Challenging the Narrative of European Decline
paulkrugman.substack.com
paulkrugman.substack.com
For me it's remarkable how the continent lives looking at the past and not at the future. The older people I talk to show no concern about Europe's economic future, they're always dismissive about the problems Europe faces. They're stuck in the 70's, 80's or 90's it seems.
e.g. in Ireland, the state contributory pension (aka what you paid egregious social security taxes for) maxes out at about $18,000 per year. The equivalent pension from US Social Security is about $45,000.
Why are there so many homeless people in the USA? If your assumption were to work, it would not be the case. You are simply making an incomplete analysis here.
See: https://www.forbes.com/sites/andrewbiggs/2019/03/15/u-s-reti...
It is from 2019, but things are still somewhat similar today.
https://ourworldindata.org/data-insights/how-common-is-homel...
https://www.notus.org/us-news/homeless-report-hud-president-...
https://www.dw.com/en/eu-sees-rise-in-homelessness-amid-hous...
You third link uses different metrics than the other two.
Are you somehow assuming homeless people are all old retired people eligible for pensions? I literally cannot follow your logic here in any way no matter how much I try.
Europe's problems can be summed up by Hanlon's razor: Never attribute to malice that which is adequately explained by stupidity.
Which is the next part:
> The older people I talk to show no concern about Europe's economic future, they're always dismissive about the problems Europe faces. They're stuck in the 70's, 80's or 90's it seems.
As an 'older' person in the UK, I've always been 'concerned' about the economic future of the continent, but we've elected increasingly incompetent politicians. When you get older you'll have the same opinions. Politics has gone from being a job trying to manage the country, to being an all expenses paid job with little risk other than re-election, and little responsibility because everything is 'the EU', or a quango (quasi-governmental organization - basically still the Government but not really sackable either).
Consider the UK - ARM was 'ours'. Could you imagine the US allowing it to be sold off to a foreign country? Well, you can guess what ukgov did.
Sabre Engines wanted a tiny amount of Government funding, who said no, so they closed and sold off some incredibly useful tech.
Maggie Thatcher sold off, and perhaps had to sell off, public utilities such as water, with little extra thought as to 'what happens next'. Well, that's 'gets bought out by foreign companies and channels profit abroad instead of reinvesting'.
Then there's the very European union-centric industries that often shoot themselves in the foot and ruin entire industries (UK car manufacturing spent more time on strike in the 1970s than building cars and can you guess what happened).
for a 100k paid by your employer, 46k goes to you after all taxes, 45k goes to social contribution, of those 20k specifically to paying current pensioners[1].
It doesn't look so bad, unless you take into account the inversion of the demographic pyramid, the workers will get progressively more squeezed as older folks enter retirement, and are unlikely to get themselves good retirement given that there isn't enough kids to support them when they will be old.
And so, the rational move is to save more to fund your retirement while already getting pressured by relatively low wages and low saving potential due to the taxes, and France doesn't really have a growth lever to pull to get us out of this situation as we're already at a very high debt-to-GDP ratio.
So that's why some workers are unhappy with what they call "fat pensions", what also doesn't help in France is that the country is very centralized around Paris and rent is now another channel where money flows from workers to (often) pensioners.
As 2027 elections approaches, it seems we have the options of being even more fiscally irresponsible (the extremes), and the center seems to lean for austerity measures (Edouard Philippe) and none of these are making me optimistic about the future.
[1]: https://code.travail.gouv.fr/outils/simulateur-embauche
Pretty sure it's a concerted effort to force the EU countries to adopt private/financialized pension schemes and abandon the still dominant socialized model. The huge new inflow into the financial markets would make some people very very rich, and conveniently would also transform low pensions from a societal problem into a problem of bad personal foresight instead.
(Not accusing GP in particular, they probably just picked it up in the media)
This being established, retired people obviously need money to live. You have basically two existing systems for this:
1. You make the working class pay for currently retired people
2. You make each people put money aside for later
The first choice is a collective solution to a collective problem, and also provides guarantees.
