The European Union's remarkable growth performance relative to the United States
bruegel.org
bruegel.org
That doesn't really matter at the end of the day when you're discussing finances. All that matters for people, countries and governments in capitalism is that they have more money in their pockets than the rest, not how ethically that value gets generated or if their work produces much social value to society.
The "in-" actually is negation; the word means something like "NOT susceptible to valuation", i.e. beyond value.
- GMail, Google Maps, etc
Saying there's no value in those (even if ad sponsored) is a bit naive
> However, from a purely economics standpoint, tech giants make up a not insignificant part of the US's GDP.
Yes. It would surely be better to have a large field of non-giants competing for customers taking up the same proportion of GDP though right?
The real question is where do those competing considerations meet up. A monopoly is bad, but you can go too far in the other direction as well. I don't know how to decide what the best answer is (I'm not even aware of anyone who has made a useful argument for any particular compromise)
Those things are not linked. Large and monopoly are very different. Your example of engines is good, there isn't afaik a monopoly on building engines. Even a small number of huge auto makers are still competing against each other.
> A monopoly is bad, but you can go too far in the other direction as well. I don't know how to decide what the best answer is (I'm not even aware of anyone who has made a useful argument for any particular compromise)
I agree, I think the general aim with the EU makes sense which is about use of power in one field to control another. So google are good at search but that doesn't mean they get to make their own shopping attempt rank higher than others. If they have 90% of the search market then fine if that came from being better than everyone else but their shopping offering has to be better than others.
Indeed. So could the US reliance on these monopolies and tax-avoiders have anything to do with the US's relatively unimpressive growth compared with the EU?
Disruptive tech monopolies upset entire existing industries for the sake of their owners/shareholders/employees, which is usually tiny compared to the said industries.
(Think of FB/Google advertisement centralisation as the end of other media providers.)
I keep wanting to push back on whether GDP is the best way to measure an economy, but most of the articles I find bring in concepts like "[GDP] doesn’t meaningfully account for successful management of priorities like public health, economic equity, climate action, or racial justice."[1] But you're making it clear you're talking from a purely economics standpoint. So pushing back on the ethics of applying GDP doesn't even apply.
If exerting tech leadership is among your goals, not having your own tech megacorps is a weakness.
If you're a skilled professional, you always end up earning more in the US than most other countries.
This is not to say Europe is bad - hell Europe is a continent so broad brush stereotypes are stupid, as my argument with an Italian yesterday about ICT market dynamics in Romania vs Italy proved. You'll earn a higher salary in Amsterdam as a SWE than you would as a SWE in Jackson MI, just like a MechE in Minsk will earn a pittance compared to a MechE in Munich.
All this chest thumping on HN is so stupid.
Those happen to be two places my best friend has lived and worked and… 20 years ago at least Jackson paid much better than Amsterdam.
Europe just really has a low ceiling on pay, across the board.
The main difference would probably be income tax, which means post-tax salaries in NL can be lower than MS
[0] - https://www.levels.fyi/t/software-engineer/locations/jackson...
[1] - https://www.levels.fyi/t/software-engineer/locations/greater...
Also the levels.fyi data for both Amsterdam and Jackson is regional (hence why data about Vicksburg is included).
> My dad was pulling $100k in port Gibson as a systems engineer and that was a couple of decades ago
Oh wow that's good money even today.
[0] - https://www.expat.hsbc.com/expat-explorer/expat-guides/nethe...
Oh, that makes sense!
> Vicksburg also has waterways, but you don’t get many tech job centers
The Army Corp of Engineer's primary R&D center is in Vicksburg, so most devs are DoD employees (good gig tbh).
> Clinton was hotter before Worldcom imploded
Ah that makes sense. I didn't realize they were HQed there - they probably could have done wonders like Centurylink did for a lot of Louisiana.
[1] https://en.wikipedia.org/wiki/European_Round_Table_for_Indus...
It’s a second order weakness. The first order weakness is the relative lack of capital availability vs the United States which made it less likely to spawn EU native tech giants. The lack of tech giants means that there is a brain drain effect to the US or US tech giants functioning in Europe.
The true power of the US is that it operates in the global lingua franca and has access to the world's biggest capital markets.
Machine translation may one day be a solution but we are far from that day.
Also culture and regulations. For example Austria and Germany, Netherlands and Belgium, might share borders and the same languages between the pairs but having different regulations in certain areas, meaning that starting a company in one country might be difficult to expand in the other due to a difference in regulations which is usually by design born out of local protectionism.
Contrary to the US, EU is not a united country, but a collaboration of fiefdoms with often diverging interests, where every one of them wants to be king and won't hesitate to sabotage other members for their own gain, even if it holds everyone back. This high level of internal squabbling and fragmentation is ultimately what keeps EU unable to scale businesses of any kind, not just tech, as easily and as fast as in the US.
What many founders do, if you're developing a SW product in the EU, is forget the EU market altogether and launch directly to customers in the US, and only when you succeeded there and made your money, you can afford to break into the EU fragmentation and expand locally. Sounds counter-intuitive but that's the reality for many product based EU start-ups that want to succeed, like Spotify for example. Why do you think Apple only launched the VP in the US and nowhere else?
It is true that language is a problem but I suspect not as much as you say. ~51% of the EU population speaks english as a 1st or 2nd language, but a larger percentage in the wealthier western nations (e.g. ~57% in France) and an even larger percentage in the major metros (e.g. ~60% in Paris). [1] I couldn't find figures but I suspect an even larger percentage of university graduates in the wealthier EU nations speak english. Tech Giants disproportionately emerge from and draw from the University Graduate population. If they had the capital availability and culture/regulatory regime (as acknowledged elsewhere in the thread) amenable to the emergence of Tech Giants then they wouldn't need a big boost to English proficiency to get by language-wise.
