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In April of 2023, three nuclear reactors went quiet in Germany. ESR 2, Incestim 2, and Emland, a country that built the modern chemical industry, a country whose engineers gave the world the automobile and the MRI machine, shut down its last working nuclear power plants on the orders of its own chancellor.
18 months later, Volkswagen announced the first German factory closures in the company's 87-year history. Robert Bosch cut 22,000 jobs. Tissen cut 11,000 more. BASF, the largest chemical company on Earth, shut down 11 of its plants in Luvigan and announced it would build its next $10 billion complex in China instead.
In Sweden, a company called Northvault had raised $15 billion to become Europe's answer to Tesla battery dominance. By November of 2024, Northfault had filed for bankruptcy protection in a Delaware courtroom, wiping out $700 million of Volkswagen investment and $900 million of Goldman Sachs investment in a single filing.
In Italy, $156,000 Italians left the country in a single year. The median age of the country hit 49 years old. The country of Michelangelo and Da Vinci and Enrico Fairmy is on track to lose 12 million people by the year 2070.
In Spain, the Barcelona City Council announced a total ban on short-term rental licenses by 2028 because their own citizens could no longer afford to live in their own capital.
In France, five prime ministers cycled through office in under 2 years. Fitch downgraded French government debt to the lowest rating in the country's recorded history. Alternative for Germany became the second largest party in the Bundes tag. Victor Orban has ruled Hungary continuously since 2010 and finally lost an election. In Austria, the Freedom Party, founded by a former SS officer, won the national election with almost 29% of the vote.
And in Brussels, a man named Mario Draghi, the former president of the European Central Bank, a man who in 2012 saved the euro within four famous words, stood before reporters in September of 2024 and delivered a 400page report on European competitiveness. Draggy called the situation an existential challenge. He said Europe faced quote slow agony. He warned that without 800 billion euros of new investment every single year, roughly double what the Marshall plan cost to rebuild Europe after the Second World War, the continent would keep falling behind. A year later, in September of 2025, Braggi returned to the podium to check on the progress. Only 11.2% of his recommendations had been implemented.
In the year 2008, the European Union was bigger than the United States. The EU produced 16.4 4 trillion of goods and services. The US produced 14.8 trillion. European leaders openly spoke about the euro replacing the dollar as the global reserve currency. European newspapers wrote about the American model collapsing under the weight of its own financial excesses. 17 years later, the American economy has reached roughly $29 trillion. The European economy sits at $19.5 trillion. That's a gap of10 trillion dollars. A chasm that did not exist in 2008 and that now exceeds the entire economies of Japan, Germany, and the United Kingdom combined.
As poor people, the standard of living in Europe has been falling behind Americas for almost 20 years. So, a continent of 450 million people, the birthplace of the industrial revolution, the home of the Renaissance, the origin point of modern science itself, how that got lapped by the country that fought a revolution against it 250 years ago. It is a story about a continent that again and again chose leisure over output, precaution over speed, fragmentation over unity, and dependency over independence. and a country that almost by accident toes the opposite.
To understand the divergence, the story starts in the 1990s in a Parisian conference room where a group of European finance ministers sat around a table and made the single largest bet in European economic history. They decided to merge 11 national currencies into a single shared currency. The French would give up the Frank. The Germans would give up the Deutsche mark. The Italians would give up the LRA. The Spanish would give up the pesa. The Greeks, who had not yet met the entry requirements, but would be waved in 3 years later, would give up the drama. 1999, the euro was born.
The theory behind the euro was elegant. A continent-sized currency would make Europe appear of the United States in global finance. Companies would stop losing money to currency exchange. Inflation would be tamed by the European Central Bank in Frankfurt, an institution modeled on the German boomstbunk. The euro would be a monument to European unity.
