European Shortfall As A Historic Constant

For some resson, the Wall Street Journal put up a link on Facebooki to a piece they ran last April, What Happens When Europeans Find Out How Poor They Are?. Coming back to it today, I find they've tucked it back behind a paywall. But the first paragraphs give up the gravamen:

Do Europeans understand how poor they are? And what will happen when they find out? Those are the Continent’s big political-economy questions for the next few years—perhaps decades.

The widening gap between American and European prosperity is among the most important facts of the global economy. The clearest manifestation is the chasm in per capita gross domestic product: $94,400 in the U.S., according to the International Monetary Fund, compared with $65,300 in Germany, $61,000 in the U.K. and $52,000 in France.

I don't know what history books this fellow has been smoking -- I've gradually come to recognize I did well by not taking any undergraduate history courses -- but European and UK underproduction vis-a-vis the US is a basic fact that underlies the whole 20th century. It's simply nothing new. To show what an elementary issue this is, I asked Chrome AI mode, "Is it possible to compare the difference in per capita GDP between the US and Germany as of 1900?" It answesred,

Yes, it is entirely possible to compare the differences in per capita GDP between the United States and Germany as of 1900, thanks to extensive reconstructions by economic historians. The most authoritative source for this data is the Maddison Project Database at the University of Groningen. This database standardizes historical economic output across time and borders using Purchasing Power Parity (PPP) adjusted to "International Dollars" to account for local cost of living and inflation.

The 1900 Economic Comparison

Data from the historical data records show that by the turn of the 20th century, both nations were rapidly emerging as global industrial powerhouses:

United States per capita GDP (1900): ~$4,096

Germany per capita GDP (1900): ~$3,134

The Absolute Gap: The US led Germany by approximately $962 per person.

The Percentage Difference: The average American's economic output was roughly 30.7% higher than the average German's.

I went to my calulator and founnd that thr contemporary numbers for Germany given in the WSJ show Germany's per capita GDP is 69.3% of the US, versus the 1900 numbers from AI showing Germany's per capita GDP as 69.3% of the US. In other words, the difference over more than a century is de minimis. This guy was somehow able to convince the WSJ that he had something important to say. These people presumably took the same history classes that say Winston Churchill was a great man.

I said above that this is a key fact that underlies the history of the 20th century. Let's ask Chrome AI another question: "Did US banks finance the UK and France throughout World War I?" It answered,

Yes. US banks, led by J.P. Morgan & Co., heavily financed the UK and France throughout World War I. Prior to the US entering the war, Wall Street banks provided billions of dollars in loans and credit to purchase essential American munitions, food, and raw materials.

When the Allies exhausted their initial gold and cash reserves in 1915, J.P. Morgan & Co. organized a historic $500 million Anglo-French Loan to prevent the Allied war effort from collapsing. By 1917, after these commercial credit lines were tapped out, the US government stepped in directly, with the Treasury lending roughly $10 billion to the Allies through the end of the war.

Say what the history books will about the Lusitania and the Zimmermann Telegram, it was actually the fear of the UK and France defaulting on their war loans that drove US entry into the war, and the unpaid war loans were a continuing issue that drove international policy in the 1920s and 1930s. I asked Chrome AI mode, "What effect did UK and French postwar debt have on the German reparations issue?" It answered,

The postwar debts that the UK and France owed to the United States directly paralyzed the German reparations issue, creating a vicious, unworkable economic triangle during the 1920s. Here is exactly how these intersecting debts shaped the reparations crisis:

The Debt-Reparations Triangle

US Demand: The United States demanded full repayment of wartime loans from Britain and France.

Allied Stance: Britain and France could only pay the US if Germany paid them reparations.

German Collapse: Germany’s economy was too broken to fund the entire Allied debt burden.

The basic problem was that neither Germany, the UK, Austria-Hungary, France, nor Russia had the wherewithal to finance the war that began in 1914. J P Morgan himself died in 1913 a seriously ill and mentally diminished man. His son Jack doesn't seem to have been able to correct his father's serious misjudgments in the years before his death, and organizing the 1915 Anglo-French loan without demanding a resolution to the war as a condition was a major lapse in itself, as far as I can see.

But let's skip over the miscalculations of the 1920s, for which Winston Churchill bore a great deal of responsibility, and move to the Second World War, in which neither Germany, nor France, nor ther UK, nor the Soviet Union, nor for that matter Japan, had the financial wherewithal for the extended fight. 1941 was simply a replay of 1917, with US money, organizational ability, and production power shifting the balance. (It was also able to push Churchill out of any influence over Allied policy.)

While both the Soviet Union and Germany couid conceal their financial disadvange via extensive use of slave labor, for Germany in particular, US production capacity won out; it could replace airplanes and pilots, when Germany couldn't. But this is just a special case of a historic constant, something only Trump has been able to recognize, and he's been belatedly readjusting policy as a result.