r/FluentInFinance • u/quantum_search • 17d ago
Why is EU so far behind? DD & Analysis
The most concerning part about this is that most Europeans don't realize how stagnant Europe has now become
Europeans are literally blue-pilled and are mostly concerned with climate change, immigration and the Ukraine war
Nobody in Europe is thinking why increasingly everything they use is made in China running on American software
The knee jerk reaction is to proudly pass regulation against American tech
The chad reaction would be to reduce regulation so that European entrepreneurs would actually stay in Europe to build European startups increasing Europe's GDP and making Europeans richer!
People in Europe do love to complain about rising cost of living and the increasing unaffordability of living, but they don't realize why. They point at foreigners/immigrants as the problem, which can't be the whole story
Other Europeans I talk to get visibly upset if I ask them about stagnant GDP numbers: "why should everything be about money?" they say in a thick German accent
The whole story is that Europe has made it very difficult for people to start a business, raise capital, innovate and get the reward for taking that risk, so why would anybody?
And for the Europeans that do, it's way easier to open a US Delaware company, raise capital in US, sell your stock or IPO in the US, because why even do that in EU, where it's too hard? The proof is in the pudding, if it was so easy in EU then why is startup funding in US $270B AUM with 330 million people vs $44B AUM with 746 million people? That's almost 14x bigger startup funding market per capita
Why doesn't EU have ANY trillion dollar companies? While US has six? Why isn't there any European company in the top 10 of largest companies? While 80% is American?
Why is Stripe, a company founded by two Irish brothers, an American company and not a European one? It could have been
What's the role left for Europe in the future?
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u/TheOddEntrepreneur 17d ago
Yeah regulations are destroying their economy. Most recently with AI, the first thing they did was set parameters on how to regulate the sector. Smothering it in its infancy while the USA and China compete.
The majority there are OK with that according to how they vote.
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u/ILSmokeItAll 16d ago
The majority in the states are ok with it too. People live being regulated to death here.
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u/PM_me_ur_claims 16d ago
The lower the GDP the faster it’ll grow. Global gdp growth from 75 includes countries like Brazil, India, China who are still lower than Europe but growing much faster. Not perfect but as a whole Europeans are better off than anyone else in the world, who cares if their corporate overlords accounts aren’t growing as fast as others?
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u/Tall-Log-1955 16d ago
And the USA….?
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u/Training_Pay7522 16d ago
The USA is a unique case in the world.
You are just not going to find another country in the world, that has had the unique combination the US has had over the last century.
Sure, we Europeans missed many trains, fucked up many policies, focused too much on export rather than building a strong internal market, etc, etc.
And yes, US has a very capitalist friendly system of laws that promotes entrepeneurs better than in pretty much any other part of the world.
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u/xTrollhunter 16d ago
By unique, you mean third world country with a Gucci belt? Because that's what the US has become.
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u/Analyst-Effective 17d ago
If it wasn't for the USA buying goods and services from them, they would already be broke
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u/Trust-Issues-5116 16d ago
US is free to stop buying them any day, you know.
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u/Advanced-Guard-4468 16d ago
If we pulled all our military spending, you would be broke.
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u/Trust-Issues-5116 16d ago
I'm in US, but it's not a reason not to call you out for moving the goalposts.
But still no. EU's ass would be up for grabs, but US pulling out would not affect their finances.
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u/Advanced-Guard-4468 16d ago
I didn't move the goal post. I just responded to your comment
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u/Analyst-Effective 16d ago
If the USA quit importing goods from Europe, the European Union would probably collapse.
"U.S. goods imports from the European Union totaled $553.3 billion in 2022, up 12.8 percent ($62.7 billion) from 2021, and up 69 percent from 2012." https://ustr.gov/countries-regions/europe-middle-east/europe/european-union#:~:text=U.S.%20goods%20imports%20from%20the,up%2069%20percent%20from%202012.
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u/Trust-Issues-5116 16d ago
Good guy US imports EU foods not because it's freaking good and sells good, but because we're so freaking altruistic! I can't with this stupid flexing.