The second choice is liable to economical crises, mistakes and is an individualistic solution to a collective problem. The risk is having people who don't have any money and who are forced to work at the end of their life (if they can still find a position and are still healthy enough for this).
Of course, 1 is not perfect: there are laws defining the minimum amount of work you need to do in your like to have a good pension. If you don't work "enough" in your life, no good retirement for you. But that's a problem both options have.
It's unclear what benefit that second solution brings to the table, in both cases there's some amount of money that needs to be set aside for stuff to work. Only, in the first solution, that's safely managed for you, you pretty much don't have to worry about it.
Pensions don't seem that fat as well.
As someone currently working, I'll take the "Europe pays the pensions" aka "We, the working class, pay the pensions", aka the first option, any day. I'm happy to pay for the retirement of my retired fellows.
I would worry more about the ultra-riches stealing money from everyone and digging the inequality gap.
Either way, working people's output today needs to support the non-working people today (unless you let them starve). Whether that is done via taxation or via wealth accumulation, one way or another, more and more young people will be supporting old people.
And it's not even clear the wealth accumulation angle is good. It requires young people to own a lower amount of wealth so that old people can dangle it in from of them to keep them supported.
The two major differences are that in the first, no money is stored, has to undergo inflation or risk disappearing. It's also not your individual money coming back to you.
I agree with the rest.
I'm not sure what benefits your proposal brings.
Whenever you have an amount of money you don't spend immediately, you have to worry about inflation and investing (that's also of course true for the second option)
And the first option force pensions to be in the country's annual budget. For the better and the worse.
I do have a private pension, and the country where I live a retirement payment can barely pay for a room in a shared apartment in the capital city. Not exactly what I call fat.
That doesn't seem true. End of 2023 the mean retired net income in France seems to be 1 541 € [1] while the mean net salary of a worker is between 1 940 € and 4 630 € depending on whether the person works in the public sector and depending on the class.
> I don't know why everyone is being so dismissive
Because that's mostly unsubstantiated random feeling that has implications that look quite bad. What do you want, when you stress that retired people earn too much (which seems mostly wrong, as we just saw), blaming this as major¹ cause of a European decline? Do you wish we would just stop providing income to the retired people?
¹ because if it's not a major cause, why even mention it?
[1] https://drees.solidarites-sante.gouv.fr/publications-communi...
This is the article I was thinking of. I don't think we can pretend that pensions are not a problem, and not a massive strain on government budgets. Incomes of pensioners have increased a lot more than incomes of working-age people, and French over 65 earn more than French working-age (slightly different claim than I made).
> What do you want, when you stress that retired people earn too much
I want to pay less into unsustainable pension system and to be able to save for my own future instead. I would love more of Europe to get a system similar to Australia's superannuation system.
Indeed we can't. Now, you have to prove that the alternatives wouldn't be worse. And you have to prove that they are unsustainable as is.
> I want to [...] be able to save for my own future instead.
No thanks. But I suspect our disagreement here comes from having very different perspectives.
So is he comparing Europe to the USA or just Northern Europe? And is he including Switzerland, Norway, Iceland, etc or just the EU? It's rather confusing and I wouldn't even know where to begin in trying to do these comparisons.
I live in Switzerland and have worked on projects all over Europe and work cultures and efficiency are so different everywhere. I definitely have a better quality of life here though than when I lived in the USA.
To be clear, though, Paul Krugman doesn't need to be specific at all, because he's simply pandering to one specific audience in America who hold one specific one of those stereotypes.
I think EU expansion is a good thing but it makes even well intentioned comparisons difficult if e.g. Germany re-absorbs East Germany, or other nations join the EU
Poland was about 20% of the USA by PPP in the 90s, 40% when it joined the EU and 60% now.
Is that a success or a failure? It can definitely make some stats look worse.