1. https://en.wikipedia.org/wiki/List_of_countries_by_English-s...
The point about university graduates is also moot because they are not the majority, even in a country like france that had the most number of university degrees awarded in 2022. Only about 35% of the french working age population has a university degree.
Language, is, in fact, a much bigger problem than many want to admit.
EU lacks on the second one, also its the one that has all the controversy.
Yet, I wouldn't downplay the USA's hard tech capabilities and talent pool. IMHO the US is special, as it doesn't have the baggage from the history that spans thousands of years on the record.
EU is the old neighbourhood that once had all the cool new stuff but now is focused on preserving what they accumulated, life is good there but not much is happening. The USA is the newly built neighbourhood that got hip and trendy and has all the new cool stuff. China is this neighbourhood that once was great, lost its lure but lately it is up and coming with some of the coolest new stuff being there.
Interestingly, there were civilizations in America thousands of years ago, as there were in Europe. The USA was founded a coupla hundred years before the EU.
Not really.
In many parts of what is now Germany, people spoke dialects that were incomprehensible even to people in the next valley; this was as recently as the 19thC. In the 20thC, a British leader could speak of Czeckoslovakia as "a faraway country of which we know little". Modern Frenchmen would regard their countrymen from 2K years ago as completely alien. Modern Greeks speak a language that is recognizably derived from ancient Greek, but in other cultural respects, modern and ancient Greeks are very different.
Those ancient societies regarded their neighbours as barbarian enemies, not as neighbours they shared a culture with. It's only since (say) the 5thC AD that European culture began to become more homogenous.
BTW, the idea that the US government is "unified" looks like a sick joke, from my perspective.
The EU looks a lot like the US articles of confederation which the US scrapped after about 10 years for the current constitution because the articles were not powerful enough. (though I personally think the articles only needed some minor tweaks - that is a different debate not worth getting into). The EU's is seeing the same problems those who wanted to replace the articles with the constitution were seeing - but are the worth replacing/fixing is an open question that the EU should be debating.
And the massive success in US is at least partially a side effect of being able to be harsh, move very fast (ie fire half of company when needed). We don't have such adaptability, some say for good reason, some disagree.
I don't think any smart politician doesn't see this clearly, but we lean way more left generally than even democrats in US, so at the end directions taken are roughly in same direction, but otherwise unique.
As long as there is overall freedom of movement and thought and cca fair competition we are all better off as such, I have US colleagues who love it here, and I know few folks who are happy across the pond.
All of the stock markets in the EU/Europe are really small compared to the US, and there's a steady stream of companies moving their listings there.
Fixing that (with the Capital Markets Union) would presumably help, even if everything else remains the same.
Washington is home to Microsoft and Amazon, so it's doing okay, too.
And that's all we're asking, guvner. Can we try not having "tech giants"? We've tried and there are all sort of issues that negatively affect society, privacy, innovation, ...
Scale - it is a lot of work to create a local alternative. While you could develop that local alternative, to make it a useful competitor to Android would take a lot of resources - mostly trained programmers. Those programmers in making your android alternative would then not be doing whatever it is they are doing right now and so less total output is done.
Is it worth the loss of those other things? There are a lot of different things going on in any country. Perhaps some of them are not worth doing. However even if you stop doing those things is there something else it would be better to spend that effort on?
For what? Certainly not GDP.
Pretty sure there must be affordable small towns in the US without SW engineers to drive up the cost of everything.
But your point is rather poor. Those US SW engineers might cause local gentrification, but they also contribute a huge amount in state and government taxes, taxes that I'm sure the likes of Germany would also like to collect if they could, to fund their welfare, education, army, healthcare, etc.
And it's not like many large German cities aren't already gentrified and overpriced despite wages being lower than the US. Try moving to Münich, Stuttgart, Frankfurt, Hamburg or Berlin, look at real estate market then at the local wages. It's the same disease everywhere.
How dare they want a better life? /s
You can always build up or denser but NIMBY's don't allow that so here we are.
>>everyone wants near good jobs
>How dare they want a better life? /s
>You can always build up or denser but NIMBY's don't allow that so here we are. reply
FWIW, I hope that WFH starts to revitalize all these dying small towns that exist on 90% of our landmass. They were nice back in the day.
There are. Cedar Rapids is great! It would be even better if we had more industry in those places, and less of the industries that generate outsized returns for a few, like tech and finance.
> But your point is rather poor. Those US SW engineers might cause local gentrification, but they also contribute a huge amount in state and government taxes, taxes that I'm sure the likes of Germany would also like to collect if they could, to fund their welfare, education, army, healthcare, etc.
It's not worth the tradeoff. I've only visited Munich, but it seems much less shitty for an average person than NYC or SF.
You need some critical mass of finance, tech, etc., but you can manipulate industrial policy to generate more of the jobs that create broad prosperity and less of the jobs that create outsized returns for a few. Contrast say the heavily financialized economies of the U.S. to the more industrial economies of Germany or Japan.
That's definitely not true. When I was at Groupon I met a couple of people in sales who didn't have a degree and yet were most definitely not second class citizens. If you can make it rain, companies nobody cares about your traditional credentials. The same is true for marketers, too.
And for that purpose it makes sense to prefer giant corporations. It's easier to steer them, talk to them, model them, regulate them (you can talk bureaucrat to bureaucrat), twist their arm, occasionally get services or equipment from them.
And from that point of view, it's useless to try and favor startups: it will be years before just a tiny fraction of these are relevant in number of salaried people.
Or if it's levelling things by cutting heads.
It's a policy choice, of course. And one set of features doesn't prevent the other of course, but you still can choose priorities and get the corresponding result. For Europe, the priority is overwhelmingly "employment of the masses". Nothing else comes close.
And anyway, European corporations are not exactly run by middle income families!