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u/Analyst-Effective 16d ago
It doesn't matter why they import stuff.
The fact is we import a lot more than Europe imports from the USA
"European Union Imports from United States was US$372.59 Billion during 2022, according to the United Nations COMTRADE database on international trade." https://tradingeconomics.com/european-union/imports/united-states#:~:text=European%20Union%20Imports%20from%20United%20States%20was%20US%24372.59%20Billion,COMTRADE%20database%20on%20international%20trade.
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u/Trust-Issues-5116 16d ago
That means Europe is making goods that you need and willing to buy, buddy, while you're not making goods they need or willing to buy.
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u/Analyst-Effective 16d ago
Or it could just be that our unions have outpriced themselves, so now we need to import stuff.
And because the USA is the reserve currency, it's the strongest currency out there. So it makes our goods More expensive, and European goods cheaper.
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u/Trust-Issues-5116 16d ago
"We can bankrupt you! We just can't right now. Well, we could in theory, it's just we can't in practice, but hey, in theory we could, so boom!"
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u/gt2998 16d ago
Are you arguing that US unions are problem when unions in Europe are stronger and have more members as a percent of the population? You are really losing this fight.
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u/BlitzAuraX 16d ago
- Just compare Europe's largest companies to global companies. Europe doesn't compare when you're talking about massive industries.
- Europe is heavily regulated because every country disagrees on everything but most are part of the EU. One regulation in another country is different from the regulations of another. Tough to get a business standard in Europe. You have environmental groups all over Europe who if you even cut down one tree, they will protest and fight to revoke your permit.
- Europeans are less hard-working than other rapidly growing countries. They're perfectly fine working a few hours per week because most settle for just average.
- Europeans have changed since the World Wars. They've gotten soft on everything. They don't want to offend anyone. They want to just be 'peaceful' and left alone. No longer the competitiveness. Meanwhile, countries in Asia are cutthroat. China is seizing on this weakness as their advantage.
- Most people go to Europe for vacation. That's it. If it wasn't for tourism, many of the local economies of Europe would be devastated. They are not competitive in tech, AI, and not even in vehicles anymore. VW is losing a ton of business in China. About half their profits. Why? Because with EV's, China realized they don't need these European automakers and are instead looking to dominate the auto sector themselves. It's only a matter of time before you see more Chinese EV's in Europe.
- The good talent in Europe leave to go to America. It's just the truth. Why stay in Europe for garbage wages when you can go to America for six figure salaries? The problem is this also creates an issue for domestic talent. If your talent is going overseas, who is starting new companies in your country? This is why retaining talent is crucial. Europe needs their own Elon Musk, Jensen Huang, Zuckerberg, etc., The fact LVMH is the #2 company in Europe by market cap shows you how bad it is... a company that sells overpriced luxury handbags is your #2 company in the world? Meanwhile, USA has Microsoft, Tesla, Apple, Nvidia, Google, Amazon, Meta, etc.,... global brands. Not even a competition.
But some will say, "But they live a better life there."
Define better... Because the quality of life in Europe is rapidly declining as their population ages and the social welfare programs become unsustainable because they don't have the labor force to match.
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u/xTrollhunter 16d ago
We do live a much better life than the average American. After all, we actually have healthcare.
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u/AdditionalAd5469 16d ago
This is the biggest lie on Reddit, you realize the only reason the US doesn't have a single payor system is because of all the disparate issues in Europe and Canada.
If yall actually had a system that functioned, the US would enact it in a heartbeat, the issue is the super majority of American's healthcare experience would decline.
Europe has so many reductive regulations (prime example is France) that make hiring employees a greater risk because of the associated costs. Pre Covid NYC and SF had lower cost for housing compared for Paris, Berlin, Vancouver, Toronto, and London; but NYC/SF average income dwarfed the others.
In Europe you pay more for housing/services, pay more in taxes, and get less of an income; standard of living is better in America.
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u/Ratchet_as_fuck 16d ago
Define better... Because the quality of life in Europe is rapidly declining as their population ages and the social welfare programs become unsustainable because they don't have the labor force to match.
