Unjustified doomsaying is one of corporate media’s favorite pastimes. And they often practice this hobby in their economic coverage of Europe. Corporate outlets commonly warn of crumbling European economies, contrasting the supposed misery of social welfare states with the United States.
“Europe in many ways is collapsing,” claimed Fox‘s Laura Ingraham (7/21/22). “Life for normal, working people there is increasingly miserable.”
Around this time last year, Fox News‘s Laura Ingraham (7/21/22) claimed that “Europe in many ways is collapsing.” The continent, alleged Ingraham, is “a total basket case” with life for “normal working people” becoming “increasingly miserable.” From this premise, she launched into a triumphalist monologue:
Even with all of our problems [in the United States], our economy is still stronger… still more resilient than Europe’s. Now, in 2021, our GDP was about $23 trillion or so. The GDP for the entire EU, which has…27 member states, was just over $17 trillion.
The Financial Times (6/19/23) used the same statistics to reach a parallel conclusion regarding American supremacy. “Europe has fallen behind,” asserted chief foreign affairs commentator Gideon Rachman, and “cannot compete with” the United States. The proof? Gross domestic product.
In 2008, the EU and the US economies were roughly the same size. But since the global financial crisis, their economic fortunes have dramatically diverged.
Rachman then approvingly quoted Jeremy Shapiro and Jana Puglierin of the European Council on Foreign Relations, who said:
In 2008 the EU’s economy was somewhat larger than America’s: $16.2 trillion versus $14.7 trillion. By 2022, the US economy had grown to $25 trillion, whereas the EU and the UK together had only reached $19.8tn. America’s economy is now nearly one-third bigger. It is more than 50 per cent larger than the EU without the UK.
Using the wrong yardstick
The Financial Times (6/19/23) bills itself as “the worldʼs leading global business publication,” but it hopes that its readers don’t know what exchange rates are.
But these statistics are misleading. Both Fox and the Financial Times strategically use nominal GDP figures, which are based on how much it would cost to buy all of a nation’s outputs on the world market. This is a measure that makes Europe look good in 2008, when it took a record-high $1.47 to buy one euro, and makes the US look much better in 2022, when you only needed $1.05 to buy a euro.
To compare living standards, however, you need to use what’s called Purchasing Power Parity (PPP) GDP. This adjusts for the fact that exchange rates are not always a true measure of a currency’s domestic purchasing power; it’s PPP that tells you how much a given nation can purchase in total goods and services, which is what determines its standard of living.
According to World Bank data adjusted for purchasing power, the US and EU have roughly equivalent GDPs: $25.5 trillion vs. $24.3 trillion. Include Britain as well, and Europe’s economy is nearly $2.5 trillion larger than the US’s.
This adjustment also reverses the supposedly diverging trends cited by the Financial Times. Standardizing price levels reveals that the European Union actually grew faster than the United States from 2008 to 2022. In terms of how much Europeans can actually buy, its GDP expanded by nearly 14% over the period, whereas the United States only grew 12.5%.
No, they’re not worse off
The Wall Street Journal headline (7/17/23) gets it completely backwards: In terms of actual purchasing power, European economies are growing faster than the US.
That didn’t stop the Wall Street Journal (7/17/23) from slamming Europe’s ostensibly sluggish growth rates. Under the headline, “Europeans Are Becoming Poorer. ‘Yes, We’re All Worse Off,’” reporter Tom Fairless condemned the continent where “an aging population with a preference for free time and job security over earnings ushered in years of lackluster economic and productivity growth”:
Life on a continent long envied by outsiders for its art de vivre is rapidly losing its shine as Europeans see their purchasing power melt away.
The French are eating less foie gras and drinking less red wine. Spaniards are stinting on olive oil. Finns are being urged to use saunas on windy days when energy is less expensive.
But to back up these claims about the supposedly worsening living standards of Europeans, the Journal uses wages measured in dollars—looking, once again, from the cherry-picked year of 2008 to 2022. If Europeans traded in the euros they earned for dollars, they would have done very well in 2008, and much worse in 2022—but this is completely irrelevant to how many domestic products (like red wine and olive oil) Europeans can buy. To gauge that, you need to use PPP, and that measure shows that European purchasing power is definitely not “melt[ing] away.”
