a day. And they enjoy a more effective social network.
In recent years, the United States has distanced itself from Europe. In 2013, European GDP was equal to 90% of that of the US. In 2022 it was already 23% lower. Demographics explain this jump. Immigration has rejuvenated the workforce on the other side of the Atlantic. Europe, on the contrary, distrusts the immigrant and is getting old.
Since the pandemic, the recovery in Europe has been faltering. In the United States it has been intense and they have been able to activate all the differential levers: abundant and cheap energy and an open field for new technologies. The White House has also collaborated. It has subsidized the installation of solar panel and semiconductor factories.
In the United States, full employment has fueled wage increases. In the lower and higher segments. With stratospheric salaries in tech jobs, where $400,000 a year is not uncommon. Of course, inflation is unforgiving and life is very expensive. A loaf of bread, $6 in California. A preschool visit to the pediatrician, $360. A daycare center in New York, $3,300.
Europe experienced its best moment between 1985 and 2005. It was the reference model. But 2005 began what Timothy Garton Ash describes in his latest book as a downward spiral: financial crisis, Russian occupation of Crimea, Charlie Hebdo attacks, populism in Hungary and Poland, Brexit, Trump… The historian looks back, back to the good old days and evokes Stefan Zweig’s The World of Yesterday. The Austrian wrote it in 1941 convinced that the Europe he longed for and loved so much (the one before 1914) was no longer to return.
Garton Ash’s fatalism seems forced. Or maybe not? The war in Ukraine has left Europe without its usual supplier of raw materials, Russia. It has transformed China from a cheap supplier to a systemic competitor in vital industries. Europe is beginning to wonder if the quality of life it has enjoyed may not have had something to do with all this and the American protective umbrella. For the first time Europe feels that it can stand alone. What will happen if the Americans leave? Who will arrest Putin?
Emmanuel Macron is the most skilled at conveying this change of mood. In August 2022, the president spoke of the “end of abundance”. A week ago, at the Sorbonne, he said: “It must be understood that Europe is mortal, it can die”. To add: “the rules of the game have changed”.
The EU has tasked Mario Draghi and Enrico Letta (what will the Italians have that we don’t have?) to elucidate what the new rules of the game are and how to restore lost trust. Mario Draghi’s answer is the most surprising, because of the self-criticism it implies for someone who has been a Goldman Sachs banker.
Three basic ideas, three gems in the rough, from Draghi’s reflection. The first, that globalization has led to imbalances that European governments have taken a long time to recognize. In particular, the EU’s misguided response to the 2011 euro crisis, in which it sought short-term competitiveness with reduced wage costs and austerity that weakened domestic demand and our social model .
second The pandemic and the war in Ukraine have created an environment of geopolitical rivalries in which not everyone follows the same rules of the game and where exporting is no longer a guarantee of success. Indeed, China and the United States use industrial policy to redirect investment into their own economies. Europe has not even considered it.
And third In the midst of a fierce race for leadership in the world of new technologies, Europe does not have a strategy to compete, neither in telecommunications nor in defense. Nor is it guaranteed the resources needed for the energy transition (they are in the hands of China). Europe must start acting like an economic nation, not like a more or less asymmetrical federation of different economies.
Draghi is not talking about working more, as the Norwegian banker is asking. But that won’t make the road any easier.
