Blain’s Morning Porridge July 16^th, 2026 – Why Is America so Successful compared to Europe? 

“Oh, would some power give us the gift to see ourselves as others see us…”

In the past 15 years the US economy has left Europe in the rear-view mirror. While America booms, Europe appears to be flatlining. The question is why? Americans say it’s entirely Europe’s fault: bad policies, failing politics, and lack of unity. However, the consequences of the (as yet unresolved) European Sovereign debt crisis triggered by the Global Financial Crisis of 2008 was the speedbump.

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This morning’s quote is from Robert Burns. It’s from “To a Louse”, which is very apt for this Morning’s Porridge. Sometimes we just don’t know how stupid, daft or misguided we are. Many of us are too thin-skinned to listen. Others take criticism with a pinch of salt – railing back against those who find fault on the basis our detractors are often blind hypocrites! But it’s worth listening to what folk say about us… even when it hurts.

Recently an American Hedge Fund chum lambasted myself and an audience of Europeans for Europe’s failure to match US growth over the last 15 years – back then the two continents were about even in terms of per-capita GDP. Europe’s share of Global GDP has since tumbled from 30% to 17%. US GDP per capita is now double Europe’s. The USA is leading the innovation of tech and has become far more productive than Europe. My chum made some painful observations on European policy mistakes and explained the data. His point was simple – Europe should stop blaming Trump for its’ problems and focus on the internal reasons it is failing.

It was one of these moments to listen and ask why it happened. So, I did listen. Europe has failed in many ways.

But I suspect the major reasons behind the collapse in European competitiveness in the last 15 years have much to do with the consequences of the Global Financial Crisis (“GFC”) which began in 2007 when failing leveraged funds in the US led to the collapse of Lehman Brothers the following year. I remember it all terribly well – explaining the unfolding crisis to clients was why I started writing the Morning Porridge.

The underlying reasons for the 2008 GFC crisis were the misvalued expectations of US assets, particularly housing prices and leveraged lending (including CDOs, so clearly explained by Margot Robbie in the bath in The Big Short), over-complexity and bad banking. It triggered a global market credit Tsunami that required billions to bail out failing banks… It caused mayhem in the US markets.

However, the consequences were most severe in Europe where the global credit crisis became a mere pre-shock to the European Sovereign Debt crisis the crash triggered. (I’ll explain it all below.)

18 years later my core economic fear is a breakdown of the transatlantic economy – the relationship that’s been so rewarding between America and Europe through shared democratic values, free markets and the trust that was built between nations in the wake of the second world war and through the cold war. Europe was able to recover under the security umbrella America provided as the Arsenal of Democracy. It enabled dramatic rebirth and growth. If it breaks – everything we currently assume about global trade, power and markets changes.

Today Europe and the US appear to be on divergent paths. The US calls for Europe to take a greater share of the responsibility and costs for its security are understandable and fair – and are being addressed. However, it is in terms of political alignment where clear rifts in the structures that once united the West are under tension.

Long-term Europe has largely chosen to finance liberal welfare-based, social democratic economies. America has chosen a more market based competitive economy. Americans earn more. Europeans earn less but have cheaper health and welfare. Very different but broadly aligned for decades.

Today that alignment is stressed. No one likes to be told what to think by a foreign power – thus the resentment towards a US President trying to influence voters to support right-wing populists his party are “comfortable” with, demanding territory and insulting elected leaders. Suddenly, the Western Alliance has become a very much more transactional relationship where Europe finds itself attacked on trading and other relationships while its status as a trusted ally is diminished.

Around Europe there is a hope that this presidency will be a short-term aberration in the long-term Atlantic Economy – but hope is never a strategy. The reality is the world has changed. Russia is a now mere regional threat on the USA’s periphery when the real issue is China’s emergence as the first challenger to the USA’s global military and economic hegemony. Europe isn’t the prime policy focus anymore – but it remains the USA’s primary trading partner.

It’s a relationship under pressure. Europe blames Trump. America blames Europe.

So why has Europe fallen so far behind. My American Hedge Fund chums pointed out that in the last 20 years the Economic paths of Europe and the US have diverged dramatically:

• The USA has seen enormous innovation, growth and wealth creation because US politicians have freed up innovation in Tech and kept energy prices low – and Trump should get the credit for that.
• In Europe the economy has stalled – growth, employment and productivity flatlining. If the UK were a US state – it would be the poorest in the Union. Europe’s politicians are largely to blame.

My American chum says Europe’s key failings are over-regulating Tech and failed energy policies. He goes on to lambast Europe for its failure to agree labour reforms, on pension policies, over Nuclear Power, not realising the global economy is entirely linked to energy costs, its slavish acceptance of the “Green Agenda”. The failure to stem immigration is creating future pressures.

I’ve long argued the major strength of the US Economy is its highly developed capital markets and financial institutions. That has provided the abundance of capital to fund growth at a helter-skelter rate which often (to European eyes) looks bubbelicious!