The USA is going to have to deal with its monopoly problem, but the EU has to deal with the problems making them uncompetitive in the tech scene.
Add to that the political and cultural soft power accrued and also brain drain that both come with that and, yeah, that does seem to be a pretty big weakness.
All the websites, operating systems, devices, device components etc.
Another effect of this is that the workforce doesn't grow to gain (the tech) skills to build such products.
Or do we want to talk about the > 1trillion student debt bubble that keeps US universities afloat?
> The median annual price paid by an undergraduate who received an MIT Scholarship was $12,715 in the 2022–2023 academic year. [2]
You're basically right, MIT (ranked #3) is almost eight times more expensive than ETH (ranked #5). To be clear though, ETH Zurich is in Switzerland, which is not in the EU.
---
[1] https://www.timeshighereducation.com/world-university-rankin...
[2] https://mitadmissions.org/afford/cost-aid-basics/access-affo...
It is geographically completely surrounded by the EU.
So politically ... it is in the EU.
Also it's a 'gray area' -- Switzerland belongs to many EU institutions like Schengen and EEA without being in the EU proper. Using Euros would also be common in parts of Switzerland.
True exponential growth requires that everyone get richer over time, all the time, even the rich.
It would be wonderful for the world if Europe could grow as rich as the States, so I hope the article is right.
The rich getting richer (aka trickle down economics) is all fun and games until you have blood on the streets which is already happening in the US.
The EU formula (have the rich make their money where it's cheaper but still within the union) seems to be better on the long run but it won't be without significant pain either.
https://www.economist.com/graphic-detail/2018/02/14/american...
There's this false narrative about the US being the bastion of social mobility, but it just doesn't hold up to facts. Europe does much better on this.
If you measured improvements in net worth as well, and measured it by the number of dollars added to someone's bottom line instead of just what quintile someone is in, it would be IMO a more fair comparison.
For example, (made up numbers ahead) let's compare two made-up people:
A is in the bottom quintile earning say 20k EUR with a net worth stagnating at 0 EUR, and they then move up to the top quintile earning 80k EUR with a net worth of 20k EUR and growing. They pay heavy taxes on that 80k EUR so it's hard to grow their wealth.
B is in the bottom quintile of the US, earning 20k USD. They make it up a couple of quintiles, but not quite to the top. They still end up earning 150k USD, and because they pay low tax, most of the 150k sticks around, giving them a net worth of say 50k USD and growing faster.
A will give a better indicator of social mobility according to the Economist's method.
But I'd much rather be B.
Wealth compounds.
In nominal terms, the bottom 10% have no chance against the top 10%.
In percentage terms, the US is going on like ~5 straight years of the lower half doing relatively well: https://www.stlouisfed.org/open-vault/2024/feb/us-wealth-ine...
If Bob makes $5000 a month and Steve makes $10,000 a month, then the income disparity between those two individuals is $5000 a month. Now imagine the economy doubles in size and those gains are evenly distributed. Now Bob will be making $10,000 a month and Steve will be making $20,000, and the income disparity between the two will be $10,000 a month.
There's nothing trickling down in that scenario.
Except that's not we have in the US/EU/UK. The top earners have been increasing their share since the 1970s, if not longer. See, e.g.
https://www.bbc.co.uk/news/business-59565690
> since 1995, billionaires' wealth had risen from 1% to 3%.
> The world's richest 1% has taken more than a third of all additional wealth accumulated since 1995, while the bottom 50% captured just 2%.
> The researchers found that the world's 52 richest individuals saw the value of their wealth grow by 9.2% per year for the past 25 years, well above less wealthy social groups.
(That was just one of the page 1 results for "wealth inequality history" that I got. I know I've read better analyses that cover longer time periods before, but I'm feeling lazy at the moment. If you have any links at all to suggest we're in anything like "evenly distributed economic growth" then there's a possibility I'd be inclined to dive deeper.)
For instance, if I could press a button that would double my net worth while at the same time 5x-ing the net worth of my least favorite billionaire, I'd smash that button a million times a day.
What makes you think they are?
* China uplifted a ridiculous number of people out of poverty after they embraced free markets in 1990. [0] [1]
* Vietnam is doing the same thing right now.
[0] https://en.wikipedia.org/wiki/Deng_Xiaoping#:~:text=77%5D%3A...
[1] https://en.wikipedia.org/wiki/Chinese_economic_reform#:~:tex...
Just look at GDP graphs for the US, EU, and China over the past couple of decades.
You’ll see smooth upward exponential growth for US + China with a small bump in 2008. For the EU, it’s been nothing but wild gyrations, mostly trending sideways. Anyone from the World Bank, the IMF, and even tradingeconomics.com has this data.
The US economy is very robust, but politics have never been this bad.
Additionally for government to be as large as it is Europe implements significantly higher tax rates than most of the world which results in consumers having less disposable income to spend on products that drive innovation like tech and private companies have less money to invest in new opportunities.
Further, Europe is probably the single most unattractive place to start a business from a regulatory perspective in addition to being very unattractive from a tax perspective. Unlike in the US or Dubai where entrepreneurs will travel to start businesses, in the UK you would typically look to do the opposite if possible and start your company somewhere else.
Nothing Im saying here is particularly controversial from an economics perspective, yet politically what I'm saying is highly controversial if you like in Western Europe. I find people here tend to view it as the government's job to fix economic issues through investment, interest rate manipulation and debt rather than allowing room for private sector to innovate and grow.
At this point the evidence of Europe's failed economics policy is clear, and given this you would think politicians would be looking to try something different. But we're not. The answer if anything is that the government just isn't big enough, there just isn't enough regulation, there just isn't enough debt and investment, there are too many damn companies making profit while we grow poorer!
My guess is that Europe's underperformance will continue for a while yet.