The economist who had written the foundational paper on shared currencies decades earlier, was a Canadian named Robert Mundle. He had won the Nobel Prize for that paper. And the paper explicitly warned that a shared currency only works when the countries using it are structurally similar when workers can move freely between regions and when a central authority can transfer tax revenue from booming regions to struggling ones. The Eurozone at launch had almost none of those conditions. German and Greek labor markets had almost nothing in common. A Portuguese welder could not move to Finland because the Portuguese welder did not speak Finnish and there was no European tax authority that could take money from booming Germany and send it to struggling Greece. When himself warned that the euro, as designed, was a machine that would amplify economic shocks, not absorb them, and the warnings were ignored.
For 10 years, the euro did seem to work. Cheap German credit flooded southern Europe. Greek workers took out mortgages at German interest rates. Spain built housing subdivisions across the Mediterranean coast. In 2006, Spain was starting more new houses every year than Germany, France, and Italy combined. Irish banks grew 10 times larger than the Irish economy itself. It felt like a genuine miracle. And then in September of 2008, the entire global financial system seized up overnight.
In the United States, the response came fast and big. Congress passed the troubled asset relief program, $475 billion to recapitalize American banks. Within 3 weeks, the Federal Reserve began buying mortgage bonds by the truckload in a program that would become known as quantitative easing. By early 2009, President Barack Obama signed an $831 billion stimulus package into law. The US run a budget deficit equal to 10% of its entire economy in a single year.
But Europe did the opposite. Germany, traumatized by memories of the hyperinflation that destroyed the Viimar Republic and helped bring Hitler to power demanded austerity. Chancellor Angala Merkel insisted that European governments cut spending, raised taxes, and shrink deficits during a financial panic. While the Federal Reserve bought trillions of dollars of bonds to flood the system with cash, the European Central Bank raised interest rates in 2011.
In the middle of a debt crisis, the consequences were brutal. Greek government debt, which had been secretly understated for years by a series of Greek finance ministers, was suddenly revealed to be massive. Bond markets panicked and borrowing costs for Greece, Spain, Portugal, Ireland, and Italy spiked to levels that made their debts impossible to pay. Without the ability to print their own currencies, these countries had no way out. Greece could no longer value the drama because there was no drama. Italy could no longer inflate away its debts because the Italians no longer controlled their currency. The only option was what economists call internal devaluation. A forced reduction of wages, pensions, and public sector jobs until the domestic economy shrank enough to make exports competitive again.
Greece was forced into three separate international bailouts. Between 2010 and 2014, the Greek economy shrank by 26%, the longest peacetime recession of any developed economy in recorded history. Youth unemployment in Greece hit 59.5%. In Spain, youth unemployment peaked at 56.4%. A generation of young southern Europeans, educated, ambitious, often speaking three languages, packed up and left, and they moved to London, Berlin, Amsterdam, Dubai, Singapore, even Miami. The Arasma's generation, named for the European University Exchange Program that had taught them to live abroad, became an economic diaspora. Spain, France, Italy never recovered. The Italian economy in 2026 still has not returned to the level it reached before the financial crisis. Italian real wages adjusted for inflation are lower today than they were in 1990. Italy is the only G7 country where workers make less than their parents did 35 years ago.
Meanwhile, the American economy finished its recovery by 2012 and then started accelerating. And while Europe was busy cutting pensions in Athens and Madrid, the American economy was undergoing a transformation that nobody in Brussels saw coming.
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In the early 2000s, in the shale basins of Pennsylvania, Texas, and North Dakota, a handful of small oil and gas companies had been experimenting with a drilling technique called hydraulic fracturing, combined with horizontal drilling. The technique pumped water, sand, and chemicals into rock formations 2 miles undergrounds at extreme pressure, cracking open the shale and releasing natural gas and oil that previous generations of drillers had written off as impossible to extract. One Saudi oil minister famously said the Americans would never get the shale out of the ground at a profit.
