Robert Oostinga

There is an important implication of the AI revolution that will profoundly impact Europe’s future, one most people don’t grasp yet. Europe’s high labor costs, driven by astronomical taxes and social contributions funding extensive welfare systems and overblown state spending, create a far stronger incentive to automate than in the US. With labor taxes accounting for over half of EU tax revenue, replacing workers with AI and robotics will directly shrink the tax base sustaining pensions, healthcare, and public spending. The US faces automation pressures as well but holds a structural advantage, its dominant AI companies (holding roughly three-quarters of global AI computing capacity versus Europe’s roughly 5%) generate taxable profits and capital gains at home. Higher taxes on tech firms or shareholders can offset lost labor based tax revenue. Europe has no such option. Attempts to tax US providers more heavily would risk restricted access, higher prices, or delayed releases for European users. Without competitive AI, European goods and services will lose competitiveness against those made with superior tools, further eroding corporate and labor tax bases in a reinforcing cycle. Europe would lose both income and corporate tax revenues to sustain its welfare, pensions, and big state systems, while facing a wave of displaced workers expecting benefits. High energy costs (often roughly double US industrial prices) and data rules constraining training make large-scale European domestic AI development basically impossible. This stems from bad left policy choices that raised labor and energy costs while limiting flexibility and data needed for tech innovation with excessive regulations. Bad left policies have always had serious consequences, in the current AI-turbocharged world, they will shake the foundations of European economies and societies. The unrest and riots now seen in many European cities will feel like a walk in the park compared to what is coming.