Thomas Piketty: 'European countries have achieved unprecedented levels of prosperity and social well-being'
Length: • 4 mins
Annotated by Antti Jauhiainen
To win the cultural and intellectual battle, Europe must staunchly defend its model, writes the economist in his column, dismantling the narrative of a 'declining' continent.
To assert itself on the world stage, Europe first has to take pride in what it has become since 1945: a democratic, social and transnational power. European countries, which had long been fierce rivals and colonial empires, united after experiencing the abyss. Within this union, they developed a new social and democratic model, and Europe became a social-democratic power. This does not confine Europe to a particular political camp: It is simply a recognition of the broad consensus across the continent in support of the European social model.
The terms may vary: German conservatives refer to a "social market economy," some prefer the notion of a "social state," others speak of "ecological social democracy" or "eco-socialism." These debates are legitimate, but the fact remains that no significant political force in Europe is proposing to reduce the role of the state to what it was in 1914 – less than 10% of gross domestic product (GDP), consisting mainly of sovereign and military spending. The most prosperous Nordic countries, such as Denmark, Sweden and Norway, have public spending close to 45% or 50% of GDP, similar from an historical perspective to the levels seen in Germany and France, and no one is going to reverse this reality.
The debate about the future centers on whether to stop there, which is the scenario of conservative social democracy and is widely shared by the right and sometimes the center-left, or whether to continue moving forward in response to new challenges, which is the thesis of ecological social democracy and eco-socialism. The latter is more ambitious but also more complex to implement. In any case, Europe is a social democratic power and will remain so.
Outdated indicators
If someone had told the European elites and liberal economists of 1914 that wealth redistribution would one day account for half of national income, they would have unanimously condemned the idea as collectivist madness and predicted the continent's ruin. In reality, European countries have achieved unprecedented levels of prosperity and social well-being, largely due to collective investments in health, education and public infrastructure.
To win the cultural and intellectual battle, Europe must now assert its values and defend its model of development, fundamentally opposed to the nationalist-extractivist model championed by Donald Trump's supporters in the United States and by Vladimir Putin's allies in Russia. A crucial issue in this fight is the choice of indicators used to measure human progress. This is not a mere technical matter; it is political and affects all citizens. All too often, the European debate becomes mired in outdated indicators that are completely unsuited to considering the future and social well-being in an era of climate change.
The most glaring and unfortunately common mistake is to compare GDP per capita using market exchange rates. This amounts to ignoring the surge in prices in the US. It is like examining the evolution of wages while forgetting inflation. In 2025, the average exchange rate was on average around $1.10 to €1 (about $1.05 at the beginning of the year and $1.15 at the end). However, to equalize price levels, the exchange rate would need to be approximately $1.50 to €1. By failing to use purchasing power parity – the only way to compare the real levels of goods and services produced in each region – people overstate US wealth by nearly 40% compared to European wealth.
Fair model of development
The second mistake is to overlook differences in working hours. Europe chose shorter workweeks and longer vacations, which increases social well-being and reduces its material footprint. Taking both factors into account, hourly productivity, or GDP per hour worked, measured in purchasing power parity, is higher in northern Europe than in the US, whose lead in some sectors and regions is more than offset by lagging performance elsewhere.
Germany and France, which were also ahead of the US 20 years ago, have since fallen slightly behind, as a result of austerity policies pursued in Europe since the 2008 crisis. Real spending per student in France has dropped by more than 20% over the past 15 years, which is the worst way to prepare for the future. Given the enormous sums invested in higher education in the US, it is remarkable that Europe is still keeping pace.
New
The third and more serious error is to focus on market GDP while ignoring social indicators, such as life expectancy, or environmental ones. When accounting for the negative externalities associated with carbon emissions, GDP adjusted for these effects falls significantly in the US compared to Europe. Covering the planet with data centers – a new obsession in Washington and sometimes Brussels – will not solve the world's problems.
Sooner or later, Europe will have to move beyond ambiguity and defend economic and trade rules that are consistent with a truly fair and sustainable development model. For instance, opposition to the Mercosur agreement, which only exacerbates ongoing deforestation in Latin America, is warranted. Even better would be supporting the Brazilian proposal for a global tax on billionaires and multinationals, with the revenue going to countries that voluntarily restrict harmful production methods. That is the price Europe must pay to become a social-democratic power on a global scale.
Translation of an original article published in French on lemonde.fr; the publisher may only be liable for the French version.