Beyond buying
According to US News, the US has a similar quality of life to European countries with roughly half the per capita GDP.
Of course, GDP itself is only a rough proxy for standard of living. It merely sums the market value of final goods and services produced within a country in a given year. This means an ambulance ride, which can cost thousands in the United States, would boost GDP by that amount. But, of course, overcharging for essential medical services makes the average person’s life worse—not better.
To attempt a broader comparison of well-being across countries, the United Nations created the Inequality-Adjusted Human Development Index—a measure that combines income, education and life expectancy, and accounts for how these are distributed among the population. Every nation in the top 10 is European. The United States doesn’t appear until No. 25—tied with Cyprus. It comes in below even Malta and Estonia, which are hardly Europe’s richest locales.
US News & World Report’s annual Quality of Life ranking tells a similar story. Using a composite of access to essentials, civic freedom and more, the company lists which “countries treat their citizens” best. European countries occupy seven of the top eight spots, with Canada the only exception. Of the top 20, a whopping 16 are in Europe. The United States lands at No. 21—sandwiched between Portugal and Poland.
‘Green policies killing Europe’
Yet corporate media outlets readily ignore these facts and run with the narrative that Europe is dying. The ultimate target of this campaign is not the continent itself. Rather, the attacks on Europe are really about discrediting social democracy and progressivism more broadly.
We can see this by noting what these hit pieces blame for Europe’s supposed economic death. Fox, for example, took particular aim at environmentalism. “Green policies,” it says, “are killing Europe.” The Journal claimed “popular healthcare services and pensions” are unfit “for fixing the problem” of European decline. The Journal further suggested that high tax rates are intolerably squeezing increasingly poor European consumers—a veiled call for austerity.
Let none of this skewed coverage convince you that progressive social policy is a failed experiment. The reports of Europe’s death are greatly exaggerated. By relevant metrics, it remains a better place to live than the United States.
Thanks for this outstanding piece exposing corporate media’s lies-in-lockstep. I would not have recognized this whopper on my own. It’s a prime example of why I subscribe to FAIR.
There’s also to consider the economic effects of the US-directed economic sanctions against Russia, which have the deliberate effect of making Europe more dependent on expensive American LNG brought by tanker instead of much cheaper gas piped from Russia via the Nord Stream line whose destruction, it seems, the US happily oversaw. Who needs enemies when you have friends like the USA?
Yes, I agree, Rebecca:
Sadly the major media seems to be forgetting about what happens when Americans are losing jobs in all areas, including Wall St–even the well paid workers need to be wary in wondering where their job will go.
But Re: Ukraine and Israel, quite sad that those 2 nations prosper while Americans are—- sans food, sans shelter, and lacking Congressional actions in fairness— America perhaps will soon be sans everything! : (
I wonder as well whether the GDP was calculated by including financial “services”, debt and other trickery as has become the norm since the late 90s.
I was in several European countries not too long ago and one thing that jumped out at me was – at the time (2019 pre-pandemic) – the exorbitant cost to own a car. Prices are incredibly high, but cut ahead to 2023 and the same is true in the USA except we don’t have a single mile of high speed rail and our normal rail system is falling apart, unreliable and often dangerous. To wit, you don’t really need a car in Europe but you do in the USA. I imagine this calculus applies to other aspects of life as well. We all know about the US “health care” system…cough cough.
In real-world, day-to-day terms, I’d still rather live in 90% of EU countries than I would in the USA. Life is just more relaxed. People are in better physical health/shape because they actually walk and bike places, and public transport is miles beyond the garbage we are forced to deal with in “America.”
Rebecca makes a good point about energy prices and the US-led proxy war and sanctions against Russia. German industry is definitely suffering as a result, and that country generally powers EU GDP. One hopes this war ends soon with Ukrainian capitulation/negotiation, but I don’t see the puppets in D.C. or their vassals in Brussels allowing that to happen.
Good stuff. Thanks. I was hoping the EU would perish for supporting the US Proxy War Lie bUT I’m also glad their socialist practice’s are mostly holding up.