What has happened to Europe’s political elite since 2010 that it keeps making decisions that undermine the prosperity, security and international standing of its own countries? Worse still, why does it persist when the damage is plain to see and European businesses and households are paying dearly for it?
Barbara Tuchman described political folly as the pursuit of policies contrary to one’s own interests despite the availability of reasonable alternatives. By that definition, Europe’s collective folly is a precise political diagnosis. Five major strategic policy failures over the past fifteen years reveal a common pattern: moral certainty has displaced reason and any serious assessment of consequences.
The first was the turn to austerity in 2010, when Europe needed public investment to support recovery and strengthen its productive capacity. Instead, German fiscal moralism elevated debt reduction into an overriding imperative. The German word Schuld means both debt and guilt; in European economic policy, the two became dangerously intertwined. Rising public debt was treated as evidence of moral failure, even when it reflected the cost of rescuing banks and cushioning a collapsing economy. The resulting drive for fiscal consolidation, subsequently entrenched in the Fiscal Compact, helped push the euro area back into recession. Public investment was sacrificed, while transport networks, schools, healthcare and social infrastructure deteriorated. Europe chose to repair its budget balances at the expense of its economic foundations. The result was another lost decade.
The second is decarbonisation without a credible industrial policy. Cutting emissions is a reasonable goal. Driving up energy and production costs through carbon allowances before ensuring that alternative technologies are available is a recipe for killing industry. Closing a European factory and importing its output may improve Europe’s emissions statistics without reducing global emissions—and may even increase them. Meanwhile, Europe loses domestic value added and jobs.
The third is shutting down nuclear power plants and replacing them with weather-dependent sources while simultaneously seeking to electrify transport and heating. During the transition, this increases the need for backup generation, electricity imports and, where clean alternatives are unavailable, fossil fuels. A recipe for energy dependence and high energy costs.
The fourth is the relentless insistence on continuing the war in Ukraine and imposing sweeping sanctions on Russia without adequately accounting for the costs to Europe itself. The breakdown of economic and energy relations has contributed to soaring energy prices, lost export markets and the contraction or relocation of energy-intensive industries. The strategic failure lies in treating diplomacy as a concession rather than an essential instrument of policy, while refusing to define an achievable outcome in a war Ukraine cannot win on the terms its supporters have proclaimed and Europe cannot finance indefinitely.
The fifth is the double standard applied to Russian and Israeli aggression. European leaders demand unconditional respect for international law in Ukraine yet fail to apply the same standard to Israel. Russian teams face sweeping exclusions from international competitions; Israel continues to participate in Eurovision. The rest of the world can see the difference between a universal principle and geopolitical allegiance. Brussels pretends there is none.
For years, people in my circle have been wrestling with the question of what could rationally explain this collective European folly. We found no satisfactory answer. So I asked artificial intelligence for help. It offered several explanations for how policies that are irrational and ruinous for Europe might nevertheless be entirely rational for the people and organisations shaping them.
Start with the institutions. The European system rewards mastery of procedure, the ability to broker compromises and fluency in the approved political vocabulary. Understanding how an electricity system or an industrial production process works is no prerequisite for promotion. Since regulation is Brussels’ principal instrument, every problem becomes an opportunity for another rule. A shortage of productive capacity is answered with targets. A shortage of geopolitical power with sanctions. An investment shortfall with fiscal constraints. Adopting a document counts as a political achievement even as conditions outside the meeting room deteriorate.
Then comes groupthink. Politicians, officials, influential commentators and sections of the expert community circulate through the same conferences, reassuring one another that their shared convictions are correct. Advocate public investment financed by borrowing and you become fiscally irresponsible. Question the cost of decarbonisation and you become a climate denier. Advocate negotiations and you become Putin’s ally. Criticise Israeli policy and you become an antisemite. Once a substantive objection has been recast as a moral offence, there is no need to answer it. The debate is closed before the arguments have been examined.
Next, consider the interests involved. Expensive energy is a cost to industry and revenue for its suppliers. A subsidy is a burden on taxpayers and a business opportunity for its recipient. Rearmament strains public finances while filling defence contractors’ order books. New regulations impose obligations on businesses, expand bureaucratic authority and create markets for consultants. The benefits accrue to organised groups; the costs are spread across millions of people.
Davos belongs in this picture too. The World Economic Forum is no secret world government. It is, however, a place where political, financial and corporate elites align their visions of the future. Steering policy towards powerful interests requires no overarching conspiracy. Shared interests, access to decision-makers and the conviction that what benefits one’s own circle must also benefit humanity are quite sufficient.
Transatlantic dependence reinforces the mechanism. What benefits American energy suppliers or arms manufacturers does not automatically benefit European industry. Yet Europe’s elite often treats loyalty to the alliance as a substitute for defining Europe’s own interests. Once the costs become apparent, another incentive takes hold: the fear of admitting error. Changing course would threaten reputations, careers and the credibility of past decisions. Failure therefore becomes evidence that the same policy must be pursued with still greater determination. If austerity depresses growth and makes debt harder to repay, prescribe more austerity. The doctrine survives; the economy bears the consequences.
Europe’s crisis cannot be blamed on a shortage of information or expertise. Warnings about austerity, neglected public investment, energy policy, industrial competitiveness, self-defeating sanctions, security risks and genocide in Gaza were available. The problem is a political system that filters out inconvenient information, disperses responsibility, discredits criticism on moral grounds and turns its own failures into arguments for ever more extreme versions of the same policies.
Collective political folly.