By 2015, the Americans had quadrupled American natural gas production and tripled American oil production. By 2018, the US had become the world's largest oil producer. By 2023, the US became the world's largest exporter of liqufied natural gas, surpassing Qatar and Australia. American natural gas production went from 18 trillion cubic feet per year in 2005 to nearly 38 trillion cubic feet in 2024. More than doubled in 15 years. And by 2024, the benchmark American natural gas price averaged $2.21 per million Btus, the lowest price in American recorded history when adjusted for inflation.
Europe went the opposite direction. In 2011, after the Fukushima nuclear accident in Japan, Chancellor Angela Merkel announced that Germany would phase out every one of its nuclear power plants. Germany was also banning hydraulic fracturing across most of his territory, meaning no German shell boom. Garer, the former German chancellor, left office in 2005 and joined the board of Gazprom, the Russian state natural gas company within weeks. His successor, Angalo Merkel, approved the construction of the Nordstream pipeline, a direct underwater gas link from Russia to Germany that bypassed Poland and the rest of Eastern Europe. By 2021, Germany depended on Russia for 55% of its natural gas, 35% of its oil, and 50% of its hard coal. 10 European Union countries depended on Russia for more than half of their imported gas. Europe had built its entire industrial base on an explicit bet that Vladimir Putin would be a reliable supplier of cheap energy.
February 24th, 2022, at roughly 4 in the morning local time, Russian tanks rolled across the Ukrainian border and began an invasion of Ukraine. 3 days later, German Chancellor Olaf Schulz pledged 100 billion euros to rebuild the German military and committed Germany to waning itself off Russian energy. And the bill for three decades of European energy policy came due. European natural gas prices rose more than 1,000% at their peak. Industrial electricity prices in Germany and France surged to three times American prices almost overnight. Russia retaliated against the European countries that refused to pay for gas and rubles by cutting them off. In September of 2022, the Nordstream pipelines were sabotaged by an underwater explosion. To this day, no country has officially claimed responsibility. German's industrial sector, the single largest manufacturing engine in Europe, began to collapse. The BASF chemical complex is the largest integrated chemical facility on Earth. It employs 39,000 people. For 70 years, the entire economic logic of BASF was built on cheap Russian gas flowing directly into its furnaces to make ammonia, which made fertilizer, which fed half the world. In 2023, BASF began shutting down its plants one by one and announced its next $10 billion complex would be built in China. Norse Hydro, the Norwegian aluminum company, closed its Slovakian smelter in September of 2022. European aluminum production fell by more than 1 million cubic tons in a single year. The continent lost roughly half of its aluminum smelting capacity. Yara, the Norwegian fertilizer giant, cut 35% of its European ammonia production. Europe, which fed the world for centuries, was suddenly importing fertilizer. And Volkswagen, the world's second largest automaker, the company that employs 600,000 people worldwide, announced in September of 2024 that it would close its first German plants in 87 years. 35,000 German Volkswagen workers were told their jobs were being eliminated by 2030.
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The energy disaster is only half the European story. The other half is technology. And the gap here becomes almost impossible to believe. In the year 2000, Europe had a fighting chance in the technology race. Nokia, a Finnish company that had started as a paper mill in the 19th century, produced 40% of the world's mobile phones. Nokia contributed a full quarter of Finland's economic growth between 1998 and 2007 and was valued at more than $300 billion. Europe also had aole in France, Ericson in Sweden and SAP the German business software company that was the third largest software company on earth. Skype which had been founded in Estonia and Sweden was the dominant video calling platform. The Colossian brothers, two Irish kids from a village of 600 people in County Tippery, were building a company called Stripe that would eventually become the one of the most valuable fintech company firms on the planet.
25 years later, Stripe is headquartered in San Francisco. Skype was sold to Microsoft in 2011. Kia sold its phone division to Microsoft in 2013 for a fraction of what it had once been worth. Arm Holdings, a British semiconductor company whose designs power 95% of smartphones on Earth, is now headquartered in Cambridge, England, but trades on NASDAQ in New York. DeepMind, the British artificial intelligence lab that built the chess computer that beat the human world champion, was acquired by Google in 2014. Spotify, the Swedish music streaming company, is listed on the New York Stock Exchange. Bara, the Swedish payments company, is also listed in New York in September of 2025.