What? The UK has a massive amount of immigration, and loads of startups and tech companies were started by Europeans moving to the UK TO START A BUISNESS. Like, you probably picked the worst country to make this claim about.
That's true. The UK relatively speaking isn't as bad as some parts of Europe so if you're operating a business serving European customers and there's a need / reason to operate in Europe for regulatory reasons the UK (well London) is probably one of the more attractive places to have your office – especially if you're doing some kind of fintech startup (pre-Brexit anyway).
Significantly higher INCOME taxes.
Europe is quite friendly to capital with lower property taxes and capital gains taxes (~18.6% average).
1. The EU added Bulgaria, Romania and other new member states in 2007 that expand the population and thus markets to 440 million in the EU vs 300-something in the US.
2. Government makes money from every transaction by its residents (and companies, but for per capita metrics, we look at residents)- income, employment, purchases, etc. The US grows by immigration - but fresh immigrants usually jump into employment in lower skilled / paid jobs. However the EU with its social policies enables more women to be in the workforce due to better childcare availability and hours and allows individuals to carry less savings because of low cost healthcare and other available safety nets. Poorer people with income buy a lot more staples, food and spend a lot more of their income, boosting the local economy. Wealthier middle class is more likely to save or spend money on bigger things- from real estate to investments to education, but that doesn’t trickle into the GDP as much (education is often non-profit and real estate has capital gains rates). When more people are employed in a country - you see a bigger rise to middle class and more spending per capita and income per capita.
To raise GDP per capita, just enable more childcare and support for employment of women. However, since the US government uses unemployment of only people who became recently unemployed and are still looking for jobs instead of all unemployed, to measure all unemployment they would irreversibly damage their performance in their favorite self-improving metric, and would have to do more for their citizens.
Great data here if you want to explore: https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?location...
[1] And also Ireland, who have really done well the past two decades.
[2] The UK in particular really fell off its mark.
Ireland was excluded form the original article statistics since it's skews the data a lot, due to all the multinational companies being HQ there. It's kind of like the Delaware of the EU.
> Start using these and you'll see Ireland settle in around Denmark in terms of wealth.
Secondly, as an Irish person who grew up during the 80s, this is phenomenally good. Ireland was so very poor when I was a kid, and has gotten so much richer. People actually move to Ireland for work! This is not something that has happened in the past few hundred years.
We have lots and lots of problems, but they're mostly problems of success rather than those of failure.
Take a look at any list of billionaires from the US vs EU…
Because construction, lawn care, and sweatshop jobs by immigrants is all registered in the US.
The “lack” of social system in the US that hides in the EU millions upon millions of people who don’t work for various reasons (ranging from not wanting to down to not being able to or not being employable) is definitely something that makes EU look better than it should. In many cases, they don’t even appear in the officially unemployed statistics, because they are so called social cases. At the same time, many of them also work “unofficially”, so they often end up earning more than honest people, while working much less.
Also, the jobs not captured by the "essential workers" also still exist in EU as the wealth scale of EU is very wide, with the lower end being significantly lower than the US lower end in terms of pay.
Anyone working in a full time job of any sort should be able to live without government assistance. The EU’s labour laws come much closer to that than American laws do.
Where?
Austria, Denmark, and Italy don't even have minimum wages...
How would this work? Jobs were banned and no one does them? Are you saying that there are whole categories of work that just aren’t done in the EU?
What are these jobs?
Humans cleaning the roads/sidewalks every day would keep things a lot cleaner than the machine that only comes every few months. However again we can't pay someone an affordable wage to do that work so we compromise - the machine lets one human do the work of around 2000 humans with a broom, even at $1/day (which would be a good wage in India where they do hire humans to do this work) a modern machine is paid for by labor savings after half a year of operation, but it will run for 5 years or more. (the machine also needs fuel and maintenance which I didn't calculate.)
It's not anywhere near as common of a job in the US as in SE Asia, but it's not at all unheard of in larger cities.
That's a very strange idea about how the EU economy is...
People really thing we don't have tens of millions of people do "low end jobs"? What's the idea, that they were somehow automated by robots?
UK and US have equivalent unemployment rates but vastly different welfare systems. Germany is more generous than the UK but has lower unemployment. Southern Europe has higher unemployment, but welfare typically less generous than Northern Europe.
Low end jobs exist in the EU too — they just pay better than they do in the US. Low-end jobs that can be shifted in location (e.g. clothes production) have already left both US and EU. Low end jobs that need to be done in-country or are harder to offshore (cleaning, food factory work) remain in country (but perhaps eat into corporate profits, explaining the lower GINI coefficient of EU vs US.
"Using PPP instead of USD to measure GDP, significantly shrinks the gap between the EU and the US"
Now, using USD has its problems, but PPP's primary purpose is living standard comparisons, and doesn't work as a national strength comparator.
When in a war, you are buying ammunition and weaponry with USD, not PPP. When there's a energy shock, you are importing oil and gas with USD, not PPP. When you are in a AI race, you are buying GPUs with USD, not PPP.
There'll be some people who argue that 'only living standards' matter. If the two simultaneous hot modern wars in Ukraine, Gaza, and soon Taiwan can't convince that hard power matters, then don't complain when the draft officer knocks on your door.
Not if you're buying it locally.
>When there's a energy shock, you are importing oil and gas with USD, not PPP. When you are in a AI race, you are buying GPUs with USD, not PPP.
Pretty much. PPP is useful for the stuff you can source locally like groceries, rents, local cars and groceries, etc. but a lot of stuff needs to be imported so then the EU's financially weaker position shows, especially when bidding internationally for scarce items.
It's "possible" for this to happen. And in the event of a large global war, we'll even go as far as to say it's plausible. But given that the world is heavily globalized and not at war, it's not actually what happens because it is cheaper to trade with others.