This is the underlying theme of Europe 2031, a scenario ostensibly in the spirit of AI 2027. (https://europe2031.ai/; discussed in https://news.ycombinator.com/item?id=48489996)
Lol wat?
> has now taken a drastic hit with America’s abandonment of the rules it largely created.
"When gentlemen can't win the competition, they change the rules". Because of course. It's not "international law order", it's "rules-based order". And it didn't start with Trump; e.g. the US started gutting the WTO's Appellate Body during Obama's term.
Shall we starting to list chronologically US's interference with foreign states now, or... ?
This is probably due to the op being the denizen of a country which has not been affected by the aforesaid hegemon
Krugman presented arguments with data, it'd be nice to see your data that counters Krugman's argument, not a whole different set of measurements that you are defining as the basis of comparison. It's just a strawman with makeup.
Southern Europe has experienced more scorching heat the past 1-2 decades and AC is going to become a necessity given the trend of climate warming but it's not Arizona.
Also I think people aren't aware that the USA doesn't use the same methodology to count heat-related deaths, a heart attack from someone working out in the fields on 35C+ weather is not counted as heat-related, Scientific American published an article about it back in 2024[0].
[0] https://www.scientificamerican.com/article/u-s-deaths-from-h...
Many things aren't needed, survival doesn't mean biological survival so you don't need to bring up "a smartphone isn't a need" since without one a life in modern society becomes quite insufferable (banking access, government access, etc.).
Is AC a need or a comfort to you given this?
I don't like the heat, so need for me - comfort is a need.
Well I don't know , I lived 4 years in the Netherlands in one of those apartments that have huge windows on every room. During the summer some days got closed to 37-38c and the sun sets at what , 11PM ? I was pretty scared our newborn might die - I put a fan right on her of course but I'm not sure this setup is OK at all.
the sun sets at what , 11PM ?
https://www.who.int/europe/news/item/01-08-2024-statement--h...
People complain about the weather in England, but in fact there are palm and eucalyptus growing in Oxford, though it's bad taste and you might lose one in a bad winter. It never gets hot and never gets cold.
I realized after living in UK and Germany that the religious fanatics who founded USA must really have been oppressed to put up with it.
https://www.scientificamerican.com/article/u-s-deaths-from-h...
Where two sets of stats are concerned always make sure they actually are using the same criteria for reporting.
And if we're being entirely honest ... most large European cities I've seen certainly could benefit from having half thrown down and rebuilt. As well as essentially all of the smaller ones.
And as for one of Paul Krugman's comment "Americans, however, have more stuff, that is, material goods: Our houses and cars, in particular, are much bigger. Europeans, on the other hand, have more time ..."
That's not because Europeans don't want big houses, don't want infinite stuff. In very large parts of Europe they can't afford it. And they certainly want more and longer jobs. They just can't find jobs that pay enough to justify giving up free time. But would they work, say, 44 hours per week for a 15-20% raise? (because it's 15-20% more compared to a 38 hour week) I know people that wouldn't, but I also know people that would love such an opportunity.
But this is true of the USA as well, large parts of it people cannot afford a big house, a bigger car, and they have fewer options of smaller dwellings, smaller cars to choose from when they cannot afford the biggest, most expensive options.
Wanting infinite stuff is definitely much less prevalent in Europe than in the USA, the materialistic culture is very different (and it differs even more between countries in Europe).
> I am unaware of the US situation, but there are vast differences in housing quality across Europe. Compare the Netherlands, even bad parts of the countryside, to the Greek or Romanian countryside. WTF!
Compare the housing quality in rich coastal cities of the USA vs the Appalachia, WTF!
Uhh... https://imgur.com/a/MTTMKDr
Installing thousands to millions of AC compressors, piping, having the grid ready for the spike in consumption when all these ACs turn on, etc. is a necessity that needs to happen because The Hague is reaching 30C for 3 days in the next week?
hello, I came here from one week in the future to laugh at you.
Ah, the classic "don't ignore the data that confirms my worldview, ignore just the data that contradicts it".
