Disneyland for Grown-Ups

Welcome to This Week’s Leyendecker View

Thinking small is a self-fulfilling prophecy.
– Jeff Bezos

FAVORITE WATCH OF THE WEEK

Prayer Is the Greatest Freedom of All

THINKING OUT LOUD

Disneyland For Grown-Ups

In an increasingly competitive global landscape, as well as a wave of populism spreading across the world, Europe faces a complex set of interconnected challenges that call into question why it should be considered a global influencer, and that threaten its long-term prosperity and security. Europe’s approach to climate policy, regulatory frameworks, labor market dynamics, entrepreneurial culture, welfare systems, and defense spending each present obstacles that, taken together, create significant headwinds for the region.

Europe’s ambitious climate policies have created economic strains. According to my new research assistant, Claude, “the average industrial cost of electricity in the United States is 7-10 cents per kilowatt hour. The average industrial cost of electricity in China is 10-14 cents a kilowatt hour. While the average industrial cost of electricity in Germany, Europe’s manufacturing center, is 15-20 cents a kilowatt hour.”

The European Green Deal’s aggressive timeline has led to higher energy prices that have burdened the region’s population with higher costs and disadvantage European manufacturers competing against countries with lower energy costs and less stringent environmental regulations.

The regulatory environment in Europe presents another obstacle. The EU’s complex web of regulations, some at the EU level and others at the country level, have created compliance burdens that disproportionately impact all businesses, particularly smaller businesses.

Administrative requirements, from data protection to labor support to product standards, demand significant resources that stifle innovation, growth and entrepreneurial activity. This regulatory density makes it difficult for new firms to enter markets, existing companies to scale operations efficiently and Europe’s industries to be competitive with other global operators.

Labor market dynamics in particular complicate Europe’s economic picture. In several European countries, employment protections make hiring and workforce changes more difficult than in other developed economies. While these protections provide security for workers, they reduce labor market flexibility, labor productivity and employer willingness to create new positions.

“I should be careful when I talk about work-life balance, but Americans just work harder. We Europeans are not very ambitious,” Norway’s sovereign wealth fund leader Nicolai Tangen claimed in a recent speech. “A working person in the U.S. works 1811 hours per year. In Switzerland, on the other hand, the average is only 1524 hours and in Germany only 1340 hours – even less than France. In other words, if the American works until the end of December, the German will finish in mid-September.”

Additionally, Europe’s aging populations and declining birthrates have created workforce shortages in critical sectors, placing additional pressure on productivity and growth potential.

If only Europe had attracted the best and brightest immigrants. To the contrary, Europe’s generous social safety net support seems to have attracted immigrants more interested in taking advantage of entitlements, not the potential to become self-reliant.

The continent’s extensive welfare systems have created their own fiscal challenges. Generous pension systems, healthcare benefits and unemployment require substantial government expenditures and tax levels that affect the region’s economic competitiveness and entrepreneurial efforts.

As demographic pressures increase with aging populations, maintaining these systems without reforms will place increasing strain on the EU and individual country public finances, while limiting economic flexibility.

In terms of security, many European NATO members have historically underinvested in defense capabilities, often falling short of the alliance’s 2% of GDP spending target treaty agreement. President Trump brought this to the forefront in his first term.

Little has changed since then, and now Trump looks to be laying the Ukraine war resolution, as well as future Russian engagement, on to the lap of European leaders. No longer can Europe hide behind the skirt of American support. No longer will American voters be subsidizing European safety and defense.

These challenges are interconnected and mutually reinforcing. Regulatory burdens discourage entrepreneurship; high social spending necessitates tax levels that affect competitiveness; entitlement culture has attracted the less hard-working immigrants; climate policies have raised costs that impact industrial competitiveness. The combination creates a difficult environment for economic growth and innovation.

Europe’s situation may not be without hope. Most of us know the old saying, “necessity is the mother of invention.” Humans can adapt. Necessity can also be the mother of get up and get after it.

The European region still possesses strengths from which it can rebuild, like capable educational systems, strong infrastructure, established industrial bases, and democratic institutions. 

As we’ve seen over the last couple of years, those democratic institutions have motivated a voter revolt against the bureaucratic state that burdens the region’s private sector. Is this evidence of a coming turnaround?

Recent crises have prompted reconsideration of policies in several areas. Voters increasingly object to Europe’s “let in all refugees” immigration policy. Damn-the-economic-torpedoes climate change policies are in retreat. Increased defense spending commitments are under consideration. Regulatory reform initiatives are being discussed. The Germans have just announced they are prepared to spend whatever it takes to right their economy.

The path to better days will not be easy. The EU is, after all, a collective of multiple independent national bureaucracies layered with one massive bureaucracy. And none of these bureaucracies will be eager to shrink itself in the manner necessary for step change. But if Europe once again wants to be a globally competitive force, they will have no choice.

Maybe this wake-up call will push Europe to reallocate their effort away from idealistic bureaucratic beliefs and policies and toward more private sector empowerment. If not, then Europe may at best be the Disneyland for grown-ups—little more than a tourist attraction.

THE RANDOMS

Who knew that tariffs were the federal government’s primary revenue source until the income tax came around in 1913?

The tariff situation made me remember my newsletter essay from a few weeks ago, No Pain, No Gain.

Western economies have become spoiled with constant government stimulus for 20 or more years. How much short-term pain can these economies endure?

