Europe's Decline (II)


BERLIN/HAMBURG (Own report) - German think tanks are diagnosing the beginnings of the decline of Europe and the USA's global policy. Europe "remains the world's largest economic area," but is suffering a "creeping loss of economic significance," according to a recent analysis of the government-financed German Institute of Global and Area Studies (GIGA). "It is apparent that the United States has lost its hegemon status" due to the rise of new global actors, e.g. India, Brazil and above all China. "Despite NATO," the "west club" is losing its ability to lead and govern. In light of the West's loss of influence, emerging countries, such as Turkey, Venezuela or Iran "no longer want to be taken in tow." The GIGA's diagnosis is confirmed by economic analyses. According to a study by the major HSBC bank, the center gravity of the global economy will have significantly shifted by 2050. In 40 years, the economies of today's emerging nations will exceed the currently predominating western economies and even represent two-thirds of the 30 countries with the world's strongest economies. Particularly European countries will slide down the scale, losing significant influence. The HSBC bases its analysis on the continuation of current development trends. However, the prognosis of the loss of the West's influence cannot be maintained with certainty in cases of unexpected major upheavals, such as wars.

A new study published by Hamburg's government-financed German Institute of Global and Area Studies (GIGA),[1] presents an analysis of the fundamental "global economic and political shifts." The author Robert Kappel, GIGA president and professor at the Hamburg and Leipzig Universities, forecasts the "decline of Europe and the United States."

No Longer Hegemon

As Kappel writes, while the USA is still "clearly constituting the world's strongest economic and military power,"[2] it is, nevertheless, "struggling with severe weaknesses" resulting from low economic growth and the prolonged decline of its processing industry, which has fallen from 25% of the GNP, 40 years ago, to currently 12%. Technological progress has also stagnated, due "to low educational standards." "Countries unable to generate economic growth that become technologically weaker are thus less able to adequately meet global economic challenges," resulting "ultimately in the loss of political and economic leadership," writes Kappel. Current attempts by the Obama administration to balance out the US' obvious weaknesses with "soft power," are no longer proving sufficient. The GIGA president draws the conclusion that "despite the vehemence applied by American politicians" - such as Secretary of State, Hillary Clinton - in the defence of "the United States' imperial (...) behaviour and the affirmation of the nation's leadership role, it is apparent that the United States has lost its status of hegemon."

No Global Role

According to Kappel, also the EU is suffering a "creeping loss of significance."[3] Even though, with an approximate 20% share of the global GNP, Europe has "remained the world's largest economic area," its average rate of growth has been lower than that of the emerging nations over the past three decades. The EU is "ill-equipped" for the future. The EU is characterized by "declining productivity, weak growth, and structural unemployment, lack of flexibility in the employment market, demographic decline and insufficient immigration." "In comparison with the US, the EU is relatively weak" in the areas of "military, diplomacy and foreign policy, as well as business-network policies." And ultimately, Eurocentricity prevents Europeans from “playing a global role." "In the period of globalization, it no longer enjoys the former respect of others as a model."

Long-term Rise

The West's loss of its former influence is caused by the growing strength of new powers, which GIGA President Kappel identifies as China, India and - to a lesser extent - Brazil. "The inadvertent economic rise" of these nations is "not just the result of growth sustained in the last five to ten years," but rather "a long-term process," having begun in the 1970s and 80s. Within the framework of the G20, these rising powers are increasingly playing a role in shaping global governance. Their process of catching up, which has increased due to their strong economic growth, will "acquire even more dynamism," predicts Kappel.[4] Paradoxically, contributing also to this surge, are the investors from the US and the EU, who want to "participate in the growing markets with trade, investments and research."

Top 30

New economic prognoses are supporting the GIGA findings. Recently the major British HSBC Bank published a study, according to which the global economic center of gravity will have fundamentally shifted by 2050. According to this paper, the economic volume of countries classified today as "emerging," will have increased five-fold, surpassing Western Europe and the USA. In 40 years, 19 of the top 30 GDP economies will be countries that we currently describe as "emerging". China will rank in first place, India will be third, and the United States will have to be satisfied with a global second place. According to the HSBC calculations - which are explicitly oriented toward investors - only three EU countries: Germany, Great Britain, and France would make it into the Global Top 10 rating and only five other European countries - Italy, Spain, The Netherlands and Poland, from the EU, as well as Switzerland - will be among the Global Top 30. Instead of other EU countries, one will find Venezuela, Malaysia, Egypt, and Iran. According to the author of the study, there can be no doubt that an upheaval in the structures of global political influence will accompany the shift in the economic center of gravity.[5]

New World Order

This prognosis is shared by GIGA President Kappel, who expects the formation of a "new world order." Particularly China, India and Brazil will become powers that, in the future, can consolidate "important other states that no longer want to be taken in tow by the US" - such as "Turkey, Indonesia, Venezuela, Iran, South Africa" who "resent external hegemony." The West "will have to learn" that these countries "will refuse to be given orders on how to conduct economic, political and cultural matters, etc." let alone accept the hypocrisy ("human rights") and the well known US and EU's "attempts to dominate and exploit". So far, the emerging great powers, for example China, lack "the ability to lead globally, or even regionally," but these lessons they will probably "learn in the near future."[6] The president of GIGA considers that "despite NATO, despite strong positions in international organizations, and despite high economic standards, the US and the EU are increasingly losing their abilities to lead and govern."

The Last Effort

The prognoses of both GIGA and the HSBC are based on the bank's explicitly stated premise: the current development trends will bear out to be true, if there are no major political upheavals. According to the HSBC, wars naturally could derail their prognosis of the West's global decline. Experts do not exclude the possibility of future hegemonic wars, particularly proxy wars between China and the USA. ( reported.[7]). These would be the western powers' last efforts to prevent - or at least to postpone - their decline.

[1], [2], [3], [4] Robert Kappel: Der Abstieg Europas und der Vereinigten Staaten - Verschiebungen in der Weltwirtschaft und Weltpolitik, GIGA Focus 1/2011
[5] Karen Ward: The world in 2050. Quantifying the shift in the global economy, HSBC Global Research, Global Economics, January 2011
[6] Robert Kappel: Der Abstieg Europas und der Vereinigten Staaten - Verschiebungen in der Weltwirtschaft und Weltpolitik, GIGA Focus 1/2011
[7] see also Europe's Decline