The Draghi report of 2024 contained a single statistic that captures all of this in one sentence. Draggy wrote that no European Union company with a market capitalization of over 100 billion euros has been founded from scratch in the last 50 years. The total number of 100 billion euro European companies founded since 1975 is zero. In that same 50-year period, the United States produced Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla. seven venture-backed companies that together account for most of the world's 10 most valuable publicly traded firms.
Europe's largest technology company today is ASML, a Dutch firm in the town of Valdifan that makes the extreme ultraviolet lithography machines used to print the world's most advanced computer chips. ASML is worth roughly $566 billion, which sounds like a lot of money, but set that against Nvidia, which as of April 2026 is worth $4.5 trillion. ASML is worth about an eighth. Nvidia alone is worth twice the entire German DAX stock index. And Apple alone is worth more than the entire French CAC40. The combined market capitalization of what American investors call the Magnificent 7, the seven largest American technology companies, exceeds $18 trillion. The entire European Union's GDP is $19 trillion. Seven American companies are worth almost as much as the annual economic output of 27 European countries combined.
And this divergence comes back again to a 100 small choices. Venture capital tells the first part of the story. In 2024, American venture capitalists invested roughly $250 billion dollars into American startups. European venture capitalist invested roughly 45 billion into European startups. Five to six times more venture capital flowed into American technology in a single year. American pension funds put almost 2% of their assets into venture capital while European pension funds put 0.01%. This is the capital that mints new technology companies and almost all of it sits on the American side of the Atlantic.
In 2018, the European Union passed the General Data Protection Regulation known as GDPR. The law was written to protect European citizens from corporate data collection. In practice, the law also became a hammer blow to European technology startups. A peer-reviewed study published by the National Bureau of Economic Research found that GDPR reduced venture capital deals led by American investors in Europe by more than 20%. The largest technology companies in the world, meaning American companies like Google and Meta, could afford the enormous compliance costs of GDPR, but small European technology startups couldn't. GDPR was supposed to tame American technology. Instead, it consolidated American technologies position in Europe and destroyed the European startups trying to compete. The Digital Markets Act followed in 2023. The artificial intelligence act followed in 2024. Of the seven companies the European Commission officially designated as so-called digital gatekeepers under the Digital Markets Act, six are American and one Bite Dance, which still owns a stake in Tik Tok, is Chinese. Zero are European.
Mario Draghi writing his 2024 report on competitiveness noted that the European Union has 27 separate national governments, 24 official languages, and 27 different legal systems. An American software company can reach 335 million American consumers on day one under one legal framework. A European software company founded in Berlin has to navigate 27 different legal systems to reach a similar audience. The International Monetary Fund has calculated that internal barriers within the European single market are equivalent to a 45% tariff on goods and a 110% tariff on services. Europe, which spent decades lecturing the world about the benefits of free trade, has built internal trade barriers on services that are higher than any developed country maintains against foreign imports.
Between 2015 and 2024, roughly 57% of European startup founders who chose to relocate chose the United States. The people who built these companies do not come out of nowhere. They come out of universities. And the university gap between the United States and Europe is one of the most overlooked parts of this entire story. Harvard University in Cambridge, Massachusetts has an endowment of $53 billion. Yale holds 41 billion. Stanford 37 billion. And Princeton holds 34 billion. The top 20 American university endowments average 18 billion dollars each. Oxford and Cambridge in the United Kingdom, the two oldest and most famous universities in the English-speaking world, have endowments of roughly 8 billion pounds each. Oxford's endowment is about 1 the size of Harvard's. The continental European universities, funded primarily by their national governments with tuition capped by law, have no endowments at the American scale.
