IS IT GAME-OVER FOR EUROPE?

GDP AND PPP TELL A DIFFERENT STORY Insights from This Week’s Mindblowers Newsletter and Podcast. Follow below links for the Podcast:

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YouTube: https://youtu.be/NgZhCpQk9pU?si=b_88gjbCKdggy6eq

Spotify: https://open.spotify.com/episode/7dk4Df8BwnbTQncZdpK5GD?si=3d5ef34e176048fc

Apple: https://podcasts.apple.com/dk/podcast/mindblowers-uncovering-the-mysteries-of-the-future/id1768640237?i=1000681105311

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Is It Really Game Over for Europe — Or Are We Missing Part of the Story?

In this week’s Mindblowers newsletter — and on our latest Mindblowers Podcast—I’m shining a spotlight on Europe’s current economic challenges. I’m joined by Global Strategist Michael Rosmer, also known as the Offshore Citizen. Together, we explore a key concern on many people’s minds: Europe’s slowing growth and declining share of global GDP, and what that might mean for everyday Europeans.

In this newsletter I will focus on one aspect of Europe's challenges - The GDP development - I believe the relative decline vs USA and China is just the beginning, and AI and robotics will accelerate it a lot from now till 2050, where I fear that Europe will only be a marginal power.

That said we need to be fair. There is a reason that European citizens has not felt the decline has much as one could think.

Europe’s Declining Share of World GDP

• In the 1980s, Western Europe made up around 30% of the world’s GDP. Today, that figure hovers closer to 15%.
• Meanwhile, China has surged from under 2% to over 18%, while the U.S. has maintained a relatively steady slice of the global economy.
• At first glance, the data suggests Europeans are becoming poorer compared to Americans and the Chinese—if you only look at GDP numbers.

However, the story isn’t that simple. While Europe’s global GDP share is shrinking, some measures show that individual Europeans aren’t necessarily experiencing the drastic drop in living standards that the raw GDP figures might imply.

The Role of PPP (Purchasing Power Parity)

GDP vs. PPP

• GDP (Gross Domestic Product): Totals the value of a nation’s goods and services, often used for cross-country comparisons.
• PPP (Purchasing Power Parity) per capita: Adjusts for cost of living and exchange rates, showing how much a person can actually buy in their local economy.

When you factor in PPP per capita, Europe’s downturn versus the U.S. appears less severe. Why? Because while Europe is growing more slowly, day-to-day expenses and wages balance out enough to help individuals maintain relatively solid purchasing power.

Why Europe’s PPP Decline vs. the U.S. Is Less Pronounced Than Its GDP Decline

Over the past decade, Europe’s share of global GDP (in nominal terms) has dropped more than its share in PPP terms. Here’s why, along with some facts and figures:

1. Nominal GDP vs. PPP

• Nominal GDP depends on current exchange rates, which can dramatically affect how an economy’s size appears in U.S. dollars.
• PPP zeroes in on local prices and living costs, so it’s less swayed by currency swings.

Since the euro has weakened against the U.S. dollar in recent years, Europe’s nominal GDP looks more stagnant or reduced, whereas PPP remains comparatively steadier.

A Closer Look at the Numbers

Below is an illustrative table comparing select indicators for Europe (EU-27) and the U.S. between 2012 and 2022. All figures are rounded and based on estimates from the IMF, World Bank, and other sources.

As can be seen by the table part of the relative GDP decline can be attributeded to the strengthening of the $ vs the Euro. Further the population is increasing faster in the US than in Europe.

Conclusion

• Nominal GDP is vital for assessing global market size, investment potential, and geopolitical influence.
• PPP sheds light on everyday well-being, highlighting how affordable goods and services are for citizens in their local currency.

While Europe has clearly lost ground against the U.S. in nominal terms, PPP metrics suggest everyday Europeans haven’t seen as steep a decline in actual purchasing power. Still, the region faces an uphill battle: an aging workforce, heavier regulations, and lower R&D investment could stall Europe’s competitiveness in AI, robotics, and clean energy—the industries driving future growth.

Takeaway

Europe’s economic influence may be diminishing in U.S. dollar terms, but PPP tells a somewhat calmer story. That said, innovation and policy reforms will be crucial if Europe wants to maintain—and enhance—its standard of living. Otherwise, the gap could widen further, even in PPP.

Why PPP Matters

1. Cost of Living A euro in Berlin or Paris might buy more (or less) than a dollar in New York, so PPP helps compare true spending power.
2. Standard of Living PPP per capita indicates real-world affordability—how people can finance housing, healthcare, and education.
3. Policy Insights Policymakers often rely on PPP to refine social programs and taxes, ensuring they match local economic realities.

Where GDP Still Rules

1. Global Influence & Trade Nominal GDP reveals how big an economy is on the world stage, impacting trade deals and infrastructure spending.
2. International Comparisons Global businesses and investors typically use nominal GDP to gauge market size and decide where to deploy capital.
3. Currency & Debt Bond markets and debt ratios often reference nominal GDP, since it aligns with foreign exchange and fiscal policies.

Looking Ahead

Is it really game over for Europe?

Headline GDP figures paint a worrying picture, hinting at less global sway and a smaller slice of overall wealth. But on a PPP per capita basis, Europeans continue to enjoy a relatively strong standard of living—for now.

The big question is policy: will heavy regulation and underinvestment in innovation keep Europe behind? Or can it adapt to lead in emerging fields like AI and green energy? It’s a pivotal moment for the continent. To learn more, check out this week’s Mindblowers Podcast with Michael Rosmer (the Offshore Citizen) on YouTube, Spotify, and Apple.

Let’s keep the conversation alive: How do you see Europe navigating these economic headwinds in a rapidly evolving global arena?

Daniel Kafer Futurist, Former Meta Country Head, and Co-Host of the Mindblowers Podcast