The slow death of Europe
Industry is being strangled by sky-high energy bills and mountains of bureaucracy.
A few days ago, BASF, the world’s largest chemical company, announced plans to downsize its production in Europe, closing several of its German production facilities and shedding around 2,600 jobs. The German chemicals giant cites increased energy prices as one reason for this, but it omits some crucial other factors – namely, that Europe’s excessive bureaucracy and sky-high taxes means that it is no longer a globally competitive market. In the future, European customers will be supplied with chemicals from China, South Korea and the US.
BASF is a German company, but it is actually older than Germany itself. Founded in 1865, it is six years older than the German state, which was only unified in 1871. In many ways, BASF reflects the ingenuity of the European economy in the 19th century, so it is a fitting starting point to take measure of the Old Continent and where it might be heading in the 21st century.
The West rose to global dominance between the 16th and 18th centuries. Yet a closer look at those 300 years reveals that they were rife with war, corruption and unrest. This period was also characterised by the assassinations of several US presidents, the American Civil War, the assassination of Russia’s Tsar Alexander II and widespread labour unrest.
Despite all this, it was a time of overall improvement. Populations grew, production increased and innovation could be found almost everywhere.
This improvement happened at an incredible pace. The foundations for the modern world were laid in less than a hundred years. Michael Faraday discovered magnetic induction in 1831. Justus von Liebig documented plant metabolism in 1840. James Clerk Maxwell published his description of electromagnetism in 1865. In 30 years, humanity achieved an understanding of the physical world that was necessary for electricity generation, artificial fertilisers and wireless communication.
The West enjoyed a level of societal energy that propelled it to global dominance. This was made possible by extending the lifetime and productive capacity of the most important resource of all – human beings. As medicine and hygiene standards progressed, so did life expectancies and birth rates.
As population levels grew and usable farmland started to become a scarce resource, it was a German company that came to the rescue. Fritz Haber, Robert Le Rossignol and Carl Bosch were funded by BASF to lay the foundations for the production of artificial fertilisers. The rise of the ‘Haber-Bosch process’ in the early 20th century ensured that the agricultural industry could feed an ever-growing global population.
Europe was once the hub of this kind of innovation and development. So why are so many industrial giants now moving production elsewhere? Today, it is not only BASF and the once-admired German chemical industry that are moving out of Europe. Carmaker Volkswagen also announced recently that the bulk of its future electric-vehicle production will be moved from Germany to the US.
And it is not just Europe that is in trouble, either. Right now, the US is trying frantically to reduce its dependence on Asia, only to discover that, having neglected its industrial base for decades, it lacks the skilled workforce needed to reshore production.
At a glance, Europe and the US still appear to be the most formidable economies in the world right now. But China also seemed unassailable back in the 16th century, before its decline. Most economic trends are no longer in the West’s favour.
Take energy production. Consumers from California to Copenhagen have to deal with high electricity prices. And to make matters worse, government institutions like the US Nuclear Regulatory Commission are shutting down nuclear power plants wherever they can. Meanwhile last year, the United Arab Emirates, usually thought of as a petrostate, finished constructing its third nuclear reactor in 10 years.
What about renewable energy, so often touted as the solution to both climate change and runaway energy prices? Even putting aside the pitfalls of wind and solar power, such as their inherent intermittency, new plants are not being built at anything like the pace needed to power our societies. In order to build a wind farm off the coast of Norfolk in the UK, developer Boreas had to issue a 13,275-page environmental-impact assessment. This is ‘144 pages longer than the complete works of Tolstoy combined with Proust’s seven-volume opus, In Search of Lost Time’, according to Sam Dumitriu of Britain Remade. For Germany to meet its 2030 energy-transition goals, it would have to install the equivalent of 43 football fields of solar panels and 1,600 heat pumps per day, plus 27 new onshore and four offshore wind farms per week. Needless to say, nothing close to this is happening.
The West is increasingly deluding itself. We are led to believe that Green New Deals and miracle innovations in battery-storage technology will solve all our problems. If our societies still possessed the vitality of their 19th-century predecessors, I could probably be convinced to believe it. But we simply don’t.
There are no perfect moments in any civilisation’s history, only periods that appear as such in hindsight. The central question every nation’s leaders must ask themselves is whether they are managing decline or managing ascent. It’s clear which way much of Europe is heading.
Ralph Schoellhammer is an assistant professor in economics and political science at Webster University Vienna.
Picture by: Getty.
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