Listen to the full episode, here.
John Norris (00:29):
Well, hello again, everybody. This is John Norris of Trading Perspectives. As always, we have our good friend Sam Clement. Sam, say hello.
Sam Clement:
Hi John, how are you doing?
John Norris:
Sam, I’m doing fantastically, and who couldn’t be doing okay?
Sam Clement (00:40):
I don’t know, John.
John Norris (00:41):
Well, I’m going to tell you right now, perhaps some folks in Europe—so at least people that really kind of follow Europe in terms of geopolitics—maybe the Europeans aren’t doing so well.
Sam Clement (00:51):
I can kind of see where you’re coming from.
John Norris (00:53):
Well, the thing about it is—and not to diss on anyone, obviously you’ve got to start out with the caveat—anything that you hear here on Trading Perspectives is really my opinion, John Norris, as well as Sam Clement’s, not necessarily those of Oakworth Capital Bank or any of its shareholders, stakeholders, board of directors, or any other associates, all that stuff.
I’m going to tell you this about the Europeans. So take a look at it. There’s the old expression: money talks and, well, something else walks, right? And really, since the end of 2007—really since the financial crisis, the global financial crisis of 2008–2009—Europe’s economy has just really lagged, and really lagged pretty badly.
And you can’t have that type of period of economic stagnation, if not contraction, and still expect to carry the same voice in global affairs as you did previously.
That’s what I say, and you’re going to have to try to convince me otherwise.
Sam Clement (01:52):
It’s hard to disagree. And I think even if you just take a simplistic view of it—what are the biggest, fastest-growing companies, and where are they coming from? It doesn’t seem to be the EU.
John Norris (02:05):
And listen, there are a couple of exceptions—maybe ASML out of Holland, Novo—I’m going to script that—Novo Nordisk out of Denmark. There are a couple of exceptions there. But you’re absolutely right.
And really, when we take a look at the companies, it’s really sort of a reflection on the economy as a whole, I would say.
And in 2007, according to the Bloomberg financial data that I’ve got on my desk—downloaded all this information—according to what I compiled on Bloomberg, the EU in 2007 represented about 25.3% of overall global economic output. Twenty-five point three percent.
In that year, at the end of 2007, the United States represented 24.7%. So for all intents and purposes, let’s just say it’s about equal. There are some differences in per capita income and all that stuff, but even so, in terms of overall output, EU and United States—about the same, right?
Sam Clement (03:09):
Yep.
John Norris (03:09):
All right. Now fast forward to 2024. The EU, in its current construction, makes up around 17.6% of overall global GDP. The United States, conversely, makes up 25.9%.
Now, there are some people out there—Brexit, all that stuff. Well, okay, I hear you. That alone doesn’t make up for the difference.
And when you really take a look at per capita income—this gets real nerdy real quick, if I haven’t already gotten there—Sam, in 2007, in terms of just good old-fashioned nominal dollars, nothing more—there’s no chain or anything. Actually, these are chained numbers.
Per capita income in the EU was $33,802. Last year, at the end of 2024, it was $43,393.
So you kind of look at that and say, “Oh, it’s not too bad.” It’s all right. That’s about a 1.1% annualized growth rate. I imagine a lot of people don’t think that’s real great.
You take a look at the United States, conversely, over that timeframe. In 2007, per capita income—again, this is just GDP divided by estimated populations—in the United States was $48,050. At the end of last year, 2024, it was $84,534.
So take a look at it. In 2007, per capita income in the EU was about 70.3% of that of the United States. At the end of last year, 2024, it was 51.3%.
So if I’m saying—and my contention, and we’ve all heard it before—money talks and you-know-what walks, what’s walking right now?
Sam Clement (04:52):
Well, my takeaway from it is not that the EU or Europe as a whole isn’t growing. It’s just that it’s getting left behind, and it’s growing much slower. It’d be like me running a race with Olympic sprinters. I’m going around the race.
John Norris (05:07):
Yeah, you’re still running.
Sam Clement (05:07):
Yeah.
John Norris (05:08):
And you might even be faster than me, which you probably are.
Sam Clement (05:11):
Maybe.
John Norris (05:11):
But you’re not going to be faster than Usain Bolt.
