The Compelling Story Behind Europe
As Intel co-founder Andy Grove wrote in his book Only the Paranoid Survive, there are certain events which result in a "strategic inflection point" after which nothing is ever the same. While paranoia may be an extreme response to an economic threat from Europe, investors would be similarly misguided to ignore what is happening there - and happening in a BIG way.

Two recent books elaborate on exactly what is going on "across the pond" in new Europe. The first is The United States of Europe by Washington Post correspondent T.R. Reid. The other is The European Dream by Jeremy Rifkin. Both are illuminating and highlight many reasons for concern about our economic future and the perception of invincibility most Americans embrace. These books do not predict an end to America as a major player in the world economy nor do they suggest we will fall from our pedestal as did the Roman or British Empires of past. They do, however, suggest several reasons why the U.S. may have to share the economic stage with others and shed some of the "unilateral" attitude many around the globe have come to resent.

Europe - The Basics
The Europe Union (EU) now has 25 member nations with a population base of 455 million and an $11 trillion dollar economy. In other words, the EU has a larger population and economy than the U.S. That, in and of itself, is reason to pay attention. While Europe doesn't represent a military threat, the next battle for world domination may be fought on the economic and philosophical battle field as well as the military one.

The U.S. dollar has hit historic lows relative to the value of the Europe's currency (the euro). This is a real concern as it affects our purchasing power around the world. It also limits our ability to attract international investments in our economy as well as the loans we have relied upon to finance our spiraling budget deficit - these loans have been in the form of foreign governments buying our U.S. Treasury bonds. It is amusing, in a disturbing way, that individuals like Alan Greenspan and Henry Kissinger are both on record has having projected that the euro would never work. Apparently, they were wrong - enormously so.

The collective power of the 25 member nation union, despite the recent rejection of the European Constitution by France and Holland, may be just the kind of "strategic inflection point" Andy Grove wrote about in terms of changing the dynamics of global economic parity. While the EU doesn't have physical territories or the ability to tax or police its citizenry, it does have an executive and legislative form of government which can override the laws of its member nations. The perceived imperialistic and bullying attitude of unilateral U.S. foreign policies has resulted in a large portion of the population that consider themselves European more than citizens of a particular country - and opposed to U.S. policy regardless of the merits of such a policy.

And because the EU provides almost 3 times as much foreign aid as the U.S. to world's poorest nations, they have considerably more pull in the international community and United Nations. More importantly, they are very willing to let the U.S. spend money and resources policing the world while they spend their money in other ways they consider more important.

What Europe Has That the U.S. Doesn't
For starters, the EU and the U.S. define quality of life differently. While gross domestic product (GDP) is lower in the EU countries, many in the population work less than 35 hours per week and take 10-12 weeks off every year to visit with friends and family or to travel and learn about the rest of the world through experience, not rhetoric.

The Economist Intelligence Unit recently conducted a "happiness" survey comparing 111 countries for relative happiness and ranked Ireland as number 1 (I know what you're thinking but it's more than their whiskey). The U.S. ranked 13th. Unlike many studies which base their results on whether respondents say they are happy, the Economist Intelligence Unit developed a complex formula to objectively rate happiness. The components used to determine the ranking were income, health, unemployment, political stability, job security, gender equality and "freedom, family and community life." Ireland won because, "although rising incomes and expanded individual choices are highly valued ... Ireland combines the most desirable elements of the new (4th highest GDP per person, low unemployment, political liberties) with the preservation of certain cozy elements of the old such as stable family and community life." While it's easy to dismiss such studies, those that do so are often the same ones who rely on similar rankings when selecting a toaster for the kitchen or a college for their children.

Despite spending more on healthcare per person than the EU, the U.S. has a higher infant mortality rate and shorter life expectancy. Ironically, there are over 40 million Americans lacking health insurance coverage while not one European fails to qualify for some form of healthcare provided by the state. And while wages are typically higher in Europe, companies have reduced costs in other areas (like healthcare) which are paid for by the government.

Children in the EU are also better educated when compared with the U.S. which ranks 9th in scientific literacy, 9th in reading and 13th in math.

And worse still, the U.S. ranks 22nd out of 23 among the world's industrialized nations in terms of the percentage of people living in poverty. Only Mexico rates worse.

As For Business And Investing
While Americans like to brag about productivity, many believe it is due to wasteful or meaningless activity like suburban sprawl, diet and celebrity crazes and the fast food industry as well as the unending spending on the military, law enforcement and healthcare. It is worth noting that the U.S. has an ever increasing prison population (requiring the building of more prisons and the hiring of more guards and bureaucrats) while the EU has much less crime, violent or otherwise.

For all the chest beating in America about economic superiority, the EU has already surpassed the U.S. in several industries including wireless technology, grid computing and the insurance industry.

It Ain't Over Until It's Over
As the famed New York Yankees catcher and manager Yogi Berra used to say, "it ain't over until it's over." Or as Abraham Lincoln was fond of saying, "keep your friends close and your enemies closer." The U.S. has been very close to their enemies (remember the "axis of evil" philosophy and Iraq) but perhaps, and only perhaps, it has taken its eye off the ball (or one of the balls) by not keeping its EU friends close enough.

The U.S. still reigns supreme and will likely, despite the undeniable surge of competition from the EU, be a significant player into the foreseeable future. Still, it is worth paying attention to what is happening in Europe and considering the investment possibilities there as well.

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