The Foreign Service Journal - April 2017
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APRIL 2017


of Europe. Relations with Brussels and the E.U.’s policymaking

machinery, in particular, are increasingly combative—perhaps a

legacy of their resistance to the Soviet yoke, or a symptom of the

E.U.’s much-criticized “democratic deficit.”

Also troubling for the E.U.

is the North-South divide

separating its Western Euro-

pean members. The fiscal

austerity forced on southern

debtor countries by Germany

and other northern Euro-

zone states has accentuated

economic disparities between

them. Youth unemployment

and backward industries with

little high-tech innovation

have become hallmarks of the

so-called “Club Med” Medi-

terranean economies.

Developments in France will be crucial to the continent’s

future. Although geographically a “Club Med” country, France

has been one of the E.U.’s economic powerhouses. In recent

years, though, the wasting of its industrial sinews has become

cause for concern. The populist siren calls, notably anti-immi-

grant rhetoric and demands for trade barriers to protect French

jobs, have produced a steady rise in support for the far-right

National Front Party. Elsewhere, extremists on both the left and

right, offering simplistic solutions to complex problems, have

become prominent figures in national politics, and pose very

real threats to Europe’s continued integration.

The Demographic Dilemma

The deceptively straightforward nostrums offered by these

populist politicians fly in the face of a single, overwhelming

reality: Europe is aging at an alarming speed, and its workforce

is shrinking while social security costs are soaring. As a rough

average, there are at present four working-age people to support

each pensioner. But by mid-century, that ratio will have shrunk

to just 2:1.

That’s clearly unsustainable, yet this grim demographic out-

look is scarcely discussed in national debates. Nor is there much

focus on the more immediate consequences of labor shortages

on the overall European economy. The reality of a dwindling

working-age population is being eclipsed in the public mind by

the headline figures of joblessness among young people.

There’s no question that school-leavers and even university

graduates in many parts of Europe have a tougher time finding

work than did earlier generations. The years since 2008 have

seen unemployment in the E.U. rise by 10 million people to 26

million, contrasting sharply with the previous decade during

which 25 million new jobs

were created. This roller-

coaster is, though, of much less

importance than the size of the

labor force.

It is generally accepted by

economic analysts that a grow-

ing labor force is key to growth

in a country’s overall economy.

Even if tighter immigration

controls lead to a slowdown

in America’s forecast demo-

graphic growth from 320

million to around 400 million

by mid-century, the U.S. economy is on a steady upward trend.

That of Europe is not.

The present population of the European Union, including

the United Kingdom, is 510 million—and looks likely to fall to

around 450 million by 2050. Raw numbers like these are less

significant, though, than the ratio between workers and depen-

dents. How far and how fast Europe’s workforce will shrink is

going to be determined by the flow of immigrants.

By mid-century, the E.U.’s workforce of around 240 million

people today will be down to about 207 million, assuming that

immigration into Europe continues at its present rate. That is

worrying enough, but there’s a growing risk that immigration

will be stifled. The surge in 2015 and 2016 that saw some 1.5 mil-

lion refugees and economic migrants from conflict zones like

Syria and across Africa undertaking perilous journeys to reach

Europe provoked much sympathy, but also a strong anti-immi-

gration backlash.

Voters are increasingly anti-immigrant. It’s a mood that did

much to determine the outcome of the Brexit referendum in the

United Kingdom, and it is shaping election outcomes across the

continent. Yet the economic effects of halting or severely cur-

tailing immigration are potentially catastrophic. Without new

blood from beyond Europe’s borders, the present workforce

could number only 169 million in 2050, taking a huge chunk out

of the European economy and limiting its maximum attainable

growth rate in gross domestic product to barely 1 percent a year.

No one is more worried about this trend than Germany’s

hugely successful export industries. Daimler, the Stuttgart-

Since 2000 the United States

has been steaming ahead with

productivity gains of more

than 2 percent a year,

while Europe is floundering at

barely half that rate.