Sam Clement (05:13):
Right. And so they are growing. You look at these numbers—GDP and what have you—it’s moving in the right direction. It’s obviously better than a full-on contraction of an economy.
But the global economy is growing. The U.S. is continuing to grow. Emerging markets are starting to move more into developed markets, and there’s more mature growth. And so you have to keep up.
That percentage of global GDP has shrunk not because the economy is truly shrinking, but because they’re being left behind.
John Norris (05:46):
Well, I think you’re right about that. And probably if you’re a European listening to this, you don’t like hearing what you have to say. You probably already turned off the podcast for today.
But part of the problem also is within the EU—and we’ll get to the UK in just a second—the biggest player, the EU hegemon, if you will—and the people in France won’t like what I’m about to say next—Germany has just underperformed.
Its economy has frankly been in recession the last couple of years. And so here we have, while the EU in large part has been growing sluggishly, the biggest player—the side of the one that has to be doing well—has not been doing well.
And a lot of the growth has been coming from places like Poland. And of course, the Dutch always seem to do well, and the Baltic states seem to be doing well. But the big players—the two big players in the EU, Germany and France—are just not getting ahead.
And a lot of it, in my estimation—particularly Germany—has to do with their overall economic policy, meaning their energy policy, as well as just overall demographic headwinds that are kind of standing in the Europeans’ way.
Sam Clement (06:57):
Well, you have to have those two economies growing. I mean, we’ve talked about it similarly—it’s not a perfect example—but with concentration in the stock market, right? It’s a lot easier for the market to do well when the giant ones are doing well.
Mathematically speaking, small moves in bigger things have a bigger impact than big moves in the smaller things. So we have to see Germany and France really leading the way—or leading the charge—for the overall EU to continue to do well. And that’s based on, one, the math of it being the largest players, and two, just the pass-through effects to a lot of these other economies.
John Norris (07:33):
Well, and to that end, you do have a lot of demographic headwinds in the EU. I’m just going to throw some more numbers at you. Sorry about that.
In 2007, total estimated population of the current construction of the EU was 437,514,000. In 2024, it was 449,310,000. That’s about a 15-basis-point per-year annualized growth rate. For all intents and purposes, nothing. Kind of stagnant.
The U.S., conversely—and listen, these growth rates aren’t great either—in 2007 it was 301,231,000, according to the Census Bureau. And then last year, in 2024, it was 340,111,000. That’s an annualized growth rate of just about 70 basis points.
Still not great. It’s still not great. But when you take a look at it compared to the EU, it’s four to five times greater.
And what that means is that economies oftentimes are just really based on overall output. And the more people you have, the more output you’re going to have, almost by definition.
So if you see Europe dealing with stagnation, sluggish growth, per-capita incomes are going to be about sideways compared to the U.S., which stands to be growing.
And then you compare that—shoot—you’ve got China over the last 20 years. You’ve got the South Koreans, the Indians, the Taiwanese, the Indonesians, the Malaysians, the Singaporeans. You’ve got all these other countries that are catching up, and yet Europe seems to be standing still.
You’ve got to have more Europeans, just like you’ve got to have more Americans.
Sam Clement (09:15):
It’s not an opinion. I mean, you see a lot of influential people talking about needing to grow the population. And you could talk about tax revenue, you could talk about Social Security—I mean, a million things rely on the population continuing to grow. And that’s just talking about the U.S.
And so these programs that we have built largely rely on the population continuing to grow.
John Norris (09:41):
Continuing to grow—one percent. And we’re growing at 70 basis points.
So we’re going to have troubles in the United States, but I’m sure the programs as they were designed in France, Germany, Italy, Spain, elsewhere—they were counting on population growing a heck of a lot more than 15 basis points per year.
And so what has Europe done? Well, they’ve opened up to immigration. But unfortunately, immigration’s coming in from cultures that are very un-European.
Not necessarily coming in with European values—completely different values, truthfully—different religions, different culture, different everything. And coming in and trying to assimilate these people into being Frenchmen, into being Germans.
And I don’t live there, but from what I’ve read, it does not seem to be going all that well.
So what happens when Germany is populated by people that don’t identify as Germans? When France is heavily populated by people that don’t identify as Frenchmen? When Sweden is heavily populated by people that don’t identify as Swedes? And so on and so forth.
