Europe as we know it is slowly going out of business. Since French and Dutch voters rejected the new constitution of the European Union, we’ve heard countless theories as to why: the unreality of trying to forge 25 EU countries into a United States of Europe; fear of ceding excessive power to Brussels, the EU’s capital; an irrational backlash against globalization. Whatever their truth, these theories miss a larger reality: unless Europe reverses two trends – low birth rates and meager economic growth – it faces a bleak future of rising domestic discontent and falling global power.

Ever since 1498, after Vasco da Gama rounded the Cape of Good Hope and opened trade to the Far East, Europe has shaped global history, for good and ill. It invented modern science, led the industrial revolution, oversaw the slave trade, created huge colonial empires, and unleashed the world’s two most destructive wars. This pivotal Europe is now vanishing.

It’s hard to be a great power if your population is shriveling. Europe’s birth rates have dropped well below the replacement rate of 2.1 children for each woman of childbearing age. For Western Europe as a whole, that’s now 1.5. It’s 1.4 in Germany and 1.3 in Italy. In a century – if these rates continue – there won’t be many Germans in Germany or Italians in Italy. Even assuming some increase in birth rates and continued immigration, Western Europe’s population grows dramatically grayer, projects the U.S. Census Bureau. Now, about one-sixth of the population is 65 and over. By 2030, that would be one-fourth and by 2050 almost one-third.

No one knows how well modern economies will perform with so many elderly people, heavily dependent on government benefits (read: higher taxes). But Europe’s economy is already faltering. In the 1970s, annual growth for the 12 countries now using the euro averaged almost 3%; from 2001 to 2004, the annual average was 1.2%. In 1974, those countries had unemployment of 2.4%; in 2004, the rate was 8.9%.

Wherever they look, Western Europeans feel threatened. One solution to low birth rates is higher immigration. But many Europeans don’t like the immigrants they have – often Muslim from North Africa – and don’t want more. One way to revive economic growth would be to reduce social benefits, taxes, and regulations. But that would imperil Europe’s “social model,” which supposedly blends capitalism’s efficiency and socialism’s compassion.

Consider some contrasts with the United States, as reported by the Organization for Economic Cooperation and Development. With high unemployment benefits, almost half of Western Europe’s jobless have been out of work a year or more; the U.S. figure is about 12%. Or take early retirement. In 2003, about 60% of Americans aged 55 to 64 had jobs. The comparable figures for France, Italy, and Germany were 37%, 30%, and 39%.

The trouble is that so much benevolence requires a strong economy, while the sources of all this benevolence – high taxes, stiff regulations – weaken the economy. With aging populations, the contradictions will only thicken. Indeed, high old-age benefits may partly explain low birth rates. With the state paying for old age, who needs children as caregivers? High taxes may also deter young couples from assuming the added costs of children.

You can raise two objections to this analysis. First, other countries are also aging and face problems similar to Europe’s. True. But the aging is more pronounced in Europe and a few other nations (Japan, for instance), precisely because birth rates are so low. The U.S. birth rate, for example, is 2.1. Second, Europeans could do something about their predicament. Also, true – they could, but they’re not.

A few countries (Britain, Ireland, the Netherlands) have acted, and there are differences between Eastern and Western Europe. But in general Europe is immobilized by its problems. This is the classic dilemma of democracy: Too many people benefit from the status quo to change it; but the status quo isn’t sustainable. Even modest efforts in France and Germany to curb social benefits have triggered backlashes. In reality, the new EU constitution wasn’t radical; either adoption or rejection wouldn’t have much altered everyday life. But it symbolized change and thereby became a lightning rod for many discontents.

All this is bad for Europe – and the United States. A weak European economy is one reason that the world economy is shaky and so dependent on American growth. Europe is history’s has-been. It isn’t a strong American ally, not simply because it disagrees with some U.S. policies, but also because it doesn’t want to make the commitments required of a strong ally. It’s more reflexively critical of America. Europeans seem active on the world stage, even as they’re acquiescing in their own decline.