Also known as "lies, damn lies and statistics".
We will eventually start cottoning on to air conditioning as people realize it's a bidirectional solution that can warm you in the winter. The need is genuinely less than the US as Europe is both further north (New York is the same latitude as Lisbon) and currently benefiting from the Atlantic evening out the temperature.
US has an excuse of suburbia - but what's the deal with compact pedestrian european cities?
> And the strategic issues of continued vast unskilled migration into Europe
If only there wasn't a global power invading countries for oil reserves over the years and causing mass migration and destabilising those places?
Also have you considered 100% of the EU doesn't NEED air conditioning?
Come back when you have a minimum wage and universal healthcare. Your IT comment forgets the fact that the US allows tech companies to do whatever they like all in the pursuit of "progress" when infact you're in a situation now that your personal privacy is a memory of a dream.
Do you think that's the only reason for 'mass migration'?
Consider that in the last 20 years internet access is *globally ubiquitous* because of cheap mobile phones.
That in turn means that people in the poorest parts of Africa that 20 years ago had no idea whatsoever about how 'rich' Europe is in comparison, in 2026 not only can see what they don't have, but can communicate with those than can help them make that journey by land and sea.
War and envy (for want of a better word) are the two reasons.
Envy will bring more skilled workers and you'd be surprised how many people don't want to leave their homeland. Regardless of the grass being greener. Infact it's those specific reasons why there is an integration problem, because they moved without choice so fairly don't feel obligated to integrate.
Because oftentimes towns and cities were not build from the ground up in a completely new continent, and most of all, are made of bricks or cement, not wood.
> Just 20% of European homes even have air conditioning.
And half of the percentage of obese population so draw your conclusions.
1. iOS asked me to select a default browser, but it wasn't working thus none of the links open for a while.
2. Cookie banners are holy-sheeet. I do see them while in NZ, but holy heck this is next level. They are huge and everywhere.
3. Gemini AI (and its cousin AI summaries in YouTube) is not available. Grok on my mates Tesla - not available (I think it's been out over a year on US).
4. It wasn't even a hot day, but no cooling in Amsterdam trams is insanity.
5. Some shops don't accept foreign cards. Also cards not accepted in red light district at all lol.
Bottle caps haven't bothered me, tiny housing is understandable and biking to places was nice. Workers everywhere seem unhappy and don't seem to be eager to work, but thats likely just local nuance.
Krugman’s analysis may well be accurate, but the problem is that China is now beginning to assert itself in sectors where Europe used to be strong (manufacturing, automotive, etc.). If our software is American and our hardware is Chinese, who will pay for the pensions?
1. Only apparent when measured at 2017 prices but not when measured at PPP (purchase power).
2. In the US most of productivity gains are concentrated at the tech industry and California. The rest of the economy (and most of non-California states) are less productive than Europe.
Personally, I am not entirely convinced but these are interesting arguments. It is loudly obvious to any non-American that the US healthcare is very far away from being "productive".
Also, if it is productive why do the US has a smaller lifespan that so many OECD countries?
If this was a soccer match the score would be 10-1 (yee ASML). Not only that the winners in these industries tend to compound and grow.
There are many great things about the EU, that are outside of this competitive ecosystem. But I don't think sticking our heads in the sand is really a great idea.
Read the article before trying to refute it. What it says is precisely that the US advantages are restricted to the IT sector that you mention. It is in the remainder of the economy that the EU pulls ahead.
Good timing given the Fable 5 story.
The USA is ahead in certain industries, mostly information technology, but decades behind in others.
Literally, you have technology most of Europe moved away from in the 80s(air insulated HV switchgear), where most of Europe now mostly builds gas insulated switchgear.
Europa has a GDP on par with the USA. Honestly what do people think the product is, wine and cheese?
Nearly double per capita. That's not "on par", that's miles away.
> gas insulated HV switchgear
Air is a gas ;)
How much if this has to do with most lines in Europe going underground because high housing density?