Are they going to continue to pay into the system and believe in the system to the same degree as traditional Germans, Frenchmen, Swedes—you get the picture?
Sam Clement (11:00):
Yeah.
John Norris (11:00):
So I don’t know the answer to that question.
Sam Clement (11:02):
Oh, I just think it can create some difficulties. The U.S. is largely a melting pot, right?
John Norris (11:09):
People try to make it a salad, but that doesn’t work.
Sam Clement (11:12):
A what?
John Norris (11:12):
A salad. Melting pots work. Salads don’t.
Sam Clement (11:18):
So it can create some difficulties. But you have to have population growth. The goal is not just people coming in for these programs to continue to work. It’s people that contribute and grow the economy.
That’s the secret sauce of population growth, without a doubt. Just bringing people in does not automatically—
John Norris (11:43):
They have to come in and add value. They have to produce. If they don’t produce, then it’s—
Sam Clement (11:47):
That multiplier you’re expecting to have from population growth—
John Norris (11:50):
—without a doubt.
So kind of shifting gears just a little bit, we’ve talked about why—and some of the reasons for—Europe’s economic malaise over the last couple of decades.
I’m going to talk about something here that we haven’t really discussed already, and that seems to be energy policy.
And I do think that’s weighing heavily on Germany’s economy, maybe to a lesser extent on others. Their desire to be more environmentally friendly, produce fewer greenhouse gases, get to net-zero carbon—all that stuff—in a very abbreviated period of time.
They depended too much on Russian natural gas. And then once that was hindered with sanctions due to the war in Ukraine, you’ve seen electricity prices throughout much of the EU, as well as the United Kingdom, soaring—absolutely going through the roof.
Particularly when compared to what’s happening in the United States, as well as what’s happening in Asia. That clearly puts European manufacturers at a severe disadvantage when they’re paying two, three, four times as much for energy as their global competitors.
Sam Clement (13:13):
Do. Yeah. I put energy and the military into the same category of issues with Europe. And the war in Ukraine shined a really bright light on both of those.
And the dependence on Russia for energy, the dependence on the U.S. for military—those have been issues for decades, at a minimum decades. And it’s been talked about that this would become an issue at some point.
I remember it being discussed at a NATO conference. People laughed when someone pointed out that Europe was dependent on Russian energy. And then we see what happens.
Those things don’t happen overnight. You don’t become energy independent overnight. You don’t become militarily independent overnight. And we’re seeing the consequences of that.
John Norris (14:11):
Seeing that—and I’m glad you shifted to military—I don’t think we need to mention energy policy much more.
When you can’t control your own energy prices because you’re relying on foreign fuel, or on wind or sun, you’re going to have real problems running car manufacturing facilities and steel manufacturing facilities if what you’re relying on is wind.
Sam Clement (14:36):
I think you can make a blanket statement that anything you can’t control as a country is probably not a good thing.
John Norris (14:42):
Probably not a good thing—particularly when it comes to economic policy and military policy.
When you take a look at military policy, anyone that says Europe has absolutely armed itself to the teeth, that Europe has put military defense at the top of the list, is either seriously misguided or lying to you. There’s just no way around it.
There’s some kind of standard—two percent of GDP. Europeans have not been doing that. And frankly, they’ve allowed the United States to take care of the defense of Europe.
And the defense of Europe, for all intents and purposes, meant defense against Russia and Russian satellites.
John Norris (15:21):
I mean, that’s what it’s been, really.
And now all of a sudden, you take a look—Europe’s got to be freaking out because this particular administration is kind of saying, “We’re tired of this.”
We’re tired of this.
And it shouldn’t have been as surprising to the Europeans as it apparently has been—the decline of the importance of NATO.
And the reason for that is, let’s think about it, Sam. I was born in 1968. You were born in the mid-’90s, right?
I was born, what, twenty-three years after World War II, right? You were born fifty years after World War II—after the end of it. You were born after the Cold War.
And so for me, hey, I still remember the Cold War. Russians were the bad guys and all that stuff, blah, blah, blah, right?
You don’t remember the Cold War. I mean, whatever you’ve read in history books or whatnot, probably not—
Sam Clement (16:20):
Even—and it’s very little. To me, World War II has a bigger spot in my brain than the Cold War. The Cold War is almost an afterthought.
