October 27, 2026
Dear Leland and Everett,
Today I want to talk about Europe.
For most of my lifetime, Americans influenced by socialist ideas have proposed that America become more like Europe, which, these advocates correctly pointed out, had (and has) a more generous social safety net. Most commonly, these proposals center around healthcare. Many countries in Europe have nationalized healthcare systems, paid for by taxes rather than America’s admittedly strange combination of taxes, employer subsidies, and personal contributions. But suggestions that America gravitate further toward the European model extend beyond healthcare: people often advocate America adopt Europe’s more generous unemployment benefits and maternity leave, to take just two further examples. Taken together, these arguments rightly point out ways in which the European system is more generous, at least in terms of government-provided or mandated benefits. Whether or not America should adopt the European model is of course more complicated than just which version is more generous; there are also questions about whether said programs are affordable, or whether they lead to desirable outcomes. The outcomes generated over the course of my lifetime strongly suggest the American model is vastly superior to the European model, to the point I’m frankly surprised Americans are still having that particular conversation. Strangely, however, American public awareness has been surprisingly slow to catch up with the changing times, and to adjust expectations based on real-world results.
Before we dive into the data, I want to dig into why I suspect Americans have been slow to adjust to reality. I’ve always sensed Americans believed Europeans were (and are) more civilized. America’s impulse to look to Europe for inspiration and guidance regarding civilized society probably has deep roots. America was born out of European nations after all, and for many years descendants of European immigrants made up almost the entirety of the American citizenry. American colonies naturally looked up to their mother countries. After America gained its independence and became a sovereign nation, Europe remained the continent hosting the wealthiest and most powerful nations on earth; of course America would continue to look to Europe for signs of civilization and wealth. Not until after WWII did America become a true superpower, and only over the last 80 years did America surpass almost all European nations in per capita income. Class status is sticky, and tends to outlast the underlying wealth and hard power that eventually lead to status. I suspect Americans still look to Europe for guidance on status and class out of habit as much as anything.
To my eyes, looking to Europe for guidance on how to direct America’s future makes absolutely no sense. By any number of measures, America is flat leaving our European counterparts economically behind. Back in the 1980s, when these arguments took root (at least in my awareness), the argument made more sense: most of the economies in Western Europe* were, on a per capita basis, similar in size to the US; some were larger, some were smaller, but the US was neither substantially richer nor poorer than Western European countries. When our economies were similar in size, it made intuitive sense to compare ours versus Europe, and wonder whether America should aspire to be more like Europe, with higher taxes, more social services, more government spending, and an economy tilted further toward socialism than the American system.
*[By Western Europe I’m focusing on the big three of UK, Germany, and France, along with Scandinavia, Belgium, and the Netherlands. I’m leaving out Mediterranean countries, partly because they have always been poorer than their northern counterparts. I’m also leaving out Ireland, Luxembourg, and Iceland, partly because they are small and partly because they all have individual peculiarities that require otherwise unnecessary explanation. I’m also excluding Austria, for no particularly compelling reason other than Austria doesn’t really change the picture. The primary reason I focus on the countries identified is subjective: these are the places whose systems I specifically remember folks suggesting America should emulate.]
Without the historical context and elite cultural biases, it’s hard for me to imagine Americans would look to Europe for inspiration today. The past four decades have, to my satisfaction anyway, laid bare which model was superior. It’s not hard to imagine Americans looking to aspects of the European system and wondering whether America could incorporate those elements, but it is much harder to see the entirety of the European model as a source of inspiration for how to manage society going forward.
Let’s start with economic growth and wellbeing. Again, as mentioned above, America was quite similar to Western European nations in 1980, at least in terms of income per capita. Since then, the story shifted dramatically. The average American makes 60-80% more than their French counterpart, versus almost identical incomes in 1980. Former industrial powerhouse Germany fared slightly better, with Americans going from 10-15% richer in 1980 to 40-50% richer now. Even Scandinavian countries, long seen as potential role models for wealthy countries with robust welfare states, got surpassed. The average American used to make about 10% less than the average Dane and about a quarter less than the average Swede; now Americans make about 10% more than Danes and about a third more than Swedes. [Norway is an exception in being a Western European country that remains higher earning than the US; Norway’s economic success is at least partly driven by its oil wealth, even relative to the US: oil revenues accounted for about a fifth of GDP and between a quarter and a third of state tax revenue.]