In contrast, Europe comprises a dispersed small markets, small national banks, and national self-interests. Despite over-regulation, no European market consensus on issues as banking capital, securitisation, markets or much else has ever emerged. As a result, there is no simple capital progression for European start-ups to success, and the capital markets required to create financial asset value are sub-scale.

It is very true Europe failed to act on the Mario Draghi Report into European Competitiveness to progress fiscal union. The former Italian premier and ECB head called for directed industrial investment to stimulate skills and innovation, EU sovereign funding to finance growth, the completion of the Capital Markets Union and implementation of single markets across services, closer integration and smaller EU bureaucracy. It was welcomed with loud cheering and nods of satisfaction – and very little actually happened.

Yep… Europe sure does have problems, and America is pretty perfect…

Europe is not America. There are 46 separate nations on the European Council (Belarus and Russian were exiled), there are 27 separate nations in the EU, and 21 of them use the Euro and a represented on the ECB – Europe’s central bank. And many of the states themselves are not single entities. The UK is four separate nations – some would say 7-8. Europe is a continent of very separate tribes with long and terrible histories that can be traced back millennia.

Nations are coloured by the economic and conflict experiences. In the First and Second World Wars, the American’s suffered comparatively less than other combatants – despite their great bravery in Europe and the Pacific, US casualties were comparatively low, the continental US was never attacked, and wartime production created a long-term economic boom that lasted for at least 3 decades. In contrast Russia, Germany, China, and Japan suffered devasting military and civilian casualties, and the destruction of the economies. Russia and China continued to see threat in the struggle to outcompete the new enemy of the capitalist US – Germany and Japan embraced the victor.

France was already exhausted – having expended itself in Napoleonic Wars, part of the Franco- German conflict for dominance of Europe that ran from 1800-1815, then 1870-1945. (Some say it continues today!) Great Britain may have stood alone in 1940, and suffered relatively minor economic damage and casualties, but was economically bankrupted by the costs of war and empire. (Almost uniquely, the UK repaid all its Wartime debts – the rest of Europe? Less so.) That core competition between the French State and the German Tribes remains a factor today. The EU’s 27 member states are no equals – some are more equal than others.

However, I suspect the real reason for the widening economic gap between Europe and the US is due to what happened post-2008.

As the Western banking system went into crisis following the collapse of Lehman, it became apparently just how over exposed European banks were to domestic and international over-leverage – especially in the smaller European periphery states like Ireland, Greece and Iceland. It became increasingly clear that sovereign finances to bail these banks out would become stretched, and if one nation went down there would be cascading failure triggering similar crisis in larger nations like Spain and Italy. As cash became strapped following the crisis it triggered a deep recession across Europe.

In the UK and USA, central banks swiftly intervened to keep interest rates artificially low. In Europe the ECB (central banking by committee – and governed by political concerns like German workers should not pay French pensions)) was slower to act facing the growing crisis from stressed nations. Selling pressure on peripheral states and rumours of sovereign defaults keep yields high. The risks of a cascading sovereign debt crisis mounted till Draghi declared the “whatever it takes” to solve it – which was effectively flooding the banks with liquidity to buy sovereign bonds to sell back to the ECB – a form of quantitative easing. However, the debt crisis forced nations to stop borrowing and institute austerity – creating the lost decade of low growth/high unemployment across Europe – the consequences of which still show up today.

In contrast – the US did exceptionally well out of the GFC of 2008 after the initial economic hic-cup. The Banks were swiftly released from onerous regulation and higher capital requirements (allowing them complete dominance of global investment markets), the new private credit markets were innovated to improved capital flows (while de-risking banks), and QE ensured interest rates remained artificially low. That created an investment problem – firms found it more rewarding to borrow money cheap and spend it on buybacks rather than investing in new plant.

The effect was to create a massive stock market boom on cheap money. Anywhere else it would be called rampant inflation – instead the US stock market tripling in size was called “astute investment. The consequences of that easy money are with us today.

It also explains better why Europe and the US have diverged so much. And why realigning Europe and the USA may prove so difficult.

Out of time, and back to the tides and the waves…

Bill Blain

Author of the Morning Porridge
CEO Windshift Capital
Advisor – Spitfire Strategic Capital

Meanwhile, don’t forget about my new book:

The Battle for Hamble is a proper grown-up examination of how economies fail: a tale of Greedy Corporates, Bad Planning and Economic Illiteracy. It uses a wholly unnecessary Gravel Quarry in the middle of a prosperous village to illustrate the multiple failings and abdications of responsibility that have created Broken Britain. It’s about bureaucracy, money, exploitation and shareholders vs stakeholders. It’s about social injustice – asking why it’s ok to put 6000 jobs at risk so corporate bosses can reap bigger bonuses! Whether is the Hamble Quarry, HS2 or the abysmal state of UK armed forces due to bad procurement, read the book to understand how its broken process and bureaucratic indifference that is sinking Britain.