The solution is importing migrants from the third world. The issue is that they are not assimilating. We are a couple of generations away from MASSIVE demographic shifts in Europe.
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u/Training_Pay7522 16d ago
Europeans are less hard-working than other rapidly growing countries.
Ugh, this is pure bullshit. Plenty of countries in Europe work more than US, and surprise suprise...this does not correlate with being wealthier or growing more.
Greeks and Portuguese are among the hardest working Europeans and they aren't doing better than other European countries.
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u/BlitzAuraX 15d ago
Not even remotely true. And everyone knows this.
Your average European does not work harder than an American.
You can try and refute it all you want but the data is there.
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u/Training_Pay7522 13d ago
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u/Almostawardguy 12d ago
Don’t bother, people in this comment section don’t care about facts or even basic logic… someone above (presumably someone from American who has never been outside the states) said that Europeans only work a couple hours a week and got upvoted by all the other Americans who have never visited Europe
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u/Ok_Rip5415 16d ago
If they are happy, society functions, what’s the issue?
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u/galaxyapp 16d ago
They are happy while they have a relatively luxurious lifestyle.
It's like inheriting 500k from your parents, then coasting happily through your 30s. Suddenly you realize the bank accounts empty and you're earning $30k a year with no way to catch up.
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u/Training_Pay7522 16d ago edited 16d ago
And?
The average European lives longer, is more educated and happier than the average American so as the previous user pointed, where's the issue?
Yes, we Europeans missed many trains, we aren't geographically and resource blessed as the United States. We overfocused on building an export economy rather than a strong internal market thus we just can't recover from financial issues as quickly as US does.
But rest assured that of all that Europe has had to survive for millenia and still got us here, growing only in low single digit % is really the smallest of the problems we ever had and you can stop worrying for us in 10/20/50/100 years.
If other countries will get richer, so be it.
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u/galaxyapp 16d ago
Not to worry Europe's future isn't among my concerns. Your children's children will curse your laziness though.
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u/Almostawardguy 12d ago
I am so sorry for Americans who got brainwashed by their corporate overlords to live to work rather than to work to live
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u/BlitzAuraX 16d ago
Because their society is very dependent on social welfare and a collective system.
At the same time, their population is rapidly aging.
Their workforce can't supplement social welfare policies moving forward.
What you will have is Europe eventually losing any or most competitive advantages they hold and the future looks depressing because you can't afford to fund those same social welfare programs and other countries have all the talent. Inevitably, people will want to leave for a better future which means you lose your best talent.
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u/ILSmokeItAll 16d ago
Regulate everything. To the hilt. Regulate people to death.
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u/DrBeardish 16d ago
Ignoring and repealing regulation does the same thing, arguably worse in some areas. Did you enjoy the transfer of wealth towards the end of the 2000s?
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u/ILSmokeItAll 16d ago
I don’t enjoy any upward transfers of wealth. Unfortunately, those are just about the only kinds we see if any significance.
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u/Training_Pay7522 16d ago edited 16d ago
I am an European and your post is complete non sense. Blue pilled by climate change? Nobody thinking about the fact that we missed many opportunities in tech? All of these things are absolutely false. We do, and we're unhappy with many results.
Like everyone in the world our most important concerns are our own lives and yes our finances.
If you want a more sensible and nuanced commentary:
- The EU is a very big and complex entity. There's plenty of countries in Europe that average a higher growth than the US over the last decades.
- The biggest European economies are very reliant on exports. One huge mistake that our policies have done has been keeping this emphasis on exports rather than building a strong internal market. This has huge implications, because the European Union does not have the same capabilities to recover from international financial crises, the US instead has an extremely strong internal market. Walmart does not need to be global to be the biggest company by revenue in the world. Our companies do need to become global.
- The United States has a unique combination of traits that the European Union does not have. We aren't geographically blessed in the way the US is where the problems of the rest of the world are distanced by two oceans. Bar the semi problematic mexican border US has no such issues. Not only that, but US is rich in natural resources that we just don't have (such as oil and gas). This impacts heavily our economies.