But the EU has both a domestic arms industry _and_ the inputs locally, so it's probably cheaper to go the domestic route, hence they can buy at PPP rates rather than nominal.
It is merely a part of a value chain. Namely, minerals and petrochemicals have to be produced upstream. Financial GDP captures the ability to produce or purchase the upstream resources, manufacturing alone does not.
Now manufacturing capacity is illiquid, and it takes time to convert financial power to manufacturing capacity, see the Ukraine ammunition crisis. While manufacturing capacity is more war-ready.
However, China hasn't invaded Ukraine yet, because US choking off the sea lanes will be catastrophic for China's economy and offensive war capacity. Without trade, the factories have no resource inputs, and no markets to export to.
So in the end, financial power does slightly underestimate the hard-power benefits of manufacturing, but GDP (USD) should still be used as the primary determinant of hard power, not amount of factories built.
Sure, manufacturing depends on its inputs. My take is that the material economy (manufacturing and all its inputs) is the actual source of hard power, finance is a proxy, and maybe not the most helpful one in a case where war materials are controlled by an opponent.
That's too reductive.
1. That ignores established stores. One of the enormous advantages that Russia has over Ukraine is its enormous store of tanks, artillery pieces, and armored vehicles. Not all of them are state of the art, but they're a lot more effective than a rifle.
2. That ignores the pace of innovation during long wars. Just look at the pace of innovation during WWII. Or even later wars. New designs for rifles, tanks, planes, etc. come out quickly when people start dying en masse. Existing manufacturing lines may not be very relevant if they can't be modified to support new equipment types.
In a sense, you have to go 1-2 steps back to "the machine that builds the machine". How quickly can tooling be brought on line. How innovative and productive of a workforce do you have? Those things are related to manufacturing capacity, but are not the same thing.
3. Access to raw materials. One of the major reasons Russia is able to maintain its war against Ukraine is because it is a net exporter of petroleum products. If they were a net importer instead, global sanctions would be able to make them effectively stop within a few months. Petroleum, steel, food, etc. are all necessary commodities. If any of them can be embargoed, that is a massive weakness that is hard to compensate for with manufacturing.
There are probably other factors, but those are the main ones I could think of off the top of my head.
I like your "machine that builds the machine", I think that's actually the point I was driving at in the original post. Finance can accomplish much, but, at least during war, it is not a substitute for the physical economy.
That depends on if you import the weapons or make them yourself, right?
In the Ukraine war, a common heard argument is that Russia can manufacture more weapons than its GDP suggests, because of PPP.
You are still dependent on foreign inputs that are dependent on the Dollar or Yuan payments, and even domestic commodities and goods are impacted by global prices.
PPP in isolation is useless, and I'm honestly surprised Bruegel even published this article.
For Russia in particular, do we have some idea of how true this actually is? Russia lacks a lot of things, but natural resources is generally not one of them.
This isn't a game of Civ 4 where access to resources automatically grants you production.
For example, the Oktyabrsky Mine is one of the largest nickel mines in the world, yet Russia has to export that nickel abroad to be processed in order to be used in batteries or integrated circuits.
And resources are not interchangeable - oil from Dharan has an entirely different set of specs to process compared to oil from northern Alberta.
Resources aren't that rare - most countries just choose not to exploit resources because they might not be an efficient deployment of capital (why should I spend billions subsidizing a commodity product whose margins are near 0 or even negative when I can use that money to build a hospital instead)
There's a reason people get PhDs in Chemical Engineering, Chemistry, Geology, Mining Engineering, Physics, Geophysics, Petroleum Engineering, etc - these are very complex and specialized problems, and no country has a complete monopoly on human capital in these spaces.
Moments like this make me wish HN was shut down - it's gotten so braindead.
I use HN to read articles or comments about ld_preload or shoot the shit about internal gossip in the tech industry - not rehash the same kinds of arguments you see on Reddit.
> I think less people asking stupid questions just leads to more confidently incorrect non-questions
Until domain experts get burned out and start flamewars for shits and giggles, or just quit HN entirely.
"Please don't post comments saying that HN is turning into Reddit. It's a semi-noob illusion, as old as the hills." I hope you've seen that rule.
There are 19 1T+ economies and 3 more on the way in the next 2-3 years (Switzerland, Poland, Taiwan).
Russia might be able to produce a lot of steel, but it is struggling to produce military grade, hard steel.
Half way down this article: https://www.dailykos.com/stories/2023/7/6/2179504/-Ukraine-U...
That's the problem right there.
Russia is actually precisely the example why GDP matters. Russia's position before the war was an overwhelming advantage, pinching Ukraine from three directions in a huge concave, in a flat plains basically without geographical barriers, against a divided, poor, and old (unlike say Afghanistan which has endless 18 year old men) country in Ukraine.
Yet it has fought the war into a extremely expensive stalemate, with draft imposed, large casualties, and basically total loss of international prestige.
All that, because its low GDP meant no high end equipment, no advanced logistical capabilities, no sophisticated information advantage. While, the US, by Elon Musk simply donating some starlinks (A definitive high GDP product), made all Russian attempts at disrupting Ukrainian command chains useless.
This might be a perfect example a drawback of having tech billionaires.
https://www.bbc.com/news/world-europe-64579267 https://www.independent.co.uk/news/world/europe/elon-musk-pu...
Given that I have, in the last week alone, read about a dozen articles about whether German workers have lost their will to work, taxes and regulations and whether Europe is impoverished this article is pretty important. The same has been true for discourse about Japan. Where the common narrative was that the country somehow has not grown in 30 years, but in terms of real output and adjusted for working age the gap even to the US is much smaller.
The US has environmental policies that increase the cost of energy, but in a sufficiently serious war, those would get suspended.
Personnel costs though are vastly higher in the US especially if "costs" included the political costs of instituting a draft.
