In recent years, the Western world, led by the US, has become entangled in increasingly bizarre situations – not only protracted and often pointless wars, but also enormous debts and potential economic crises. So what has led to this precarious situation? I would like to highlight two major mistakes that stand out from the vast pile of accumulated missteps.
1) Of course, one could argue that the West should have stayed out of the Russian-Ukrainian war, which is in many respects an internal dispute that perhaps need not have turned into a war. Setting aside this obvious fact, the sanctions against Russia and other BRICS countries were the major mistake. They hit back hard, as the West no longer holds the economic upper hand. Sanctions work best if one has economic dominance oneself and the sanctioned countries are heavily dependent on imported goods and foreign trade. If they are partially self-sufficient or have economic partners who do not care about the sanctions, then the tactic does not work. Instead, the sanctions may backfire, and your own country is exposed to higher prices and tariffs.
2) Whilst the Covid lockdowns certainly kept people in their homes, and gave our leaders a golden opportunity to show who’s really in charge, they also led to many people starting to work from home, a trend that continued even after Covid. The rise in remote working meant that many office spaces stood empty and subsequently remained unlet. As office rents are a major expense for many companies, they seized the chance to save money by getting rid of unused space. The only reason office rents are not falling is that they are owned by institutional investors, pension funds and the like, who are not particularly affected by rental income in the short term, as the purchase is primarily a long-term investment.
Furthermore, vacant premises will sooner or later cause the housing bubble to start cracking, and many wealthy individuals have invested huge sums in property, which would make them very nervous and prompt them to look for other investment opportunities. Well, we’re not quite there yet.
Rising prices per square metre are also a way for politicians to mask hard times, and they are keen to encourage mortgages and debt. GDP rises when property prices rise, without us actually having invented or produced anything new. So, even though many people feel richer when property values rise, the profit can rarely be realised, as one must have somewhere to live. GDP is therefore a tricky way to measure growth. Perhaps, in the long run, it is a measure of increased debt?
The rising property prices of the 2000s are perhaps the best indicator of a stagnant society, in which many young people are shut out of the housing market because they can no longer afford either a deposit or a mortgage. This has an impact on society as a whole, where urban life is becoming increasingly difficult, and where overcrowding, lower standards of living or moving to the countryside become the only options.
Consequently, falling house prices appear attractive to those on the outside, whilst rising prices are attractive to those already part of the system. And perhaps the empty office spaces left in the wake of Covid could be what shatters the dream of ever-rising prices?
We are living on old memories, and our beautiful European cities are tending to become open-air museums for Americans and Asians on holiday. Innovation and new thinking now take place outside Europe; we have become the followers and the copycats, whilst we delude ourselves that everything is working and we are heading in the right direction.
At the same time, Europe has very strong human capital, innovative traditions and good infrastructure – the world lies before us – but we find it incredibly difficult to break free and begin to challenge the new economic order. Apart from the daily bureaucracy and the eagerness to regulate citizens’ lives, our leaders have no vision or goals.