John Norris (16:27):
And the thing is, the Russians were the good guys in World War II. They were buddies.
So when you take a look at things, you probably don’t fear or hate Russia as much as previous generations.
Sam Clement (16:43):
Not impossible—but it’s really hard.
John Norris (16:45):
It’s really difficult for someone in your generation.
Sam Clement (16:46):
And I still don’t think the Russians are the good guys. I don’t mean that. But I don’t have the direct reasoning—
Sam Clement (16:54):
—for it that prior generations have. I almost don’t have the skin in the game that people—
John Norris (17:00):
That—yeah. I mean, for you or for my son, John.
Sam Clement (17:04):
It’s more ideological and theoretical, the Russian issue with the United States.
John Norris (17:09):
But when you take a look at the ideology—what’s going on in Russia compared to what’s going on in the EU—I mean, this is an American talking, reading what we see in the news that comes to the United States.
Things like Germany, for all intents and purposes, saying the AfD can’t participate. Doing whatever they did with the Romanian election. All but censoring Orbán in Hungary. Whatever Tusk has done to upend the president in Poland.
I mean, all these things—you go to jail in the United Kingdom for putting out a less-than-favorable social media post. None of this sounds like what we would want to see here in the United States, without a doubt.
And then Germany tried to seize Russia’s assets at Euroclear. None of this sounds like shared values, in my estimation.
So when you take a look at it—and while Russia’s still the bad guy—are Europeans really the good guys?
And that’s a question for your generation. The people who would be called upon for Article Five of NATO—to go out and kill Russians, pick up an M-16 or whatever we’re using now and go fight.
And let’s face it—I’d be very hard-pressed to think your heart would be in it.
Sam Clement (18:27):
Well, these alliances happen—and this may be a little strong—but they’re sort of a marriage of convenience.
World War II—it was easy to see why we were all on the same page with Europe. We were attacked by the same enemy.
John Norris (18:46):
The Axis.
Sam Clement (18:47):
Yeah. The Cold War—Cuba—that made sense. Shared enemy.
But it seems like NATO as a whole—and I’m talking less about the specific alliance and more about the countries involved—that marriage of convenience doesn’t have the same strength it once did.
We don’t have the same level of shared enemy we had in the past.
And that naturally shifts how I view Russia as an enemy. It’s more theoretical.
Yes, we need to be aligned with Europe. I probably agree with that. But I don’t have the same shared fear that Europeans have—or that we’ve had in the past.
John Norris (19:35):
And so you as an American—and while you probably wouldn’t be called to fight, given conscription and the fact that you’ve got dependents now and another on the way—do you think that other NATO countries, particularly the larger ones, should be picking up a bigger share of protecting Europe themselves?
Sam Clement (20:06):
One hundred percent.
John Norris (20:08):
Do you think the United States should be the primary defender of Europe?
Sam Clement (20:15):
Well, I think it makes sense that you should be the primary defender of your own territory.
John Norris (20:20):
Yes.
Sam Clement (20:21):
Again, the size and the weighting—we’re going to be a powerhouse in that, right? But at some point, you need to at least play your role.
John Norris (20:31):
Well, it’s kind of like saying, “If you don’t care, why should I care?”
And then recently, young German men were protesting because they had to answer a question about whether or not they’d be willing to fight. There were protests over that. I’m not sure if you saw that. It’s crazy stuff. Germans don’t want to go fight for Germany.
I’ve read polls from various sources—a lot from Pew Research—that say many Europeans aren’t necessarily willing to fight for their own countries.
So if they’re not willing to fight for their own country, why should we be willing to send young American men and women over there to potentially die for countries that don’t want to defend themselves?
Sam Clement (21:10):
Well, just in general—and this is anecdotal, it’s just how I feel—I don’t see a lot of appetite from younger Americans to go fight and die anywhere. Especially other people’s wars.
John Norris (21:28):
Listen, we have a very bad track record for that.
Sam Clement (21:31):
We have a bad track record. And I think it’s impossible to have a good track record fighting other people’s wars.