The American National Institutes of Health, which funds medical research at American universities, has an annual budget of $47 billion. The European Research Council, which funds research across all 27 European Union member states, has an annual research budget of €2.3 billion. American universities dominate the global rankings in a way that would be comical if it wasn't so consequential. 15 of the top 20 universities in the world by most serious academic ranking are American. The entire continent of Europe, excluding the United Kingdom, has two universities in the global top 21. Neither Italy nor Spain has a single university ranked in the global top 100. American universities spend roughly $35,000 per student per year. Continental European universities spend less than €10,000 per student, almost four times the investment per student per year.
And American universities are being fed by an immigration pipeline that Europe has nothing equivalent to. In the American 2024 student visa year, 1,177,000 international students studied at American universities, contributing $55 billion to the American economy. A 2022 study found that 55% of American unicorn startups, meaning privately held companies valued over $1 billion, have at least one immigrant founder. Elon Musk was born in South Africa. Jensen Hang, the CEO of Nvidia, was born in Taiwan. Z Nadala, the CEO of Microsoft, was born in India.
Europe takes in millions of migrants, too. But the composition is profoundly different. In 2015, at the peak of the Syrian civil war, more than 1.3 million people applied for asylum in European Union countries in a single year. Germany alone under Chancellor Angala Merkel took in roughly 890,000 applicants mostly from Syria, Afghanistan, and Iraq. Merkel declared, translated into English, quote, "We can do this." 78% of unemployed immigrants in Germany in a recent analysis lacked any vocational qualification compared to 38% of unemployed native Germans. Germany's famously effective dual apprenticeship training system, which turns teenagers into skilled electricians and mechanics and welders, is extremely difficult to enter without near native German language fluency. Immigrant children underperform on European academic tests at rates that have not meaningfully improved in a decade.
The political consequences have been enormous. In 2016, the United Kingdom voted to leave the European Union outright, a decision driven primarily by migration concerns. Alternative for Germany, founded as a fringe anti-uro party in 2013, became the second largest party in the Bunanag in 2025 and won the state of outright in September of 2024, the first outright victory by a furtheright party in a German state election since the Second World War. In Italy, Georgia Maloney became the first furtheright Italian prime minister since Mussolini. The Sweden Democrats became the second largest party in Sweden. Gart Vilders won the Netherlands. and Austria the Freedom Party won.
America took the skilled immigrants while Europe absorbed the humanitarian case load. The economic results split along the same lines. In America, a 100,000 Indian software engineers on H-1B visas, each earning $200,000 a year at Google generated tens of billions of dollars in tax revenue and built some of the most valuable companies on Earth. In Europe, the millions of Syrian and Afghan asylum seekers who arrived after 2015, most of whom could not speak the local language and lack the credentials to enter the regulated European labor market, have been net fiscal costs in most serious peer-reviewed studies. Integration has stalled. The political backlash has been enormous and the European universities that might have attracted the Indian software engineers lost them to Stanford and Carnegie Melon and MIT.
The European Union's total fertility rate in 2024 fell to 1.34 births per women, the lowest figure ever recorded on the continent. Italy sits at 1.18, Spain at 1.0, and Malta at 1.01. Every European Union member state is now below the replacement rate of 2.1. Italy is projected to lose 12 million people by 2070. Germany's population grew by onetenth of 1% in 2024, a number driven purely by immigration. More native Germans died than were born. America's fertility rate at roughly 1.68 is higher, but also declining. And American immigration keeps growing the country. The United States added roughly 53 million people between 2000 and 2025. The European Union added roughly 22 million. That gap alone, compounded across two and a half decades, explains why Germany's GDP per capita today is roughly equivalent to the American state of Oklahoma and why France has fallen below Arkansas.
