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Joel Kotkin: Canadians must stop romanticizing a failing Europe

Europe’s sluggish economy, energy self-harm and creeping authoritarianism make it a terrible alternative to U.S dynamism

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Canadians have long looked away from their often gruesome southern neighbor, tempted instead to embrace a chicer European identity. They could point to a more civil public culture, greater bilingualism and a more generous welfare state, compared to the dog-eat-dog reality of the United States. Prime Minister Mark Carney has called Canada “the most European of non-European countries,” and some policy wonks now advocate joining the EU.

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Author Phil Resnick, in his recently published book, The European Roots of Canadian Identity, embraces an idea popular among some Canadians that Europeans form the base of the country’s identity, and its most crucial way to distance itself from its noisy neighbor. I guess he didn’t check in with the multicultural lobby.

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Europhilia has been reinforced by Donald Trump’s moronic “51st state” rhetoric, as well as his more understandable concern with Canada’s protectionist policies. Trump managed to implant himself in Canada’s brain, leading some to look across the Atlantic for succor.

Many Canadians, particularly on the left, worship Europe and see it as a role model, but perhaps it’s time to assess the reality. Europe may be more “progressive” than America, particularly under Trump, but is it also a model for economic and social progress?

When it comes to opportunity and innovation, the U.S. model performs far better.

A look at the data tells a very clear story. Over the past 15 years, the Eurozone economy grew about 6 per cent, measured in dollars, compared with 82 per cent for the U.S., according to International Monetary Fund data. Canada’s rate has become increasingly European in its economic profile rather than American. To put it another way, the most powerful economy on the continent is barely the size of that of my adopted home state of California. Since 2019, Europe’s productivity per hour worked grew by less than 1 per cent, but U.S. productivity grew by six times that amount.

The most obvious weakness lies in tech. Of the top 50 tech firms, only three are located on the continent — Canada has one, Shopify. Instead, the list is dominated largely by the United States with China a firm second. Apple, itself, is worth more than countries like Mexico, Brazil, Russia, Italy, and Canada. U.S. predominance also extends to a potentially huge space industry, a dominant force in the future. Overall, the U.S. has a larger space industry than the rest of the world combined.

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This entrepreneurial gap extends across the economy. MIT researcher Andrew McAfee has revealed how, within the last 50 years, the U.S. created “from-scratch” companies with a market cap over $10 billion — five times the rate of the EU. At the grassroots level, as American entrepreneurs have flourished and self-employment has grown, in Europe, these have actually declined.

Since the Russian invasion of Ukraine and now with the Iran war, this weakness has become ever more obvious. The great bastion of European competence, Germany, is being undermined by climate catastrophism, leading to what one observer called “energy suicide.” Germany is now losing much of its industrial base, notably in chemicals and autos. The vaunted smaller mittlestand are failing in large part due to high energy prices and a diminishing workforce. Germany’s entire industrial structure seems likely to decline, and could lose upwards of 400,000 of its estimated 800,000 auto jobs by 2030. Here’s a sign: McKinsey recently advised Volkswagen to close eight of its ten German plants.

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Other European industrial countries are also fading. Today, Alabama and Mississippi produce more vehicles annually than Italy or the United Kingdom. Deindustrialization has its effects. By some accounts, Britons are now, on average, poorer than Mississippians.

Like some Canadians, Europe’s grandees believe that money is fleeing Trumpian chaos. But in reality, there is a surge of new investments — estimated now at as much as $7 trillion — from companies now seeking to relocate or expand in the US. This makes absurd the kind of thinking you see often in the European mainstream press, epitomized by The Economist and The Financial Times. They don’t seem to realize that Europe is no longer a leading financial power; the U.S. also controls the majority of the world’s financial assets, with only China as its key challenger.

The Iran crisis has been made worse by Europe’s decision to undermine its own energy production, making them twice as exposed to the Hormuz crisis as the U.S. It’s Europe, not North America, that is facing an imminent shortage of jet fuel, a direct threat to the one industry — tourism — that sustains much of the continent.

Two decades ago, one could legitimately see Europe, with its own regime of protectionist policies, as a determinative third force in the world economy. But today, not so much.

Europe’s weakness is amplified by its pathetic military stance. Countries like Britain and France talk a big game, but increasingly Britain can’t even defend its own bases from Iranian missiles. They have become dependent on American kindness, now not always a cup overflowing.

Leaving NATO entirely might be a mistake for America, but it would leave the EU and Canada largely defenseless. Those who cry loudest to cut ties likely will be the last to step up defence spending to make up for it.

So, whither Canada? America remains the only serious counter to authoritarian countries — Iran, Russia, China — whose values are far more outside Canadian norms than those even of this U.S. Administration. What would the EU do if threatened with Iranian nuclear-tipped ballistic missiles? I doubt their opting for, as one observer put it, “the delusion of soft power and woke diplomacy,” would be all that effective.

Canada, of course, should always look out for its own interests. But does this mean looking towards Europe as an ally? America remains, by far, the largest investor in Canada, more than the entire EU, China, Japan and the U.K. combined. It also shares many geopolitical advantages that Europe does not have, most obviously in terms of energy resources.

Nor would a growing European alliance necessarily make Canada freer. Trump may strut around like a superannuated Mussolini, but values like free speech are rapidly disappearing in Europe. When EU advocates talk about “values,” they mask their real censorious intentions with noble rhetoric. I assume Canadians, like Americans, generally prefer free speech and less censorship.

One favorite media meme is that Americans, reacting to Trump, are moving to Europe or Canada en masse. About five million Americans now live in Europe, just about the same numbers as those settling in the U.S. Many of the Americans are young digital nomads or retirees. In contrast, European immigrants, increasingly from the more vital eastern regions, tend to be extremely well educated and want to participate in a more dynamic economy.

This pattern applies even more so to Canada. The U.S. is now home to nearly 800,000 Canadians, roughly twice the number of Americans living in Canada. More important still, the nature of the immigrants is quite revealing. A majority of U.S. residents in Canada are over 50, and many may be retired. It’s the go-getters who go south. According to Bank of Canada  research, many of the south-migrating Canadians come in the top 1 per cent of earners.

To be sure, Americans can be annoying, socially clueless and pushy. But they are also great role model for success. They also represent ideal customers for Canada’s products, including tourists drawn by its natural beauty and what remains of its civilized way of life. You may not want to give up on any of these differentiating assets, but looking to Europe seems a mistaken way to preserve them.

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