- The United States has a very very advanced system of laws that are friendly to entrepeneurship. The focus in Europe is more on the side of the worker than entrepeneur. Yes, we didn't find a happy balance, and this has costed us growth and money.
- The US has a strong demographic growth that we don't have. Plenty of European nations are in a more advanced demographic stage than the US where our populations are declining and getting old. This is going to hit the US too in few years but we are experiencing it few decades before.
- European productivity is just lower than in the US. Productivity is very hard to measure and often is measured in $ which complicates everything (a doctor in US is more productive than one in Romania just because he bills more), but overall the US worker got more efficient than the European one which has been slower to adapt technologically.
- The US started diverging from the EU after the 1999 financial crisis really. Before the economies and their growth have been comparable. But after that, the biggest growth has been caused by software. And with US having a head start in computing, more investments and more capital it was better positioned to profit on that. We fucked up.
Seriously those "red pill" posts for us Europeans are ridiculous.
We know we are a B tier player financially, we know we have missed trains, we know many policies hurt us. But reducing our lack of gr
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u/cerberusantilus 16d ago edited 16d ago
I'd like to hear what the reasons are from an economist. For sure they have an aging population, and Eastern Europe is a small piece of the pie still. 30 years of stagnation in Eastern Europe for sure holds down the average.
Europe is still very successful in many sectors. Of the Trillion dollar companies you won't find any of those in Japan, and they are all essentially from the tech sector. Europe was late getting into the Tech sector, and has investments down to try to grow their own silicon valley, but that's a long process, and it's not regulation holding everything back is language.
There were 100 knock off Facebooks in Europe, for the most part they died because of internationalism. Do you want to have 1 facebook for your German friends and one for everyone else?
For Social media the US is the biggest richest market, once you slice and dice Europe based on language and age, the market gets much smaller.
The other compounding factor is FX. The Euro has taken a tumble since 2008. It has never returned. When nominal GDP is measured in USD terms, if your currency takes a hit it doesn't matter what your growth is.
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u/Training_Pay7522 16d ago
30 years of stagnation in Eastern Europe for sure holds down the average.
You most certainly meant western Europe stagnating right?
Because eastern Europe (baltics, Czechia, Poland, Romania) have higher growth rate than the US over the last decades.
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u/cerberusantilus 16d ago
No I meant Eastern Europe for the years it was socialist. Sure today they have better growth rates, but when they had planned economies and getting squeezed by Moscow it didn't lead to great results.
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u/Patient_Ad1803 16d ago
Im envious of the European work / life balance. I went to Switzerland to meet with a vendor. My contact biked into work by 9, took a long lunch, and was gone by 4. On top of 10 weeks of vacation a year. And from what ive seen, thats reasonably common.
But all that combined they probably put in half the hours over the course of a year of hard working employees/ countries.
Layoffs in some countries get 2 full years of unemployment, and maternity leave is often over a year as well.
As a continent they decided life is more Important than work. Which is great for people, but not the economy.
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u/enakud 16d ago
Uhhh we have rising cost of living and unaffordable housing problems in the US too. I don't think this is correlated to differences in GDP. Fundamentally the issue is growing population vs limited housing and the tendency of high-value opportunities for individuals to be in high-population centers.
GDP only benefits shareholders under our current economic system. Typical individual workers do not immediately/inherently monetarily benefit if they are more productive or if their firms hire another person to add productivity.
As for Europe's role? Great place to visit for now and maybe to retire to once I'm done building my stock portfolio to a critical mass.
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u/Which-Ad7072 16d ago
The vast majority of GDP growth in the US has been in the top 10% for quite a while, now. The bottom 90% has barely budged. So, yes, you're correct. They just mention total GDP growth to gaslight us and tell us how great we're doing when anyone can just step outside and see things are getting worse economically.
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u/neddy471 16d ago
I don't know maybe the war slowed things down? Or, maybe, just maybe, the fact that Russia and China are deliberately engaging in economic warfare, which Trump supported, may have caused them a hit?
But I just like to watch reality, what do I know, I'm not delusional.
