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 trust.
Europe is less hard-working, less ambitious, more regulated and more risk-sensitive than the United States, Nicolai Tangen, chief executive of the Norwegian Oil Fund, tells the Financial Times. “Americans simply work harder,” he concludes.
One imagines Norwegians as peaceful people who think about whales and winning at Eurovision. But you walk through the buildings of downtown Oslo and what you discover is an abrupt, vertical capitalism. A country of soldiers and bankers. Or from bankers trained as soldiers. Like Tangen himself, who before becoming a fund manager in London, studied interrogation techniques in the Norwegian Intelligence Service.
Norwegians have built a 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 have a chronic fascination with the United States. By its businessmen, direct and informal like cowboys. Due to the less protected labor market. Because of low taxes. On the other hand, life expectancy in Europe is five or six years higher; so is the quality of life. Europeans have more vacation days, they work one 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 equivalent to 90% of that of the US. In 2022 it was already 23% lower. Demographics explain that jump. Immigration has rejuvenated the workforce on the other side of the Atlantic. Europe, on the other hand, is suspicious of immigrants and grows older.
Since the pandemic, the recovery in Europe has been halting. In the United States it has been intense and all its differential levers have been activated: abundant and cheap energy and 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 triggered wage increases. In the lowest and highest segments. With stratospheric salaries in technological employment, where $400,000 per year are 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 in New York, $3,300.
Europe lived its best moment between 1985 and 2005. It was the reference model. But in 2005, what Timothy Garton Ash describes in his latest book as a downward turn began: financial crisis, Russian occupation of Crimea, Charlie Hebdo attacks, populism in Hungary and Poland, Brexit, Trump... The historian looks back , to the good times and evokes Stefan Zweig's The World of Yesterday. The Austrian wrote it in 1941 convinced that the Europe he longed for (the one before 1914) was no longer going 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 that and with the American protective umbrella. For the first time Europe feels that it can be left alone. What will happen if the Americans leave? Who will stop Putin?
Emmanuel Macron is the most skilled at conveying that change of mood. In August 2022, the president spoke of the “end of abundance.” A week ago, at the Sorbonne, he said: “We must understand that Europe is mortal, it can die.” To add: “the rules of the game have changed.”
The EU has commissioned Mario Draghi and Enrico Letta (what will the Italians have?) to elucidate what the new rules of the game are and how lost trust is restored. Mario Draghi's response is the most surprising, due to the self-criticism it implies for someone who has been a Goldman Sachs banker.
Three basic ideas, three raw gems, from Draghi's reflection. First, globalization has brought imbalances that European governments have been slow to recognize. In particular, the EU's erroneous response to the 2011 euro crisis, in which it sought short-term competitiveness with a reduction in 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 exports are no longer a guarantee of success. In fact, 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 new technologies, Europe does not have a strategy to compete in it, neither in telecommunications or defense. Nor does it have the necessary resources for the energy transition assured (they are in the hands of China). Europe must now begin to act as an economic nation, not as a more or less asymmetric federation of different economies.
Draghi does not talk about working more, as the Norwegian banker asks. But that's not going to make the path any easier.