The generational effect on all of this is one of the most under reportported parts of the story. The young people of Europe are doing worse than their parents did at the same age. A young software engineer at Google's office in Munich working on the exact same codebase as a counterpart in Mountain View, California earns 40 to 50% less in total compensation when stock options are included. In Paris, a young doctor earns roughly onethird of what a young doctor in Boston earns. Spanish youth unemployment as recently as 2024 was still at 25.3%. One quarter of ambitious young Spaniards could not find professional work of any kind. In France, the unemployment rate of French workers between the ages of 60 and 64 is just 33% compared to 61% in Germany. The French retire early and they also kick their young people out of the labor market to make room for the old.
And then the cost of housing in European capitals has become absurd. A studio apartment in central Paris now costs more per square foot than most neighborhoods in Manhattan, Amsterdam, London, Dublin, Munich, and Stockholm have some of the most expensive housing markets on Earth relative to local income. European zoning laws, land use regulations, and rent controls make it nearly impossible to build new housing at the scale the markets demand. The populations of European capital cities grew dramatically in the 2010s. Housing stock did not. Housing became a rationed good distributed by inheritance and luck.
Then there's the cultural side of the gap. American young people raised on founder mythology on the Elon Musk and Jeff Bezos and Mark Zuckerberg origin stories tend to idolize entrepreneurship. A bankrupt French entrepreneur takes nine times longer to legally recover and start a new business than a bankrupt American entrepreneur. Donald Trump's companies have filed for Chapter 11 bankruptcy protection six times, but he was elected president of the United States twice. If a French entrepreneur had filed for Chapter 11 six times, he would be permanently blacklisted from running any business, let alone from holding public office. Silicon Valley startups hand out stock options to every engineer they hire. European startups legally and culturally do not. A software engineer at an earlystage American company can reasonably hope that the equity she is paid in in addition to her salary will make her a millionaire if the company succeeds. Her counterpart at an earlystage Berlin company will get paid a normal salary with no real equity upside under a labor contract so protective that her employer is reluctant to hire her in the first place.
And where we can see the simplest version of this cultural divide is the hours gap. Because the average American worker logs 1,811 hours on the job per year, the German worker logs 1,341 hours, almost 470 fewer hours per year, which adds up to roughly 10 fewer weeks of work year after year. French workers, thanks to the famous 35-hour work week the French government codified into law in 2000, log about,490. The productivity per hour in Germany and France is quite good, often competitive with the United States. But Europeans take that hourly productivity and apply it to many fewer hours, taking the difference in extravation and paid leave rather than an output. European voters have consistently ratified the trade-off at the ballot box. The trade-off only works when nothing important is changing in the world, and something important has been changing.
The financial markets have delivered a verdict on everything in this story, and the verdict is unambiguous. Since the year 2000, the American S&P 500 stock index has returned roughly 500% to investors, including dividends. The Euro stocks 50, which tracks the 50 largest companies in the Euro zone, has returned in price terms roughly 0% over the same 25-year stretch. A European investor who bought a diversified basket of European stocks in 2000 would be at exactly the same dollar value today before dividends. An American investor who did the same thing would be six times richer. The Italian FTSE MIIB index is still well below its 2000 peak. 25 years of flat returns in Europe. 58% of American households own stocks either directly or through retirement accounts. In Germany, the stock ownership rate sits around 20%. And in Italy, the rate runs closer to 15. American households feel the benefit of a rising stock market immediately through their 401k retirement accounts and individual retirement accounts which automatically pour a portion of every American paycheck into equities. European savings sit in low yield bank deposits and national government bonds and feel nothing. Europe's trade body for money managers, the European Fund and Asset Management Association, has estimated that European households forfeited roughly 1 to2 trillion euros over 11 years by not investing in equities. The cumulative result of this capital allocation gap is that American public markets are now roughly five times larger than European public markets. The United States accounts for about 65% of global stock market capitalization. The European Union accounts for roughly 12%. Europe has 27 national stock exchanges, 35 separate listing venues, and zero unified capital markets. Every attempt to build a capital markets union since 2015 has failed in the face of national resistance.
