It is becoming more and more popular in international relations and international political economy circles to say “wither Europe”, “Europe is dying” and the like.
Let’s look at this in detail.
Human rights
Using the Press Freedom Index as our metric of freedom, and looking at the countries which have a good or satisfactory ranking:
- 6 African countries (11%)
- 2 Asian countries (4%)
- 27 European Countries (51%)
- 5 North American/Caribbean countries (22%)
- 5 Oceania countries (36%)
- 2 South American countries (16%)
Over half of these countries are located in Europe.
If we look at corruption, we find a similar trend, New Zealand, Singapore, Australia, Canada, Japan, the United Arab Emirates, Uruguay, Bhutan, United States, Seychelles, Taiwan, Barbados, Bahamas, Qatar, South Korea, Botswana, Brunei, Israel, Saint Vincent and the Grenadines, Cape Verde, Costa Rica, Dominica, Oman, Rwanda, Grenada, Mauritius, Saudi Arabia, Malaysia, and Namibia have scores above 50. Out of these 59 countries, 30 of them are in Europe.
A similar trend.
Out of 53 countries which are arguably in Europe (including Georgia, Armenia, and Turkey) half of them score as some of the freest countries in the world by both metrics. It is the only “continent” in the world where over half of its countries are ranked as among the world’s most free.
When it comes to Democratization, there are many countries classified as flaeed democracies by the Economist Intelligence Unit in Latin America, but when it comes to Full Democracies, Western Europe is one of only two regions with an average score over 8, the other one is North America consisting of only the United States and Canada.
Population
Is this because of having a large number of small countries?
There are X countries with a population under 1 million people, and 10 of them are in Europe. 
Europe’s population is the 3rd largest “continent” with 750 million people, behind only Africa and Asia. Europe is larger than North America in terms of both population and GDP. No one is seriously projecting that the United States is going to stop being an important player in the world, see the GDP plot above.
It is clear Europe will be a critical region in the world because of the large population for as far as anyone can reasonably predict.
Economics
Keeping in mind that Europe has 53 countries, out of the top ten countries by GDP (PPP), 4 of them are in Europe, 4 are in Asia, and 2 are in the Americas.
Out of the top 10 countries in the world by GDP per capita (PPP), 6 of them are in Europe, 4 are in Asia, and one is the United States. The next 5 countries are also in Europe. So out of the top 15 countries by GDP per capita, 3/4 of them are European.
The 75th percentile for the world’s countries by GDP per capita is around $15,000. 21 of these countries are in Europe, 9 are in Asia, 4 are in the Americas, 2 are in Oceania, and 1 is in Africa.
If we get the average GDP per capita for Africa, Asia, the Americas, Europe, and Oceania, Europe has a GDP per capita of $30000, and Oceania has a GDP per capita of $37,000.
Europe hits that sweet spot between having a large population, a large economy, and a high average quality of life which is unique in the world today.
Asia might someday catch up to Europe though. China has a GDP per capita 1/4 that of Europe, and 1/5 that of Western Europe.
If China manages to grow their GDP per capita at an average of 6% per year, and Western Europe grows their GDP per capita at a rate of 2% per year it will take them 43 years to have a GDP per capita the same size as that of Western or Eastern Europe. This is of course assuming constant growth rates. If China’s growth rate slows to a more normal average for developing economies, it might not happen for another 80+ years, long after I expect to be dead. Only people who are children today might be able to see the day where China’s average quality of life is on par with that of Europe.
Europe’s quality of life is going to be better than that of most of the world for a long time to come.
Of the 15 largest military expenditures in the world, 5 of them are in Europe, comprising 13% of global military expenditures. This is one place where Europe pulls just about where you would expect, with roughly 10% of the world’s population, they comprise over 13% of the world’s military expenditures.
We can also look at political power rankings as calculated by US News, and we see the US at number 1, then China at number 2, followed by Russia, Germany, and the United Kingdom. No country in Africa, South America, or Oceania make the list, 5 countries in Asia, 1 country in North America, and 3 in Europe.
It doesn’t matter how you look at, if you take GDP, GDP per capita, military expenditures, quality of life, or just cut to the chase and use US News’ political power rankings, several European countries still rank as some of the most powerful countries in the world, and the rest of the peninsula is comprised of countries with strong economies which when unified as a single bloc are a force to be reckoned with.