The numbers look even more stark when you compare various European countries to US states. France would rank 51st – dead last – among US states in terms of GDP per capita. The UK would rank either 50th or 51st, with per capita GDP roughly on par with Mississippi, America’s poorest state. Germany and Belgium would rank 47th, right around Alabama. Sweden would rank 42nd, around Montana, New Mexico, and Kentucky. The Netherlands would rank around the middle, around a cluster of states including Kansas, North Carolina, Tennessee, and Wisconsin. I would wager a lot of money the average American tacitly assumes these European countries are much, much richer than they are, and would be shocked to consider where they rank among American states.
Here is why income and economic growth matter: the American government (when we combine federal, state, and local) spends more per capita than France. For all France’s famed social welfare, America spends more. America can afford to spend more per person than France while imposing a much smaller taxpayer burden because Americans are so much richer than the French.
In fact, the American tax system is more distributive than given credit for. The American system tends to focus more on transfer payments to the poor and less on free services. I think transfer payments are a more efficient way to help the poor, and I think America does that adequately. America actually redistributes a larger share of the national income to the poorer half of citizens than most European countries, and the gap in income equality between America and Europe shrinks substantially once transfer payments are factored in. The bottom half of American earners take home a smaller percentage of national income, even after transfer payments, but they can afford to own and consume as much or more than their counterparts in Nordic countries, and materially more than their counterparts in France. Free services compress the gap, but private consumption and housing quality points to a higher standard of living among America’s relatively poor.
Even some of Europe’s perceived benefits, relative to the US, are overstated. Americans think pretty much all Europeans have free healthcare. While most Europeans do receive a baseline standard of care for free, that baseline is often below American standards and what I anticipate Americans would tolerate. In fact, Europeans commonly supplement their healthcare coverage with private insurance and other add-ons that make their system less advantageous than commonly understood. And that’s before we factor in certain restrictions on coverage, most commonly in the form of extended wait times. Americans can get most needed procedures completed in less than a month; Europeans often wait several months for the same procedures. I have a hard time imagining Americans developing the patience needed to suffer with a known, diagnosed condition, knowing the only thing in the way of relief is a bottleneck in the system due to a lack of funding.
Unfortunately, Europe has no obvious path out of the current situation. European companies, from my vantage point, seem to be falling behind in terms of technological innovation, competitiveness, and growth. Of the top 10 companies in the world based on sales, 7 are American; none are European. Of the top 50, almost half (23) are American versus 10 European. Zooming out to the top 500, the gap narrows (141 American companies versus 123 European), but the European companies are concentrated lower down the list.
Looking at companies by market cap is even more stark. We can think of market cap as a discounted estimate of future earnings. The ten most valuable American companies are worth close to $30T, and the 100 most valuable are worth a combined $45-55T; by contrast, the ten most valuable European companies are worth ~$3T, and the 100 most valuable companies are worth $8-12T. If we take all companies listed on a stock exchange, American companies are worth a combined ~$80T, versus European companies, which are worth ~$20T. I’m only including listed companies for ease of use, but adding unlisted companies doesn’t improve the outlook for Europe. While Europe does have large, privately held companies, America has a large number of venture-backed companies (think late-stage startups) worth trillions of dollars (the ten largest are worth close to $3T).
As far as I can tell, European innovation is being strangled by regulation, a cultural aversion to success, and a cultural reliance on the state. Examples of European overregulation abound; my personal favorite is that when German companies are purchased, the buyers and sellers must sit in front of a notary, who reads the entirety of the sales agreement aloud to both parties. Unfortunately, instead of revisiting the degree to which overregulation appears to be strangling innovation and economic growth, European leadership seems determined to impose its draconian regulations on the rest of the world. It’s rather stunning to see.