I know for many power outages are unheard of, while for some are normal. People don't realize that in suburbs or exurbs that are popular in US power lines are simply overground and very susceptible to bad weather.
I deliberately didn’t use GDP per capita as it’s a flawed measurement.
Have a look at these lists, not many US cities qualify.
https://en.wikipedia.org/wiki/City_quality_of_life_indices
So you can take your GDP per capita, that’s skewed to the rich anyway, and I’ll take my happiness.
Hows those grapes? Are they sour?
The US is the IT-supplier of the world. I don't know how large a % of that comes for outside the US. But with all the 'shenanigans' of the Trump regime and the trust the US has lost due to that, that should lead to losing IT business from the rest of the world.
In other words, If Europe would disavow using US IT, as would be the wise choice I think, then Europe might close the gap.
I just hope this is not just wishful thinking though.
I'm not holding my breath for this bubble.
https://www.snopes.com/fact-check/paul-krugman-internets-eff...
For your information: Paul Krugman is a Nobel memorial prize winning economist. He used the publicity of his award to become, essentially, a political commentator, including an opinion column in the most important American newspaper of record, the New York Times. He's not a random commenter on a website, without any ambitions of relevance. He uses the aura of being an eminent scientist to give his personal opinions a veneer of respectability that they perhaps do not merit.
The USA has a few key areas where it benefits a lot - for instance, the oil mafia that is controlled by the USA, e. g. the old petrodollar deal, though with the defeat of the USA against Iran (look at the "Memorandum of Understanding" signed by Trump recently) this may change a little. But an even more important area of US dominance is the software situation. The US corporations control WAY too much already. That is not good. Then add the fact that the arms industry as well as the nuclear arsenal, is also heavily controlled by the USA; arms industry is more varied, but the nuke issue is a problem, even more so when you see that Putin has Trump by the ... precious. Europe needs to disentangle as much as possible from the USA in every area. And this is not happening. Quite the opposite, Merz is constantly surrendering and submitting to Trump. He is like the ultimate US politician. Recently the EU parliament also submitted to defeat by agreeing to Trump's selfish trade deal. And european nukes? Where are these?
So unfortunately, Europe is not doing well. It is not doing completely wrong either, but it is acting like an old man who wants to submit to others. And I don't see the current generation of politicians in the EU to want to change this. They get too much financial kickback to hold down other european citizens right now. Nobody will fix the EU either, so - a deadlock situation.
One of the most important things to recognize is that the vernacular meaning of "productivity", which would be something to do with how hard people work and how many widgets they turn out, is not the same as the technical economic term "productivity", which is roughly GDP divided by hours worked. This causes a lot of discourse with people talking past each other.
The examples relate to tech companies. If you think about, say, Youtube, that (a) contributes a lot to US GDP and (b) doesn't cost European consumers all that much. Indeed, a lot of stuff produced by Silicon Valley is ""free"" (ad-supported or free tier) at the point of use.
This is before we get into complicated cases like international attribution of revenue, such as Apple Ireland.
Multinationals really confuse comparisons - when I bought a macbook here in Europe it got shipped to me directly from china. My money went to apple Switzerland. At no time in the process was the USA involved.
Well, yes, but in both cases of Youtube revenue and Apple, that money is eventually going to show up in the accounts of the US parent company and its share price, even if it's in a Swiss bank account.
It's very hard to say where internet economic productivity ""is""! That might cause it to be over- or under- counted.
Trump had a tax holiday in his first term where companies were allowed to send revenue back to the USA without being taxed. If I remember correctly apple sentt back billions and used it for stock buybacks.
So money earned outside the USA rarely makes it back.
This is the same guy that said the internet was not going to be a big thing, made wildly incorrect predictions about everything from post-Covid inflation to Obama-era growth predictions, and was oblivious to the downsides of zero interest rate policy.
At this point, Krugmans work should be considered entertainment at best, or maybe political comedy.