Europe’s Weak Economy Becomes a Security Threat

Europe’s sluggish economic growth is increasingly shaping up as a security threat for the continent. For decades, the Europeans have prioritized generous welfare states, funded by high taxes that stifled economic expansion. This left little for defense, and the Europeans were content to let their militaries atrophy under American protection. Now Russia’s invasion of Ukraine — and the Kremlin’s aggressive moves against Europe — are prompting a rethink.Recent saber-rattling by Communist China over trade, too, is putting the spotlight on Europe’s relative military weakness on the global stage. The emerging question is whether the Europeans will be able to right the ship and revive economic vitality before external dangers become insurmountable. Or, as the Financial Times’ Janan Ganesh puts it in an arresting column this week, “the economic question has become an existential one.”This in turn suggests that “the case for growth is that, without it, Europe cannot deter its mortal enemies.” Mr. Ganesh points out that the concerns over Europe’s lackluster growth are hardly new, but that for years they have been pushed aside. The concession that “Europe would become a bit poorer over time,” he reckons, “was never enough for voters to accept the upfront pain of, say, welfare cuts and lighter job protections.”Too, Europe’s preference for generous welfare states, and its disdain for the more free-market oriented American mode, have deep roots. One of the best chroniclers of Europe’s recent history, Tony Judt, in 2005 expressed optimism that the continent had crafted a kind of third way between the world’s two economic superpowers, America and Communist China, neither of which, he said, offered “a serviceable model to propose for universal emulation.”Judt, in his “Postwar,” argued that the Continent, having learned the lessons of the two world wars, was now eschewing nationalism and putting quality of life ahead of economic and geopolitical rivalry. Europeans, he said, “were now uniquely placed to offer the world some modest advice on how to avoid repeating their own mistakes.” He added that “few would have predicted it sixty years before, but the twenty-first century might yet belong to Europe.”Judt’s appraisal, more than 20 years on, aged poorly. Feature how in 2008, the European Union’s gross domestic product was slightly larger than America’s. Yet by 2022, America’s GDP was one-third larger than Europe’s. This remarkable divergence is among the reasons why the Wall Street Journal’s Joseph Sternberg suggests that “the widening gap between American and European prosperity is among the most important facts of the global economy.”Mr. Sternberg argues that this “chasm” can best be traced by the transatlantic gap in GDP per person. In America, GDP per head is currently some $94,000. Yet the same statistic is $65,300 in Germany, and $61,000 in Great Britain. In France the number is but $52,000. Statistics like these are why the former European Bank chief, Mario Draghi, has lamented, when it comes to the need to revive growth, an “immense complacency.”Mr. Draghi points to Europe’s “big social welfare system” as part of the problem, but also notes a shortage of private-sector investment. He traces that in part to an elevated role played by governments in research funding. The deficiency can be tied as well to the Continent’s high-tax regimes, which create little incentive for the kinds of innovation and risk-taking that have fueled America’s economy, particularly in the high-tech sector where Europe lags.Europe’s anemic growth will need to be overcome if the Continent wants to revive its defense capabilities. Mr. Ganesh has doubts as to whether “rich and mature democracies can make painful reforms, except in a crisis.” Yet “the impetus for change” could emerge from the need “to survive as a nation,” he argues. For Europe, he suggests, “the politics might be lining up for pro-growth reform, as it hasn’t for almost half a century.”

Europe’s Weak Economy Becomes a Security Threat

Europe’s Weak Economy Becomes a Security Threat

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