A cultural aversion to success is hard to prove; I’ve heard startup founders make different versions of the complaint and have seen firsthand commentary that seems consistent with the thesis, but I’ll acknowledge possessing limited hard evidence that would convince a skeptic. The cultural reliance on the state is easier to demonstrate. France is currently well into its second month of protests and riots. The unrest began as a nationwide set of protests demanding more school funding. On the surface, demanding better funding for schools seems laudable; taken in broader context, the French protests strike me as self defeating to the point of economically suicidal. French government spending accounts for well north of half of GDP; the statistic I hear most commonly is 57%. Whatever the exact figure, there just isn’t much room for the French state to grow. The French economy does, by contrast, have plenty of room to collapse. French public debt is more than 100% of GDP, and its deficits are running at greater than 5% of GDP. French private debt, mostly held by corporations, also exceeds French GDP. For these reasons, the cost of debt in France is rising rapidly, with 10-year yields increasing by about 1.5 percentage points in the last year, of which almost half a percentage point came over the past month. France just doesn’t have a lot of room to increase public spending; if anything, it will likely need to either decrease spending in the near future or default on its debt.
For an American, it can be a little jarring to watch a European country which ostensibly has all the things left-leaning Americans suggest we should want – free healthcare, a robust social safety net, and a combination of worker protections and regulation that ensure the work-life balance of the French – taking to the streets demanding more. Given the degree to which France in many ways pushed reliance on the state to its furthest potential boundaries, the French unrest agitating for more government largesse suggests that the healthier answer is to avoid growing the state in the first place. At the very least, we should not grow the state at the expense of the economy, because economic growth is the engine that enables social spending. But I’m even beginning to double down on my previous skepticism that the state was best suited to solve problems such as retirement and healthcare in the first place.
I worry about Europe these days. My read of history is that humans need to feel a sense of optimism for the future. Europe has stagnated economically and culturally for so long that I don’t see how its citizens could feel any real sense of optimism. Just to pick, again, on France: multiple artifacts have been stolen from the Louvre in just the past year or so. If the state cannot even protect the nation’s most precious cultural artifacts, how are its people meant to believe in their future? The most reliable way to demotivate a child is to tear apart their work once it is complete; watching cultural artifacts be stolen by gangs surely must have a similar impact on the French public psyche.
I am European by ancestry. I grew up in a nation born out of European ideals. European history and thought dominated my education. I bring this up just to suggest my life experience biases me toward a favorable view of Europe. I feel a connection and debt toward Europe. I’ve been to Europe on a number of occasions, and eagerly look forward to taking you to visit the museums and experience the culture and food.
Regardless of my bias, I firmly believe it is time Americans stop looking to Europe for inspiration and guidance. Europe is struggling, and in some places may even be failing. Europe may well need America’s support, and under the right conditions (namely, a newfound European willingness to stop pursuing self-defeating, suicidal policies) we should provide it. But it is perhaps also time for America to grow up a bit, to recognize that ours is currently the place at the head of the table. America may be born out of Europe, but that does not mean we should continue looking to Europe for guidance. Europe appears to have lost touch with the capacity to lead, to innovate, and to create. America needs to do all those things, and we’ve proven the capacity to do all of them. Perhaps losing Europe as our cultural inspiration means losing our sense of operating with a safety net, but such is the journey: at some point we must mature and strike out on our own.
My hope is that Europe can reinvent itself, but that is for Europe to decide. We live in America, and Americans must decide our own fate. Such is the age in which we live. As I type, I find the message of Matthew 10 resonating. Truth be told, that passage haunts me of late. I think we’re in an era of turmoil, and of increasingly rapid change. I think the great opportunity ahead of us is to release some demons and live a freer, fuller, more fulfilled life. The risk is that we cling to our attachments, and let them drag us down into a pit of despair, such that we lose all hope of ever becoming free. As Matthew 10 implies, I think this will be an intimately personal choice, such that it will divide families.
I may well come back to the topic of Matthew 10 in future letters. For now, I apply the lesson just to say that I hope Europe, or at least a substantial number of Europeans, might wake up to current realities. In the meantime, Americans are also adjusting to a rapidly evolving landscape. I fully anticipate the near-term journey will be harrowing. I do think the opportunity on the other side of this journey is immense, and greater than our wildest dreams can imagine. I anticipate the costs of clinging to our demons will be catastrophic. And so, to Americans, and Europeans, and anyone who will listen, may I counsel: wake up!
I love you both. May we navigate the coming challenges with strength born of wisdom, and a connection to the almighty. May you be the judge of how we did.
Love,
Dad