That said, in a sufficiently serious war, IMO there'd be homeland attacks on critical infra, be it cyber or long range strikes, so it's really about who can survive/operate/recover from capex attrition fastest.
PRC domestic consumption is 14m barrels per day.~6m goes to transportation, 2m goes to heating, both in process of being electrified. 2m goes to other. Industry, uses ~4m barrels, of which PRC MIC uses relatively little as % of output. They can sustain military multiple their current size on wartime economy. There's also estimated 300m barrels and growing in strategic reserves,.
Coal is useful in that coal gassification useful to make fertilizer. Which PRC did - they were NET fertlizer exporter ~10 years ago before they clamped down on coal and curtailed sector.
Utimately it's not just a US+co navy+airforce vs PRC navy+airforce fight, it's a whatever US military logistics can bring in theatre vs entire Chinese industrial homefront pivotting into MIC fight with their various PPP advantages using domestic inputs, which is looking more and more to be more substantial relative to what US+co is projected/planned to muster.
Because the US fights global wars, it focuses on quality over quantity, as logistic costs start to dominate the production costs of military power.
If China tried to fight some Iraq war, it'll be just as expensive as the US effort. Even soldiers have to be paid far more in offensive expeditionary wars than defensive homeland wars, just to maintain morale.
One exception is mercenary groups like Wagner, they are actually extremely cost effective. That's because of much more flexible management structure, using private enterprise structures instead of rigid formal militaries, works 100 times better for chaotic low intensity warfare.
Maybe once - the shambolic internal politics playing out with the funding for Ukraine (a lot of which stays in the US anyway) doesn’t indicate American power. Quite the opposite.
Which is the only thing that matters to people.
>"When in a war, you are buying ammunition and weaponry with USD, not PPP. When there's a energy shock, you are importing oil and gas with USD, not PPP. When you are in a AI race, you are buying GPUs with USD, not PPP."
Thank you for confirming the purpose of USD - make every other country into a servant.
Practically speaking nobody has attacked the EU country. Rather quite the opposite. EU also happens to have their own weaponry. And in a worst case they can just produce whole bunch of nukes and declare simple policy: do not attack us or else you will be nuked.
That might be a bit difficult with no uranium reserves.
https://world-nuclear.org/information-library/nuclear-fuel-c...
This sentiment has been expressed a few times in this thread now. Is it really true?
From my understanding nuclear war at any scale will be devastating for the entire planet, not just the aggressor. So the threat of nuclear retaliation hinges on the aggressor believing the defender to be either be suicidal a or mad.
The default assumption of people being rational means it should be quite safe to attack despite talks of nuclear retaliation.
It kind of depends on which countries you're talking about.
The US and Russia have enough nukes that if they're involved, that's definitely true.
But what about Pakistan? Or Israel? There are several nuclear powers who would have a hard time devastating a single country, not to mention the entire world.
First source I found now: https://www.tandfonline.com/doi/full/10.1080/00963402.2019.1...
> the climatic effects of the smoke produced by an India-Pakistan nuclear war would not be confined to the subcontinent, or even to Asia. Those effects would be enormous and global in scope.
Ukraine can be burning on your front door, and you still think EU is safe. Guess what, EU is safe only because of NATO. Russia has attacked basically every neighboring country in Europe that is not in NATO.
Nukes don't work against salami slicing. Russia takes Estonia tomorrow, are you going to throw a nuke against Russia? No, you'll won't risk annihilation for Estonia, so you'll ignore it. So the next day Russia takes Latvia. And so on so forth. The only way of fighting salami slicing is applying proportional response, which requires a conventional army.
Also, Ukraine living standards isn't very high right now, regardless what their PPP is, and getting conquered by Russia, means you get used as battle-slaved for the next conquest. This snowball tactic was innovated by the Mongols, using the conquered people as cannon fodder for the next war.
What are you talking about? Russia hasn't invaded anyone in Europe except Ukraine since WW2
Before that, there were threats to invade Tito's Yugoslavia, but those have been not accomplished.
Plus an attempted coup in Montenegro.
The photos from the former, in particular, are practically iconic.
How is it possible to miss this history?
That's not true, Russia has participated or initiated the following wars in the greater European area (i.e. excluding Syria for example, but including the Caucasus) after the USSR collapsed:
* Georgia (a couple of times)
* South Ossetia
* Abhkazia
* Transnitria (part of Moldova)
* Chechnya (also a couple of times)
* Dagestan
* Ukraine
Mostly,these were local conflicts inherited from the USSR or border region disputes, not country invasions like in Ukraine.
Russia did not invade, or threaten to invade, any of its main European neighbours:
* Finland (which only became NATO last year)
* Norway and the Baltic states (members of NATO)
* Azerbajan
* Turkey (border by sea)
A lot of bad things are happening already, no need to make things up.
In any case, OP said "basically every neighbor" and you're doing a victory lap because only about half of their neighbors have been invaded.
Or stealing every piece of military equipment that isn't nailed down for use in an offensive war in which the allied nation isn't a party to.
And obviously, without NATO, a EU defense force would quickly spring up (including possibly the UK), and more money would be put into all kinds of weapons.
Forget to take your meds?
As long as my country has an independent nuclear deterrent and a functionally democratic government then I feel that my son is safe from the draft officer. The places you're listing lack one or both of those things.
That depends on your geo-political allies, for example I'm sure Russia had no problems in purchasing artillery shells from North Korea without using USD. The fact that Europe has become dependent on using the USD for its vital interests (like purchasing artillery shells, for example) is a major strategic weakness, but that's the bed that they have laid out for themselves.
The reason the EU seems to have fallen by 1/3 compared to the US is that the dollar got stronger, not that EU suddenly became 1/3 less productive.
Your point of view is just completely wrong and it's funny how you think it's the article that has it wrong.
