Europe: Divided We Fall

The United Kingdom voters decided to leave the European Union (EU). Citizens of other countries, too, may think they might be better off outside the EU. But considering the economic and demographic developments within the next decades, this is a fundamental misjudgement.

1. Economic integration fosters economic growth

Numerous studies show that a deeper economic integration has a positive impact on economic growth, employment and material wealth. We demonstrated this for the proceeding globalisation and the European single market. Consequently, an economic disintegration has a negative effect for economic development – especially for those countries which pull out. Hence weakening European integration produces no economic winners. Apart from this, strengthening European integration is not just an economic question. A united and strong Union is necessary if Europe wants to keep room to manoeuvre on the political world stage.

2. Global population development = Shrinking Europe

At the moment, four large European countries – Germany, France, the United Kingdom and Italy – belong to the eight largest economies in the world. In the future, however, Europe’s economies are likely to be overtaken by developing countries. One reason is global demographic development. By 2050, population numbers will increase in all regions of the world – except in Europe (see figure 1). This implies not only a larger workforce in developing countries but also a higher dependency ratio for European countries. A higher dependency ratio means an increase in the relation between people who are not working (because they are too young to work or too old) and the population of working age.

3. Shifting economic powers mean no EU country will be in the list of top economic powers in the world by 2050

In combination with high increases in productivity in developing countries, this growth in global population will result in a shift in global economic power relationships. Of course long-term forecasts are always fraught with uncertainty. Nevertheless, PwC dared to make a prediction out to 2050. According to this forecast, at the latest before the end of the year 2050, the group of the eight largest economies worldwide – measured by the gross domestic product (GDP) – will consist of the United States, Mexico, Brazil, Russia, China, India, Indonesia and Japan (see figure 2). Hence no single European country belongs to the group of the economically most powerful economies.

4. Safeguarding European interests in a changing world

Economic power is often a prerequisite for political power. Hence the loss of economic power of European countries leads to a reduction of political power and thus influence on the approach to global challenges. At the moment, there are at least four areas of global challenges which all have a significant impact on the wellbeing of the people:

• Shaping globalisation, for example establishing common standards concerning consumer protection, social security, worker protection, international trade and the regulation of financial and foreign exchange markets.
• The common combating of tax havens.
• Combating climate change, establishing global standards in the areas of environmental protection, energy efficiency and raw material extraction.
• Combating cross-border international crime including money laundering and international terrorism.

Due to changing economic powers, even large European countries such as Germany or the United Kingdom are unable to enforce their interests alone. As the former Belgian Prime Minister Paul-Henri Spaak already stated in 1957: “There are only two kinds of countries in Europe today, the small ones who know it and the small ones who do not know [it].”[1] Yet it is possible only together to safeguard European standards and interests. In a world with new economic powerhouses in Asia and Latin America, we need a united, but not a divided Europe.

[1] Cited after: Gustav von Hertzen, The Challenge of Democracy, Eetos kuustannus, Helsinki 2009, p.285