The global economic picture of today would not be recognizable to a European living 60 years ago. At that time, global economic output and trade were dominated by Western Europe and North America, with many other world nations only just emerging from European colonialism. Communist economic policies were not only present but seemed unlikely to disappear. Significantly, the economic future of Europe was tied into geopolitical fears about the Iron Bloc--the Soviet Union. These fears made the need for a trade organization that unified customs policies across borders seem vital.
The European Economic Community, or EEC, emerged at a time when Western Europe’s political and economic future seemed more insecure than it had ever been, squeezed as it was between two ideological and military powerhouses: the United States and the Soviet Union. The EEC (and later the European Union) was a means for Europe to leverage its industrial might and trade ties in order to prevent individual countries from lapsing into irrelevance. Though several events have completely changed the world economic picture, the European Union is still beset by the same issues that plagued its predecessor organization, and the nagging question of whether it’s possible for Europe to preserve its historical place on the world economic stage.
Western Europe And The European Union
With Brexit still very much on everyone’s minds, much of the talk about Western Europe today is where the European Union went wrong. The precursor of the European Union—the EEC, founded by six nations in 1957—was from its very beginning beset by many of the same questions that fan the flames of critics and detractors today. Economists wondered how so many nations (and there were only six initially) could coordinate economic policy. They wondered if European nations like Germany could maintain exports in the face of high worker’s wages. They gushed over the relative strengths of the French and German economies.
Over time, several other nations would eventually join the European Economic Community, namely the United Kingdom and the Scandinavian countries. The EEC would eventually evolve into the European Union, which was formed in 1993. Although the European Union has now expanded to include countries outside of Western Europe, the community still struggles with historical rivalries, bureaucratic tangle, and individual nations questioning the viability of certain policies. For better or worse, the question of the economic future of Western Europe is tied to the EU’s own fate.
Western Europe After World War II
World War II must have represented a devastating event for the Western European nations that were left to rebuild. Much of the industrial and governmental infrastructure had been destroyed. There had been a significant loss of life and manpower had been decimated. Western Europeans had to deal with the elephant in the room: the reality that they had definitively been overshadowed by the militaries of new world powers. The European Union was the obvious result of a need for Western Europe to assert itself for its own economic survival. Still, it's easy to wonder whether the creation of this community represented the tacit acceptance of an American pragmatic commercialism.
We will leave the discussion of the alleged ills of commercialism to Honoré de Balzac and posit that Western Europeans had little choice but to place all their chips in their respective economies. The Industrial Revolution had begun in Western Europe. Industrial production and trade might have been the only hand that Europe had to play. What Europe needed to do was rebuild, invest in global organizations that encouraged and facilitated trade, and pave the way for the creation of an economically powerful Western Europe if nothing else.
The European Union Today
Perhaps what is remarkable today about the European Union is that despite a 60-year history, beginning with the EEC, the European Union still gives the impression of a body that has not fully worked out a coordinated economic policy. Some wonder whether a truly united European Union is even possible. Although the union has managed to endure with one of the world’s strongest currencies and with a remarkable share of world trade, the Brexit affair has highlighted whether the EU will be able to overcome some of its core issues.
Challenges And Opportunities
There are several challenges facing Western Europe today and its place in the global economy. As the European Union has expanded from the economic role of its predecessor organization to a more social, political, or even executive one, the cracks have begun to show. The overarching theme of the European Union may be whether this organization is capable of reconciling the demands of wealthier member-states with those of its less privileged states.
To an outsider, the European Union seems to struggle with an issue of equity. Both the bigger players and the smaller states seem to end up dissatisfied when cooperative agreements are reached. The 2008 global economic downturn devastated many nations in the union, namely the more economically fragile states like Greece. The overall wealth of the region has managed to spare it from outright depression, though, social issues seem to have crept up just as the economic ones seem to be resolving. And lest anyone suggest that the social issues are not relevant to the economics of the region, the UK’s exit from the organization suggests that social issues surrounding immigration policies can have an enduring economic impact.
Innovation, Trade, And Economic Growth
One of the curious facets of the economy in Western Europe is the uniformity of economic views within individual nations despite the existence of the European Union. A review of the data reveals that European nations represent a mélange when it comes to key economic measures. Some of the measures include:
- Unemployment rates
- Spending on research and development
- Investments in renewable energy
- Reliance on imports of foreign energy
These issues suggest that the European Union has not been entirely successful in becoming the cohesive organization that it set out to be. Indeed, the idea of a region with a highly varied picture of industrial production, natural resources, and worker issues developing a coordinated, standardized economic policy across all nations seems unrealistic if not an outright fantasy.
An Aging Population
Like many post-industrial nations, Western Europe is dealing with an aging population. Population growth across the EU is flat. The median age in the EU is expected to increase from 42 to 45 in the next 12 years. The EU has managed to stave off a declining share of world population by adding new members, but the massive predicted growth in population in India and Africa will mean that Europe’s share of world population will continue to fall. What this means for the economy is unclear. Workforce concerns in Western Europe are not quite as critical as they are in countries like Japan.
Brexit And The Global Economy
The impact of Brexit on the EU is not clear. It is incredibly difficult to project exactly how Brexit and the changes to the European Union will affect the global economy. Many legislators both inside and outside of the United Kingdom have spoken out about the devastating impact that Brexit is likely to have on the UK. However, it's possible that these political maneuvers are nothing more than good old-fashioned politicking ahead of an election. Brexit will mean that the UK will lose some of its EU-mandated economic laws and regulations while retaining a few others. The impact of Brexit on the world economy will, in reality, be dictated by whether global investors see this move as a step in the right direction or a step in the wrong one.
Western Europe And The Future Of The World Economy
The questions surrounding the role that Western Europe will play in the world economy have as much to do with other parts of the world as they have to do with Europe. China and India are likely to play a much larger role in the future world economy. They currently contribute to Western Europe's growth as major importers of European goods while exporting products to European markets. This trend is expected to continue and may impact Europe's standing in the global economy. Another issue is the large growth of population anticipated outside of Europe. There is a question of whether Europe can maintain its position as a global leader through the same tactics it has used in the past: financial savvy, high-quality manufactured goods, and a reputation for precision.
Western Europe’s position as a region of economic importance is unlikely to disappear in the near future, despite the issues plaguing its most significant organization, the European Union. For better or worse, the economic future of the region does appear to be tied to the EU's economic viability as it struggles with economic downturns, member dissatisfaction, and social issues. Although the exit of the United Kingdom from the European Union is unlikely to be followed by the egress of other member nations, the overall economic strength of the EU vis-à-vis the rising economies of Asia is a matter of serious concern.