Introduction
During this year, 2025, it should have become evident to the people of Europe that the world order built after the Second World War is no longer guaranteed and is visibly beginning to disappear. That order managed for eight decades to preserve relative peace, stability, and a legal framework across much of the world. It will now need to be replaced by a new order that is beginning to take shape across different parts of the globe. As has always been the case in history, politics in this new structure will largely serve as an extension of economic interests, on the basis of which entirely new alliances and partnerships will be formed. It is therefore important to understand where different actors derive their competitiveness for the next chapter of world history and what position modern Europe holds within it.
Before the last major global financial crisis, which peaked in 2008–2009, Europe competed economically quite well with the United States, while China’s economic progress had not yet become so apparent to the rest of the world. Since then, however, over the past 15 years the world has changed enormously.
The United States did not substantially alter its attitude toward risk following the financial crisis. In the past it had survived even larger market collapses. It therefore continued pursuing economic progress through the availability of enormous amounts of capital for risky investments in companies whose growth is based on new technologies and innovation. In addition, the owners of successful American companies actively lobby governments around the world to reduce tax burdens and to remove regulatory obstacles and additional costs imposed by state regulation. All of this makes them globally more competitive than European companies and has contributed to the strong economic performance of the United States over the past 15 years.
The competitiveness of companies in China, on the other hand, is based on highly centralized and hierarchical decision-making, which relies heavily on proven scientific and technological practices and enormous human resources. The “one-child policy,” implemented from 1979 onwards, meant that people younger than 46 today, i.e., the core of China’s workforce, did not have siblings with whom they had to share their parents’ resources, and they are therefore exceptionally well educated. At the same time, through major planned successes in recent years in transitioning energy production toward renewable sources, China has developed enormous manufacturing capacity. Thanks to all these factors, China is now capable of producing almost any product at least as well as other countries and often at lower cost.
Lower prices of Chinese products are increasingly not the result of lower wages, since wages in China have also risen over time. Prices remain low largely because of massive investment in production robotics across China, which now far exceeds the level of robotization in the rest of the world. As a result, in many industrial sectors Chinese products, with their favourable balance between price and quality, will displace those of other countries worldwide, provided markets remain open and tariffs are not imposed to protect domestic industries. All these factors have contributed to China’s strong economic growth over the past 15 years, although its growth had already been remarkable during the two preceding decades.
Alongside the United States and China, the economies of several other large markets are also growing rapidly - the markets that only a decade ago were not even considered potential competitors to Europe. India, Brazil, and South Africa joined China and Russia in the BRICS group with their enormous populations. Less well known to the European public is that several other large countries have since followed them, including Indonesia, Egypt, and Ethiopia. These three additional countries alone together have more than half a billion people, i.e., more than the entire European Union with its current 27 member states, demonstrating how small Europe has become in terms of population in today’s world.
African countries today possess significant demographic advantages for future development. The overwhelming majority of their populations are young, population growth is rapid, and urbanization is accelerating. Africa is expected to have several of the world’s largest cities by the middle of this century. Anyone who has not visited Africa in the past decade would likely be surprised by the appearance of some of its cities today, which look modern and vibrant and are filled with energetic and ambitious young people. These young people do not assume that a good life is their “acquired right,” but are willing to strive for it within their own generation. At the same time, many feel considerable resentment toward Europe due to the era of colonialism that left their countries lagging behind the rest of the world despite their abundant natural resources. For these reasons, Africa is currently extremely attractive to investors in local companies because of their strong long-term growth potential.
Europe’s New Position
Where does Europe stand amid all these developments? Unfortunately, its economic development has stagnated significantly over the past 15 years compared with the United States, China, and other rapidly growing regions of the world.1 This is not surprising: after the financial crisis of 2008–2009, unlike in the United States, fear of risk increased in Europe and the appetite for high-risk investment declined. Consequently, in contrast to the United States and China, European investment in supporting start-up companies is extremely small relative to its economic capacity. Europe’s global share in fostering the growth of new companies has fallen to around 10%, or even into single-digit percentages.1
Other important determinants of Europe’s competitiveness are also largely the opposite of those driving growth in other regions: in addition to European capital’s aversion to risk, corporate taxes are relatively high, regulatory frameworks significantly complicate business operations, industrial robotization is far below that of China, decision-making in Europe is often decentralized and slow, and cooperation between European states is sometimes limited due to lingering historical mistrust.1
Furthermore, European countries face additional internal challenges. Negative demographic trends in most countries mean that the availability of a well-trained workforce has become a major challenge for national economies. This is compounded by a frequent perception among young Europeans that Europe’s historically leading global position and the comfortable and secure life within it represent a kind of “acquired right.” Unfortunately, none of these attitudes helps European companies remain competitive in the new world that is currently emerging.1
Long-Term Effects of Weak Economic Growth
What European leaders should understand, and what is well known to those working in global health and development in poorer parts of the world, is that regions do not become “problematic” only because of decline caused by wars, natural disasters, or health crises. Much more often, the mechanism is prolonged absence of growth or persistently weak growth. Although the difference between annual growth rates of 1% and 3% may not appear large in the short term, if such differences persist over many years the region with slower growth will eventually fall far behind the faster-growing one. Europe is unfortunately currently in such a position. Its relative lag in economic growth compared with the United States, China, and other regions over the past 15 years has become too large to ignore without action.
Globally competitive business ideas in Europe should therefore receive significantly stronger support, together with greater willingness among investors to assume risk, if Europe is to regain economic momentum. Its long-term geopolitical security may depend on this. Analyses of the “Horizon Europe for Excellence, Innovation and Competitiveness” programmes, which channel enormous EU funds into technological innovation and patents that could underpin future companies, show that Horizon has largely succeeded in overcoming fragmentation within the European scientific community and maintaining competitiveness in global scientific productivity.2
However, the bottleneck lies in translating these discoveries into start-up companies through European universities. In the United States and China, academic culture increasingly values not only scientific publications, grants, and awards, but equally, or even more, the translation of knowledge into successful companies. For this reason, strong institutional support exists there for converting academic innovation into commercial ventures. In Europe this support remains insufficient. Coordination and cooperation between universities and the private sector are still limited, and the translation of scientific discoveries into companies occurs far more slowly than among competitors. Universities, which are mostly publicly funded in Europe, often display excessive caution toward risk-taking. Unless this approach changes significantly, universities in the United States and China will increasingly benefit financially from their spin-out companies and become even more competitive over time, while European universities may face serious financial sustainability challenges – this is already occurring in some countries.
Nevertheless, despite economic stagnation and relative decline, Europe’s leading universities remain globally competitive. They can therefore play a central role in achieving strategic goals that will ensure Europe’s long-term competitiveness in the global economic, technological, scientific, and military race. Europe’s best universities should accelerate the launch of promising companies based on scientific and technological innovations, while major European banks and investment funds should assume greater risk in supporting these companies during their expansion phase, providing sufficient development capital and strategic partnerships, involving entrepreneurs in shaping competitiveness policies, and building the visibility and trust necessary for global competitiveness.