China Supreme?
In 1900, the largest country in the world by population was China, like most of human history. Europe dominated the world however, with most of Africa colonized, and the European continent held 8 of the world’s 20 largest countries by population. Over 1 in 5 people were subjects of the British empire, and Europe dominated the world economically and politically.
The 20th century saw a rapid decolonization across the planet, and the majority of countries which were decolonized were extremely poor, and many were dictatorships for the rest of the 20th century. With a few notable exceptions, while colonization was obviously bad for many reasons, local government did not mean that the quality of life for the people in such countries improved, corruption and poverty were the norm in the wake of decolonization.
But now things are starting to change. Several countries are solidly middle income, most countries in the Americas are classified as flawed democracies by the Economist Intelligence Unit. China is seeing rapid economic growth year after year, and several petrostates in the Middle East have became incredibly wealthy.
The world is a different place than it was 50 years ago, and while many countries have developed, and many countries have seen an expansion in liberty, if we look across multiple metrics of not just pure power but also freedom, because what good for a business is a giant population if most of them are in poverty? If we filter for low corruption (top 25% only), high democracy score (over 7) and a high GDP per capita (top 25% only), we find the following map:
There are 9 countries outside Europe which fit this description, and 22 countries which are European which fit this description.
However, what if I don’t care about human rights, I just want to see countries which have the largest economies and the highest average quality of life (using GDP per capita)?
Again we see a familiar pattern. North America, most of Western Europe, Australia, Japan, and South Korea are the only ones which are in the top 25th percentile for both population and GDP per capita.
We are seeing that for countries which have the most flexibility, Western Europe still dominates, without any filters for human rights. The top ten power rankings from US News match this, with adding in China and Russia because of their large populations, and Saudi Arabia and the United Arab Emirates because of their vast oil reserves. But Saudi Arabia and the United Arab Emirates are heavily reliant on oil exports, an embargo on either one would destroy their economy quickly. Russia is a petrostate as well, and if Western Europeans managed to move off of natural gas to heat their homes, Russia would lose a large amount of its economic base. China is starting to diversify, but most of their technological growth is not from new inventions but by copying inventions done by the United States in flagrant copyright violation. The rest of the powerful countries are heavily diversified knowledge based economies where the inventions occur, with large domestic consumer markets. If China, Russia, the UAE, or Saudi Arabia were to alienate the world they would quickly find that their economies would quickly dry up.
Europe is the world’s largest consumer market of consumers who have lots of money to spend. We live longer lives, have better health care, and are happier overall.
China is able to flex their muscles because they are large. Russia is able to flex its muscles because of how the world’s oil infrastructure is built gives them a tremendous advantage in terms of selling petroleum based products to Europe.
But both of these countries honestly punch below their weight. The European Union is the largest trading partner of the United States, with 18.7% of exports, and 18.9% of imports. China does produce 21.4% of imports to the United States, but this is relatively proportional to the percent of the world’s population in China. The EU however is punching above their weight, with 6% of the world’s population they trade with the United States with a percentage of our trade 3 times larger than their population would predict. If the European Union or some other country had a population on par with China, they would absolutely dominate imports and exports with the United States.
The same story for the European Union, China again is the source of about 22% of imports to the EU, on par for their percent of the world’s population. The United States on the other hand with about 4% of the world’s population is the destination for 18% of exports from the European Union, and the source of 11.8% of imports send to the EU, far above our weight based on our population alone. Even Russia has imports and exports of 4-5% of European imports and exports, despite having only 2% of the world’s population. That is also while sharing a border with the European Union. This seems impressive on the surface…
What happens when two strong developed economies share a long developed border in terms of imports and exports? We don’t have to wonder because that is the case of the United States and Canada. Canada has 0.4% of the world’s population, yet is the destination of 18% of exports from the United States, and the source of 12% of American imports. Canadian imports to the United States pull weight 30 times their size! China having imports and exports on par with their population doesn’t seem so impressive when you take their size into account.
