From my latest column at The Free Press:
I worry much more about Europe in the longer run. Let’s consider how some of the most important comparisons between America and Europe are likely to change over the next 20 years.
Two of America’s biggest problems are obesity and opioid addiction, with opioid deaths running at about 54,000 a year. Yet both of those problems are getting better. GLP-1 drugs will help us beat back obesity, and finally opioid deaths have begun to decline. If this follows the path of previous drug epidemics, the decline will continue and perhaps accelerate.
More generally, we are entering a new age of fantastic biomedical innovations. These advances likely will help Americans more than Europeans, as Europeans are more likely to be in good shape to begin with, which is why Americans are more likely to need new and better treatments. That is, of course, a ding on America, but it will matter less as time passes.
One major advantage of America is likely to increase with time, and that is one of scale. Americans do things big, think big, and have created some of the world’s largest companies, most obviously in the tech sector, where size is often rewarded. You can see this in the stock market valuations of those tech companies, including Nvidia, which at its current $4 trillion or so valuation is worth more than the entire German stock market. Europe shows few if any signs of catching up in this area, or of having a major presence in the commercial spaces for artificial intelligence. If anything, EU regulations go out of their way to prevent Europe from excelling at tech.
Is tech likely to stop growing in economic and cultural influence? Have we reached peak application for current and future AI models? You can guess at the right answers to all of those questions. They imply that America’s economic lead over Europe will widen.
The brain drain from Europe (and other regions) to the United States seems to be accelerating in the areas of tech and AI, most of all for young people. If you want to do a big, successful start-up, you probably should move to America. End of story. America has major and growing companies in these areas, full of foreigners, and Europe does not.
Of course, a lot of that talent will not pay off right away. Not all of those smart and ambitious individuals will have big commercial hits at the age of 22. But more and more of them will by the age of 40. Europe has lost an increasing number of these people, and won’t be getting most of them back. The continent feels a bit of pain now, but the talent differential will de facto increase, if only due to the mere passage of time and the rising productivity of those people. It is not just about more people leaving; rather, those who already have moved to America will make a bigger and bigger difference over the next 10 to 15 years.
And:
The more general lack of European economic dynamism also is an issue that worsens with time. One recent economic study found that “Europeans switch jobs much less frequently, and restructuring is much rarer.” That is, of course, a problem, but in the short run the associated difficulties are not so large. If your economy remains static, after a year of progress elsewhere it is only missing out on so much beneficial change. After five years it is missing out on much more, and after 10 years much more yet. The more static and less dynamic nature of European economies naturally increases in size as a problem with the passage of time.
Population aging and low birth rates are another problem that will make it harder for Europe to catch up. The U.S. total fertility rate is about 1.63, whereas in the European Union it is about 1.38. Over time, this will make it harder for Europe to afford their current system of pensions. The major European populations also will be older than the American population, and probably as a result less innovative. This difference has only started to bite, and it is likely to grow in import.
I consider some other important issues, such as immigration, at the link.
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