Now, none of this means the continent is doomed. Europe remains one of the wealthiest regions on Earth. Life expectancy in the European Union stands at roughly 82 years against 79 in the United States. and parts of the continent hold genuine islands of excellence. Norway has accumulated a sovereign wealth fund worth $2.1 trillion in late 2025, about $340,000 for every Norwegian on Earth, built off disciplined management of North Sea oil revenues. Poland has grown so fast over the last two decades that Warsaw is now a more modern city than many German cities, and the International Monetary Fund projects Poland to overtake Japan in GDP per capita by 2030. Ireland's corporate tax strategy turned Dublin into the European headquarters for half of American big tech. Switzerland, though technically outside the European Union, remains one of the most innovative economies on Earth.
After Russia's 2022 invasion of Ukraine, European militaries, which had spent the entire postcold war era shranking, began to rearm. By 2025, all 32 NATO members met the 2% of GDP defense spending target that had been agreed to. In 2014, Poland became the single highest NATO defense spender at more than 4% of GDP. Germany's Bundesog amended the German constitution in March of 2025, rewriting the famous debt break that had enshrined austerity into German law, specifically to allow unlimited borrowing for defense spending. Frederick Merittz, the new German chancellor as of early 2025, committed Germany to rebuild the Boon Bear on a scale not seen since reunification. Rymanl, the German defense contractor, saw its stock price rise 15fold between February of 2022 and late 2025. Europe has begun to respond, and the response is large.
The problem is that Europe is trying to fix everything at once in the middle of the largest geopolitical shock since the Cold War. While its demographic math keeps deteriorating, while its energy costs are structurally higher than its competitors, and while its own population keeps radicalizing against the European project itself. France has had five prime ministers in under 2 years. In Germany, Olaf Schultz governing traffic light coalition collapsed in November of 2024. In Italy, Maloney remains the most stable European leader, mostly because her opposition is even more fractured than she is. In Spain, Sanchez clings to power with a coalition that requires the cooperation of the Catalan separatist parties whose leaders are in some cases still fugitives from Spanish justice. The European Parliament's most recent election delivered historic gains to parties that openly want to dismantle the European project itself. Orban and Hungary blocks Ukrainian aid. The Dutch and the Swedes are increasingly hostile to deeper European integration.
At the same time, Ursula Vanderland, the president of the European Commission, has launched the Competitiveness Compass, the Savings and Investments Union, and a proposal called EU Inc. that would let European technology companies operate under one unified corporate legal regime across all 27 member states. The proposals are real, but Vanderland has to get all 27 national governments to agree to each of them unanimously on every single meaningful decision. The demographic tsunami is the deadline nobody can negotiate. Euroat, the European Statistics Agency, projects that the European Union working age population, people between the ages of 20 and 64, will fall from 262 million in 2025 to 198 million by the year 2100, a loss of 64 million workers. In Italy, the retiree to worker ratio could reach 90%. For every 10 working age Italians, there will be nine retired Italians. Every European welfare state, every European pension system, every European health care system has been built on an underlying assumption of a young workforce supporting an old one. And that assumption is ending.
America's demographic picture isn't perfect, as American fertility has fallen below replacement. American social security will, by most projections, face a financing shortfall within the next decade. But America holds the advantage of scale. It contains 335 million people under one federal government, one currency, one capital market, one language, one tax system, and one military command structure, which allows Washington to adjust policy quickly. Europe contains roughly the same number of people under 27 governments, 24 languages, different tax systems, different pension systems, different labor laws, and different military commands. Adjustment at that scale requires coordination among sovereign politicians, and European politics in 2026 is not coordinated.
Looking ahead to 2030, 20 240, 2050, the International Monetary Fund's most recent long-term projections released in late 2025 suggest that by 2030, the American economy will reach roughly $40 trillion in nominal GDP. The European economy will reach roughly 25 trillion. The gap that was 10 trillion in 2024 will grow to 15 trillion by 2030. The Eastern European countries that joined the European Union in 2004 will keep converging. The western and southern European countries that anchor the block's GDP will keep stagnating. The global center of economic gravity will keep shifting east. By 2050, China and India combined will be larger than the United States, Europe, and Japan combined.