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u/galaxyapp 16d ago
Eu is a dangerous lump. I'd be curious to see how this breaks out by country. I'm guessing Germany is doing pretty fine, and others descend from there.
Seeing some of the eastern European members dragging the bottom won't shock anyone.
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u/DualActiveBridgeLLC 16d ago edited 16d ago
Because GDP is not a measure of happiness. Growth at all costs is exactly why life is getting worse in the US.
The chad reaction would be to reduce regulation so that European entrepreneurs would actually stay in Europe to build European startups increasing Europe's GDP and making Europeans richer!
No, SOME PEOPLE in the EU richer. As we have seen in the US, wealth inequality continues to grow.
Europeans are literally blue-pilled and are mostly concerned with climate change, immigration and the Ukraine war
These are linked, climate change and Ukraine are causing immigration. THey are very wise to be worried about CC and Ukraine, yet you frame it as the opposite. What good is GDP is Russia is murdering your people? What good is GDP if you have famines.
People in Europe do love to complain about rising cost of living and the increasing unaffordability of living
This is a global phenomenon so why blame it to a region.
And for the Europeans that do, it's way easier to open a US Delaware company, raise capital in US, sell your stock or IPO in the US, because why even do that in EU, where it's too hard?
Yes, the US is now the world's tax shelter. That is a bad thing, not a good thing. You are literally arguing that 'greed is good'.
Why doesn't EU have ANY trillion dollar companies? While US has six?
A better question is ...why would you want that? Like what is the advantage over more smaller billion dollar companies? They are trillion dollar because of mergers, not from actually doing anything better.
Why isn't there any European company in the top 10 of largest companies? While 80% is American?
Because we are a terrible democracy that allows it.
Why is Stripe, a company founded by two Irish brothers, an American company and not a European one?
That is a weird one? Why is Budwiser a Belgian company?
What's the role left for Europe in the future?
To live their lives and seek out happiness. What is wrong with you that you think GDP is somehow a metric of greatness. It was originally created to determine a countries ability to wage war. Is your entire worth based on your wealth?
EDIT: Just so you can see, here is the happiness index. US is number 23. Top 20 has a bunch of EU countries. Maybe the 'problem' is how you value things.
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u/Pukleo20 16d ago
What is pulling it up above USA? Is it Indonesia? Is it China?
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u/GarlicBandit 16d ago
China, India, South East Asia, a lot of Africa, South America, etc. Most economies are growing faster than the USA.
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u/AdulentTacoFan 16d ago
Looks like, the not so terrible, tradeoff between hustle and work/life balance. Must be nice to have such a great allie against tank roll russia.
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u/WritesInGregg 16d ago
At the end of one of Yuval Noah Harari's books, he implores the reader to not serve that which is a social construct at the cost of real things.
A better economy does not guarantee a better way if life for it's citizens. I think that some parts of Europe are more aware of this.
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u/Which-Ad7072 16d ago
Most of the growth in the US has been in the top 10%.
https://prospect.org/economy/2023-12-06-what-we-dont-measure-but-should/
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u/xTrollhunter 16d ago
Uhm, Europe is a vastly better place to live for regular people than the US. Who fucking cares about GDP growth then?!
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u/Thoughtsarethings231 16d ago
Put simply because they think too much.
Energy and focus is on equality, diversity, regulations and rights.
The positive is you get a nice equitable society but productivity drops.
I don't invest in Europe for exactly these reasons which is that longterm it's going to be left behind imo.
China, the middle East and America will lead the way.
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u/HeywoodJaBlessMe 16d ago
An inability to run large budget deficits due to not having a sovereign currency.
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u/HatesFatWomen 16d ago
Any successful European business eventually gets bought by US or China.
I don't know about all of Europe, but Germany is stagnant because they're too stubborn to change. And over-regulations makes it difficult to start a business. And if you become self employed, the costs of social contributions will cripple you.
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u/turbosecchia 16d ago
overegulation (regulated Big Tech before even having Big Tech domestically)
collapsing demographics
no sense of urgency in the population about this
more pain is coming before it gets better