Despite having the world’s largest economy, China’s government consistently fails year after year to leverage this in the global economy to really achieve their true potential. China should be able to amass a massive economy of scale to absolutely dominate imports and exports with other large economic blocs around the world, but they can’t seem to do it. Given that they have 1/4 of the world’s population they are far smaller than they really should be. India may be the world’s second largest country, but they don’t even appear on the brief summaries of imports and exports to the United States or Europe because they are underdeveloped.
Despite having a population around 1/3 the size of China, the European Union consistently is able to trade with the United States on par with China. Despite having a population only 2% of that of China, Canada is able to have 25x the trade with the United States one would expect based on their size alone.
China is significantly under performing compared to where they should be.
Now, even though I know that Economists have successfully predicted 5 of the last 2 recessions, I’m going to take a stab at what is likely to happen in the future.
There are two paths. If China continues to lag in corruption perceptions index, they will likely continue to see their gini coefficient rise. It is already higher than that of the United States. Corruption increases inequality and poverty, which needs to be dealt with soon. If China is to really pull their true weight in the global economy they need to deal with internal problems like income inequality and poverty. Corruption has a negative impact on growth as well according to Transparency International.
Challenges to Chinese economic growth going forward are numerous. As China’s economy grows it will need its currency to appreciate in value. As more Chinese families start to have middle class lifestyles, they will want to import expensive goods from abroad. China’s currency policy makes these imports more expensive, and this will eventually slow growth. At a GDP per capita of only $10,000 China has already seen its working age population peak, which means more of its money is going to need to go to take care of elders than has been in the past. Chinese productivity is behind that of highly developed nations. There is also evidence that Chinese economic growth over the last decade was actually around 4% APY.
Source: Challenges to China’s economy
If Chinese economic growth is indeed already at 4% APY, and Western Europe grows at 2% APY, then it will take China 85 years to catch up with Europe’s economy.
It becomes clear that while China will continue to be the world’s largest economy, they continue to punch below what their weight would imply compared to how highly developed nations perform in terms of exports.
Towards a multipolar world
I do not foresee a future where China is the world’s dominant super power. The US and EU, despite having fewer people than China will continue to have significantly more economic and foreign power, particularly when we work together.
But one thing which is definitely shifting is that Eastern Europe is becoming more democratic, joining the European Union, and developing economically. The shift of Eastern Europe from being members of the Warsaw Pact to being members of NATO and the European Union has created a massive shift in terms of the balance of power for the world. When the United States and European Union work together on international economic aims, we are far more powerful than China, despite our smaller population.
During the Cold War, Eastern Europe was part of the Warsaw Pact, they were poor, and had little real power beyond themselves. The Soviet Union had a large population, and a stronger economy than China which was still recovering from the Great Leap Forward until the 80s and 90s, but as soon as the Soviet Union broke up and lost Eastern Europe, Russia by itself didn’t have enough clout to be a major world player beyond being the main source of natural gas for Europe. Western Europe’s population by themselves wasn’t large enough to be a major power without Eastern Europe joining, and given that Spain was recovering from Franco, Europe was still reassessing its place in the post-colonization world from the 1960s to 1990s.
But times have changed. There are three main powers in the world today:
- The United States, the world’s largest advanced democracy by a long shot
- The European Union, the largest trading bloc in the world
- China, The world’s largest population, but a relatively poor economy considering its population
What we are going to see is the world forming where multilateral international relations are going to be more important. Combined, the European Union is a force to be reckoned with, and China has power just through sheer population.
But the United States is by far the most powerful individual country in the world. We have the world’s most powerful economy, semiconductors, the hardware behind most of today’s modern innovations, are all based here in the United States. The United States publishes more scholarly articles than any other country except China, at 4 times China’s rate per capita. There are three main operating systems people use today, Linux, Macintosh, and Windows. All three are American. Of the 10 largest companies by market capitalization, 8 of them are American. 4 of them are headquartered in Santa Clara county, California. America’s GDP per capita and HDI are extremely high. Out of highly developed democracies, the United States is an outlier. Despite all of this we have some problems we need to deal with, racism, inequality, and relative lack of opportunity for low income Americans exemplified by the student loan crisis.
But it is obvious that if there is any one country which has the population, economy, and global influence to be the major player of the 21st century, there is one obvious answer.
The United States of America.