Artificial intelligence is the next defining contest, and the competition is already over. In 2024, American private investment in artificial intelligence hit $ 109 billion. European Union investment was under 10 billion. The American Stargate project announced in January of 2025 committed $500 billion over four years to build AI infrastructure in the United States. By October of 2025, 400 billion of that had already been secured from private investors. Manuel Macron announced 109 billion of French AI investment in February of 2025, a figure that amounts to a fraction of the American commitment. 70% of the world's foundational AI models have been developed in the United States since 2017. Three American companies, Amazon Web Services, Microsoft Azure, and Google Cloud, control more than 65% of the European cloud computing market. The AI Act, the European regulation designed to constrain American AI systems in Europe, was so restrictive that by late 2025, the European Commission itself began drafting what it called a digital simplification package to roll back parts of the law. Brussels quietly admitted what every European tech founder already knew. The continent had regulated itself out of the AI race.
Europe could recover on paper. Mario Draghi wrote down the ingredients in his 2024 report isn't a secret. Draggy called for common European borrowing at continental scale, completion of the capital markets union, regulatory simplification across GDPR, the digital markets act and the AI act, unified defense procurement and energy policy that produces the electricity and American prices, selective high-skilled immigration, and acceptance of the fact that European welfare states were designed for a demographic pyramid that no longer exists. So that prescription is actually on paper. But the question is whether any European government faced with voters who would rather preserve their pensions and their six week vacations than accept a Stanford style hustle culture can implement it. Ragi himself asked a year later whether he thought his recommendations would be adopted. And he answered that he was very pessimistic.
The honest reading of the last quarter century is the United States did not destroy Europe. Europe destroyed Europe one choice at a time. The continent gave up output in exchange for leisure, surrendered speed in the name of social protection, replaced skill-based immigration with a humanitarian heavy version, phased out nuclear power in bet on Russian gas, kept 27 fragmented national markets instead of building one continental one, and enshrined the precautionary principle where America practiced permissionless innovation. And the European government spent decades building regulatory moes around American technology companies rather than building European technology companies of their own.
The United States went the opposite direction. Not through any grand plan, but through a series of accidents, geographic luck, and cultural instincts. America got lucky with Shell gas. with a Silicon Valley venture capital ecosystem that emerged in the 1970s with cold war immigration policies that prioritize high-skilled workers from India and China and with a dollar that became the world's reserve currency after the Second World War and has never lost that status. But America also made choices. Americans worked more hours, put their savings into the stock market, tolerated the social costs of inequality and industrial disruption in exchange for higher total output, gave their entrepreneurs second chances after bankruptcy, and made bankruptcy a feature of the economic system rather than a stigma.
Neither path was right or wrong in the abstract. The European model delivered shorter work weeks, longer vacations, and stronger safety nets. And the European public has consistently voted to preserve those comforts. But those comforts weren't free. They were paid with slower growth, lower wages, and a smaller share of the economic future. And the bill is coming due now in the late 2020s because the geopolitical environment those European choices assumed has ended. That environment was one where American military power would guarantee European security for free, where Russian energy would flow reliably, where Chinese markets would absorb European exports, and where artificial intelligence would be a future problem rather than a present one.
Whether Europe adapts or whether Europe keeps drifting into what Draghi called slow agony will depend on political decisions made in the next few years in Berlin, Paris, Rome, Warsaw, and Brussels. The signs so far are mixed. Germany has begun to rearm while France has fallen into legislative paralysis. Italy continues to shrink demographically and Poland continues to rise. Every European leader now publicly agrees that Europe has a problem. Only a handful have been willing to do what is required to fix it. Question is now whether Europe can accept what it has become and whether the world now arriving will give the museum enough time to reinvent itself into something more. I'll see you in the next one.
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