I’m not sure that Ukraine has been a good example of US power. Things may have turned a corner but it’s been a hell of a show of US internal division and turmoil.
MER is the right metric for most uses. But for comparing growth no currency conversion is needed, obviously.
In every period to 2023 from 1995 (1995-2023, 1996-2023, 1997-2023 etc) US GDP growth has exceeded EU GDP growth.
US output is 59% higher than in the year 2000. EU output is 36% higher. (Constant local currency data from the respective governments.)
A weakness of this metric is that you can raise it by having a high minimum wage and other policies that discourage the employment of less skilled workers, while reducing total income by shutting some people out of the labor market.
The pay-line above which a corporation will value automating over having an employee, is always moving for every job, and yes, they will automate jobs 'No-Matter-What-The-Minimum-Wage'. Jobs today that are minimum wage are already at risk for being automated and eliminated, changing the minimum wage only hastens or pushes out the time frame. It will happen.
Thus Increasing minimum wage is only forcing corporations to not use slaves. To keep the population above some starving threshold.
And of course, it pumps money back into economy since people have to spend their pay.
Honest question: why is this absurd? Slavery has been a widespread practice in history, and it is still ongoing in some places.
Corporations exist to make money. The brute mathematics of profit require costs to be reduced. To zero, if at all possible.
I'm just reacting to the current push in the US to drive down the lower and middle classes, and funnel so much wealth to just a few. A lot of this is done by wage suppression, so that corps can have higher profit.
Really? As far as I know, the most authoritative ranking in academia is the Shanghai ranking[0], where, apart from outliners in the US with gigabudgets, most of the top are made up of European universities. The top looks rather like that, except for a “bunch” of mega popular US universities, the rest are quite mediocre.
But for me it's a little disingenuous to start taking cherry picked slices of the EU and comparing them against the whole US. If you ignore Mississippi, Alabama, Louisiana, etc, or just focus on the Northeast corridor or West Coast...no region in the EU comes close in GDP terms.
At the same time people are emigrating to rest of the Europe (Germany, Ireland mostly). We never had that much emmigration in the history of the country. And people are not leaving because the "economy is stellar". At the same time the government is having no trouble getting immigration historically from Bosnia and nowadays from Asia. "People just don't want to work" the local government is shouting while paying everyone minimum wages, while extracting EU money using their friend's private companies.
You hope or you know?
[0] https://en.wikipedia.org/wiki/List_of_OECD_regions_by_GDP_(P...
US has created businesses out of Universities and Health meaning you can buy things that should be offered to you by the state; people need more money to stay afloat in the US, more jobs sure are going to get you more GDP.
And if we go regional in EU, I bet you can have a better life in Portugal or Greece than Alabama, Mississippi or pretty much the whole South.
Provided you have a job and a job that pays well enough to be able to afford a decent life. All this rhetoric about european health insurance and job security is good but it is good today. Will it be good tomorrow? unlikely, as the EU faces the same demographic crisis as most of the developed world. Mind you, i'm not advocating for US-style free markets running amok and turning healthcare into a for-profit service but there is a good argument to be made about certain positives of the USA's economic structures.
Remember, when the chips are down, you cannot eat the architecture or social services in europe. Those things cannot be exchanged for money.
> All this rhetoric about european health insurance and job security is good but it is good today. Will it be good tomorrow?
In Croatia it already went down the drain years ago. People who never needed hospital treatments in their adult life have absolutely no clue at what the'll get into. Frequent misdiagnosis, waiting lists for years in advance to even see a specialist - not even to have a surgery, no responsiblity, 30 year old methods and knowledge etc.
Doctors themselves are disgruntled and are complaining about low salaries how they whould be paid much more if they were in the States or say Germany etc. Which is simply ridiculous because they're highest paid profession over here and frankly any other worker would be paid more if it was working abroad.
This is the only profession over here where its completely legal to work in both a public hospital/clinic and work in a private clinic/practice at the same time. So it quickly came down to: "oh you see, the waiting list for your life-saving urgent surgery is 2 years, but if you come to my/friend's practice will sort you out in no time at all, we accept all payment options". Or "Sorry the waiting list is very long, but I'm the one who makes it wink wink".
So this quickly devolved to "why would I give two shits what happens in my public hospital (workplace) when they cannot fire me (because they need me)". It also priced out many non well-off people because the Germans and Italians are using these private services too raising the prices.
So the public health services are used now pretty much by friends and families of the people working there and by poor people who have no choice but to take whatever scraps are given to them.
Citizens get screwed over twice; they get no or bad service for the money thats taken from them by force (very high taxes), and they'll have to pay for private care which is very expensive and the private insurance options are actually very poor.
I could go on about job "security" now, but this theme is so painful I'll leave it for another time.
Ehhh food deserts and food scarcity is very much an issue for millions of people in the American south.
1 in 4 face some type of food insecurity in Alabama. https://www.alabamapublichealth.gov/npa/food-access.html#:~:....
(I would have thought that California has the best food quality in the US because that is where most of the organic fruits and vegetables in the US are grown and the other elements of a healthy diet can be shipped around the world with very little loss of quality.)
Most people need to earn money through labor, and earning money is much easier in Alabama or Mississippi than in Portugal or Greece unless you have one of those jobs where it does not matter where in the world you live as long as the internet connectivity is reliable.
Some are going be tempted to reply that that might be true for people whose earning target is sufficiently high, but for just earning the median income, Portugal or Greece is easier. I disagree: I say it applies all along the continuum of incomes.
If you are disabled (unable to earn money) or have all the money you will ever need (as savings), then yeah, you can have a better life in Portugal or Greece.
And what it says is the gap for GDP (PPP) per capita between the North/West EU versus the US hasn't narrowed since 1980. It has widened vs. South EU. All the effect seen at an EU level is from the East.