And we don’t have Pearl Harbor, or even the Cold War threat, where Russia posed a direct threat to the United States. I mean, I’ve seen nuclear bunkers on campuses—it felt like a very real threat to us.
John Norris (21:58):
No, we had them at Wake Forest.
Sam Clement (21:59):
Yeah. Auburn has them.
John Norris (22:00):
Yeah.
Sam Clement (22:01):
So I’ve seen that very real feeling. It didn’t happen, but those things had a real impact on people’s willingness to defend their own country.
John Norris (22:12):
So would you say right now—understanding that the great Russian bear has underperformed in Ukraine, and I mean underperformed in Ukraine—would you say Russia is a serious threat to Europe?
And if so, would the Russians be able to cause significant problems in Germany, if they could even get past Poland—which I’m not sure they could. Would the EU be able to defend itself?
Sam Clement (22:40):
I think they could. I mean—
John Norris (22:42):
I think they could.
Sam Clement (22:42):
Yeah.
John Norris (22:44):
It’d be a bloody mess, but I think it would be very similar to what we’ve seen in Ukraine.
Sam Clement (22:48):
Well, that’s what I was going to get to. The war in Ukraine has been going on, what, three full years? It’s going to be four years coming up.
That’s a lot longer than I think anybody predicted.
When you look at the maps—
John Norris (23:08):
Hey, listen—
Sam Clement (23:10):
They really haven’t moved the lines all that much in the grand scheme of things. It’s unbelievable. To an untrained eye, if you looked at the maps and saw what was Ukraine and what’s now controlled by Russia, you’d say it almost looks the same.
John Norris (23:25):
The Russians fight wars the same way every time. They’re very good on defense. They bleed the other side white, and then they go on offense.
Whenever Russia tries to take the offensive first, they don’t do a very good job. That’s the way they are now, and that’s the way they’ve historically always been.
I’ve said it. I’m not taking it back.
Sam Clement (23:45):
That’s pretty good. Even beyond Ukraine, World War II is probably the best example of that—the defense of Leningrad or Stalingrad.
John Norris (23:56):
Even World War I—they weren’t as bad as people make them out to be. In 1914 and 1915, they were pretty bad. In 1917, they were great—whenever the Brusilov Offensive was. Seventeen or sixteen—I’m drawing a blank.
And I’m not asking you to know, because I’m weird about this stuff.
So going off on that tangent—what we’re really trying to say here today is when you take a look at Europe and its place in the world today—
Listen, I just came back from the United Kingdom. Loved it. Had a great time.
It doesn’t feel like it’s falling apart or anything like that. It can stay the way it is forever, and it’d still be cultural and wonderful.
But its relative importance is going to diminish.
And that’s what we’re talking about—not absolute decline or penury or anything like that—but relative importance.
Europeans have been used to calling the shots around the world for a couple of centuries, really.
Sam Clement:
At least.
John Norris:
For a long period of time. And then a compliant United States—mostly on the same page.
Europe has played a huge role in global affairs. Now we’re looking at a future where Europe doesn’t have the economic clout it once did and doesn’t have the military clout it once did.
So how is it going to have the influence it once did?
Frankly, I don’t see it happening.
Sam Clement (25:31):
I think it’s really, really difficult.
John Norris (25:35):
I think it’s really difficult. That doesn’t mean good things don’t come out of Europe.
It just means that in terms of relative power and strength, unless Europe wants to turn things around—get more serious about economic policy, get more diligent about military strength—they’re going to have to accept a diminished role in global affairs.
They’ll still be a major power. Just less of a major power.
And we’ll see how the European eagle takes that.
What do you think about that?
Sam Clement (26:00):
I agree wholeheartedly.
John Norris (26:01):
All right, guys. Thank you all so much for listening. If you have any comments or questions, please let us know.
You can always drop us a line at , or you can leave us a review on the podcast platform of your choice.
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Take a look under the Thought Leadership tab. You’ll find links to previous Trading Perspectives podcasts, our newsletter and blog Common Cents, links to our quarterly analysis and magazine Macro & Market, as well as content from Mac Frasier and the Advisory Services team.
Whew.
All right, Sam, anything else to say today?
Sam Clement (26:49):
That’s all I’ve got.
John Norris (26:49):
That’s all I’ve got too. Y’all take care.
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