If Andrew Como becomes mayor of New York City, what do you want to bet he runs for president in 2028?

Since some people think it’s illegal to fire federal workers, why does the private sector get to do it? Should we just ban layoffs altogether?

Why are humans more intelligent than, say, a cockroach? The cockroach has been around 300 million years. How about humans? Why would we not consider the most intelligent creatures on earth the ones that have survived the longest? Is it because cockroaches don’t care about inhabiting Mars? Or are they so smart that they’d rather let humans do all the work to get to Mars, and they can just tag along?

Does it seem like our current technological path is following the model set out in the Matrix movies?

What we say to people isn’t always what they hear.

ECONOMIC NEWS

Economy
Anyone want to talk about stagflation?

Credit card defaults at 14-year high
Auto loan defaults at 30-year high
Many are starting to worry about stagflation
Trump echoes TLV: No Pain, No Gain
Atlanta Fed predicts negative GDP

Labor
Learn a new skill, baby!

Pre-Trump chaos job report looks fine
A top-tier MBA doesn’t lock a job
Have an idea? You can be a coder
Schools are reviving shop class

BUSINESS

Finance
Hoping to catch another big wave.

Private equity industry starts to shrink
Is the private credit gold rush close to a bust?
Wall Street is not Trump’s focus
BlackRock’s woke era is over

Real Estate
Lots of irritating economic noise.

Some home values are falling
Americans postpone home improvements
Why are we building in climate danger zones?

Tech
How will AI change Big Tech??

Want an EV with a drone launcher?
Intel delays plant from 2026 to 2030
A robot DJ has debuted

AI
Are you using it yet?

China finding workarounds, buying Nvidia chips
AI softening overseas call center reps’ accents
What’s next for AI in 2025?

Energy Transition
The real real is starting to be real.

Coal-fired plant closures to double
US solar companies in trouble
US offshore wind looks dead
The troubled energy transition

THE NATION

The Washing-Tone
How deep is the deep state?

Trump creates strategic crypto reserve
Justice Department has a bipartisan nominee
SCOTUS is not Trump’s lackey
Trump wants education back to the states
And CHIPS Act to end
Veterans Affairs to cut 70,000 employees
Sanctuary cities fight back

DOGE
The bureaucrats are scrambling.

Trump clips Musk’s wings a bit
DOGE slaps $1 credit card limit on workers
Big consulting firms in the crosshairs
DOGE puts DC landlords at risk

The Tariff War
MAGA tool or new tax policy?

Here today, gone tomorrow tariffs
Tariffs are negotiable
End of the free-trade era?
TSMC to invest $100B in US

Social Trends
We’re just so confused.

CA’s Newsom splits with party on woke sports
New retirement vision? No retirement
Trump country is happy
Gen Z may never leave home

GEOPOLITICS

Global
The world is flat, right?

German bond sell-off raises global rates
BlackRock gets Panama port deal
Mexico blames US gunmakers for cartels
Japan births at 125-year low

Europe
Has it lost its relevance?

ECB cuts rates to stimulate
Germany gives up on being frugal
Europe set to seize €200B of Russian assets
Europe is ready to rearm
Investors want Make Europe Great Again

Ukraine
Is Ukraine on the ropes?

US cuts intelligence sharing with Ukraine
Zelensky ready for peace talks
US pauses military aid to Ukraine
Will Europe fill the gap?
The US wants some payback
Europe wants to negotiate via committee

Middle East
Can Trump build peace?

The secret history of Syria’s new leader
Trump gives Hamas the ultimatum
Israel not soon withdrawing from Lebanon
Egypt has a Gaza plan
Arab states agree on Egypt’s plan

China
The quiet giant still looms.

China blames US for export slowdown
US charges 12 Chinese national in US for hacking
What the US imports from China
China’s tech minister removed from office

War Creep
Who is brave enough these days?

China uses the “w” word—war
Germany unshackles its defense spending
Will Palmer Luckey save us all?
Drone war, deadlier than ever

MAKING A BETTER YOU

Mind
Get more quiet time.

Get better at managing stress
Understanding the ketamine experience
Is God a mushroom?

Body
Get more outside time.

Lifestyle choices more important than genes
Why everyone should take cold showers
10-minute yoga

FUN STUFF

Let your hair down, baby! Even if you’re all alone.

The Extraordinary

2025 underwater photography contest winners
Who’s up for a public bench project?
Earth was once covered in snow and ice

Music That Found Us

Classy classical
Slim Smith & The Uniques “My Conversation.”
Lyrics can be poetry, ya know.
Jason Isbell “Foxes in the Snow”
More poetry

Worth a Watch

Mickey 17 looks hilarious.
The sweet Superboys of Malegaon.
The fun Running Point trailer.
Wacky, crazy Companion trailer.
A Thousand Blows trailer.

The Yum Yums

Best fried rice recipes
Miso leeks with white beans
Magnolia Bakery’s banana pudding
How to cut shallots and garlic

PARTING THOUGHTS

It takes inordinate courage to introspect, to confront oneself, to accept one’s limitations—scientists are seeing more and more evidence that we are specifically designed by mother nature to fool ourselves.
– Nassim Taleb

IN CASE YOU MISSED IT

The Production-Service Jobs Balance
February 28, 2025

A Chat With Claude
February 21, 205