There are lots of interesting stories you can tell and lessons you can learn from these trends, but it's not a story of core EU outperforming.
The process of choosing new, rosier, metrics is disingenuous and nothing more than marketing, because it raises the question: If those metrics are doing so well, why are the traditional metrics not reflecting this performance gain? I.E. It demonstrates that the metrics don't have a legitimate relationship to overall performance and thus the piece is almost certainly built to support a pre-determined conclusion. If one is going to discard metrics such as GDP for new metrics, one needs to certainly prove why these metrics are better than the old measure. That includes outweighing the historical reasons for why these metrics are used.
Another misleading device is including various weaknesses of the EU, as if these were levied against the EU and not just the direct results of their own policy making decisions.
It's disappointing to see articles like this, because reporting on these metrics would be an interesting way to better understand business in the EU. Instead the metrics are being needlessly spun so someone could write the words "The European Union’s remarkable growth performance relative to the United States".
This viewpoint assumes that the article is wrong (and maybe it is). However a metric can be fine, and then something changes which necessitates a change measure. What if this has occurred?
I don't see how this is substantiated. Perhaps quote or elaborate upon the part of my reply which you feel substantiated your reply.
Then someone says that it’s unfair to factor in the whole of Germany instead of just the wealthiest parts. Where does it end?
Same should be applied for Netherlands and Luxembourg.
And Malta.
Luckily UK is already out of the EU, or that would be another can of money-laundering worms!
Too bad we're demographically dying here in Europe, as in the population has stopped growing.
We're slowly becoming the 18th century Venice of the global world, i.e. pretty wealthy by the standards from back then but just waiting for a Napoleon to put it out of its geo-strategic irrelevance.
We hosted a German foreign exchange student. His dad was an anesthesiologist.
He said the hospital told him “here’s what you’ll be making”.
No negotiation. No competing offers.
Why would harder or go out of your way to contribute to your industry if your salary is going to be artificially capped?
Because most people do don't do their job well to get paid better?
In fact, monetary incentive are one of the least efficient way to motivate workers once they are past subsistence level. (Sure you can make sure that everyone starts their work life with a six digit credit for their studies and then need to take another, even bigger, one for housing so that they can never go past subsistence level, but that's no a recipe for healthy society… And that's not how the US worked in its golden age either).
Gaslighting.
This is standard in many hospital systems. If there are several hundred people in the same role, having the same contract for all of them has advantages on both sides. It will also have downsides.
You aren’t going to get a competing offer from the same employer, they’d need to apply to a different one.
1. Study in the US or move to the US after completed studies.
2. work in the US for 3-10 years
3. Move home when they have kids
I’ve seen this over and over. You get to a phase in life where you conclude you have been getting while the getting was good and other factors are more important
The overarching goal of the oligarchs is to eventually merge and equalize the whole of the Americas and Europe into a kind of Oceania from 1984 and revitalize a kind of aristocracy, but whose power and control is abstracted and secured through technology. Some call it digital-feudalism, I think cyber-feudalism is more accurate because it evokes the nexus between human interaction with technology more.
Peoples are promised one thing and they always get something way worse from it, the EU that is effectively already an abstracted tyranny, is just one example.
What does the EU even do?
Can't launch things to space, and gets salty that SpaceX is launching Sats for them,
> https://en.wikipedia.org/wiki/Ariane_5 > Ariane 5 is a retired European heavy-lift space launch vehicle > https://en.wikipedia.org/wiki/European_Space_Agency > The ESA currently has only one operational launch vehicle, Vega
EU can't launch their own Sats since they have no rockets that can launch anything that isn't a tinysat
https://spaceflightnow.com/2024/04/27/live-coverage-spacex-t...
Well that's embarrassing.
can't make shells for a war that literally at their doorstep and relies on countries literally half a world away to do basically everything for them (US and SK),
> https://en.yna.co.kr/view/AEN20231205000300315 > S. Korea indirectly supplied more 155-mm shells for Ukraine than all European countries combined
barely has a navy that can patrol waters literally next to them and has to rely on the US for boats. Has fewer Carriers than single nations and the ones that the UK has are Diesel because they couldn't afford nuclear power.
> https://en.wikipedia.org/wiki/EU_Navy > The combined component strength of the naval forces of member states is some 514 commissioned warships. Of those in service, 4 are fleet carriers.
Damn, smaller carrier fleets than entire countries.
Do better when you want incredibly easy to find numbers.
So what DOES the EU do?
Sats they are building.
> can't make shells for a war that literally at their doorstep
By they are making tanks and armored personal carriers. Just to name two things.
> S. Korea indirectly supplied more 155-mm shells for Ukraine than all European countries combined
S. Korea has a neighbor that they have reason to believe will invade if they don't have a good defense program. Thus S. Korea needs the proven ability to make enough shells to hold off an invasion even when there isn't one - if the invasion happens they will need those factories working overnight. The EU didn't think they needed that so they invested elsewhere.
> has to rely on the US for boats.
Many of the US navy boats are designed in Italy. Italy also builds a lot of boats.
> barely has a navy that can patrol waters literally next to them and <snip> Has fewer Carriers than single nations
They don't need them - the US is patrolling the oceans. If they have a problem in Kenya (random country I can spell) they will call the US to take care of it for them.
The world is connected. The EU doesn't need to do those things you name. They do other things instead and buy from the US, Korea, Japan, New Zealand... , while those countries buy from them.
Though I would agree the EU underfunded their military over many decades. However that is not the same as the EU building nothing.
Because I do not buy satellite launches, from the point of view of my personal needs the industrial production of USA appears weaker and less competitive than of most other developed countries.
Even the DIY products that are competitive, which are not really consumer products, e.g. AMD CPUs, are only "Designed in USA", but "Diffused in Taiwan" and "Assembled in Malaysia".