North America vs. Europe for whom is the future brighter?

What began as an American national prime-mortgage lending crisis has quickly spread to Europe and the emerging markets of Asia, South East Asia and Latin America, transforming into one of the worst global financial crises since the Great Depression.

I had an interesting discussion online with a friend of mine the other day. This friend, is about to finish her Law Degree at City University in the UK.

She is originally from France, so I teasingly asked her when I could call her a London Barrister?

She replied that she doesn’t want to be a lawyer, despite the fact that she thoroughly enjoys her studies. In any case, she retorted, there are no jobs in the UK these days.

She has decided that she wants to do her Masters in Communication in NYC. I replied, with a smile, that the job market was likely just as bad in NYC. :)

This sparked off a lengthy conversation about which region of the world, Europe or North America will be better off in the long-run given the global economic crisis?

To be fair, we didnt talk about the outlook for the whole world. The National Intelligence Council Report predicts that by 2025, the global system will be multi-polar, with the US and China as the main players with Russia and Brazil and India also having increasingly more influence.

But for the sake of this particular examination, lets just focus on Europe and North America. In our discussion, I argued that North America is, most certainly better off.

Perhaps I have been in North American too long now, but if you look at European demographics and economic trends, the hard truth that their relevance on the international stage will decline is painfully obvious.

Aging Population and low birth and immigration rates

Based on current projections (NIC Report) the annual level of net immigration would have to double or triple to keep working-age populations from shrinking in Western Europe.

What does that mean?

Even with productivity increases, slower employment growth from a shrinking work force probably will reduce Europe’s already tepid GDP growth by 1%.

The NIC report shows that the entire EU economy will comprise of just barely over 10% of the entire global economy by 2050.

Birth rates aren’t incredibly high in North America, especially when compared with most developing countries, but at 11% (Canada) and 14% (US) they are higher than any EU country.

Moreover, the immigration rates are far higher in North America. Canada has the highest per capita immigration rate in the world driven by their economic and family reunification policies.

Only recently has Europe started to bring in more immigrants, perhaps as a desperate attempt to alleviate their labour shortages. According to the NIC, by 2025, non-European minority populations could reach significant proportions—15 percent or more—in nearly all Western European countries and will have a substantially younger age structure than the native population. But given growing discontent with current levels of immigrants among native Europeans, (to be exacerbated for sure, with more economic crisis) these increases are likely to heighten tensions.


Unemployment

My friend argued that 3 million American workers lost their jobs last year. That’s true, and a scary fact. (Up here in Canada 250,000 lost their jobs last year).

But the reality is that 3 million people correspond to 1% of the US population adding to what was a 6% unemployment rate.

France and Italy already have 8% unemployment rates, but a ridiculous 30% unemployment rate among people between 25-30 years old! Moreover, France and Italy have had 0% growth for the past decade!

My friend also argued that France has less poor people than the US, because of their social welfare system. That is also undeniably true for most of Europe as well. However, given their demographic and economic troubles, I'm not sure how much longer that system can last.

The only way Europe can fix their demographic deficits are to have cutbacks in health and retirement benefits, which most states probably don’t even want to contemplate. A strong social welfare state has been the politically uniting ideology of the EU since WWII. But with low economic growth, and aging population and a lack of popular will to increase immigration, what is going to happen?

Certainly the crisis is going to push the US (if Obama gets his way) into a more socially equitable economic structure. Canada already is very much a social welfare state. But north America has lots of resources, high economic growth, high birth rates and high immigration (especially Canada). So although this crisis is going to hurt, in my opinion the ability of North America to bounce back seems a lot more likely than that of Europe.

The big concern I have is that the challenge of integrating immigrant, especially Muslim, communities in Europe will become acute if citizens faced with a sudden lowering of expectations due to the struggling economy resort to narrow nationalism and concentrate on parochial interests.

If youre interested, check out the NIC Report:

http://www.dni.gov/nic/NIC_2025_project.html