Europe Under Threat: Can the Centre Hold?

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1:00David McWilliams: To understand the economy, you have to understand human nature. This podcast is powered by Acast.

1:15David McWilliams: How you doing there? It is time for the podcast. Today the podcast comes live from Clonacilty in West Cork. Clonacilty, an amazing little town full of great bars, full of great little places to go. Classic, classic West Cork vibe, except, John, I am also coming to you live from Clonacilty in what looks like one of the worst storms this winter. It's called Storm Bram after Bram Stalker. Yeah, looks like your head was out in the storm. I woke up this morning I opened the window all you could hear was the Atlantic crashing in massive waves and the sea is white grey you know there's white grey and even the seagulls look a little bit intimidated they're kind of hanging in the air you know the way seagulls hang in the air in a massive sort of wind but they're kind of looking at the sea saying I'm not sure if I fancy that it is amazing You should get your boots on, big coat, and get out into the middle of it.

2:24David McWilliams: That's the crack. Well, if I didn't have to talk to you, I would. You know what I mean? But Clonacilty, great place, and I'm really looking forward to going to a little bar called De Barra's. Everybody tells me about this tonight. Oh, yeah, that was Noel Redding's bar. Noel Redding as in the bass player from Jimi Hendrix. No way. Yeah, yeah, yeah. That's where he played, that's where he gigged. That's where he lived. He lived in that area after Jimi Hendrix. And Mitch Mitchell, his mate on drums, used to come out and hang out in Clonacilty. You know, that was the place to be, man. Well, tonight will be the David McWilliams experience.

2:58David McWilliams: Very psychedelic. I'll be there in my tie-dye T-shirt sitting in the back of the virus. Exactly, exactly. I'll be doing cross-town traffic from Clonacilty. And away we go. But anyway, the storm is amazing. I'll actually look at the storm precipitated my thought process for today's podcast, John. because when you're in the very west of Ireland, and Irish listeners will know, and maybe some tourists who've been here, and the Atlantic is angry and loud and lashing in on top of us, and we are the only piece, I mean, when you're here, you realise this is the only bit of land between here and America, right?

3:40David McWilliams: So, you know, so the seas are huge and the waves are huge, they're crashing down, And it kind of does reinforce this notion of being an island nation. That sometimes when you're in other parts of the country, you don't feel that. You don't feel that sense of exposure, the sense of the elements. Yeah, yeah, yeah. Also the sense of history. Also the sense of history, the people who came here, where they came from, all that sort of stuff. And also the kind of the fragility of being an island nation, on the one hand. Yeah, the vulnerability of it, yeah. But also the kind of security of it too. That, you know, you're basically surrounded by the sea.

4:15David McWilliams: you're exposed to the elements but you know you've kind of got fish as neighbors and fish are pretty well behaved you know what i mean when you're kind of thinking of the world right so i was just what struck me john is that today we're going to talk about the economics the politics the geopolitics of being this sort of island nation at a time when the world has changed dramatically We're basically the last month of 2025, slightly looking back in the year, slightly looking forward to what's ahead with an element of trepidation, John, it must be said. But that sense of what has happened this year that has changed in the world and what those changes might mean to a small island nation that is, again, you get it down here, we're kind of an Atlantic race rather than a continental race.

5:13Our history is the history of the ocean.

5:16David McWilliams: Our history is the history of our relationship with the sea. our history is getting here from the sea going to places by the sea all that sort of thing that in a way although we are european we are not continental we're kind of an atlantic european race and that's really interesting in what's happening between russia and america and china and all these sort of things so that's what we're going to talk about today yeah well if you are if you fancy that john if you fancy that well let's have a little chat about that shall we but i tell you what i mean as you said there earlier on 2025 is a pivotal year i mean it feels like all the rules have changed all the playbooks have been torn up and there's a whole new yeah but let me ask you this though in this kind of context and an environment talk about an island nation can any nation really be an island nation apart from obviously the physical island that it is, but politically and economically, can anybody be an island?

6:21No, I don't think you can, number one. But number two, being a small island nation is quite different to being a small nation. Right. And by that, I mean, so for example, in German history, a little bit of German history. Go on, why not?

6:37David McWilliams: In the Holy Roman Empire, John, when there were literally dozens of small states within Germany. Kind of ludicrous states in many cases. Some were quite big, like Bavaria, that could have been actually a country of its own. But some were like tiny little, like Bremen, tiny little... Gated communities. Almost like gated communities. And German intellectuals like Humboldt and all those fellas, right? They used to have, in Goethe, they used to have this extraordinary agonization over what they called Kleinstaatserai. And Kleinstaatserai was a condition. So klein means small, stat means state. and Arai means statery.

7:18So there was the condition of being small. And they thought like being small meant being backward. You couldn't impose your power on people.

7:26David McWilliams: You couldn't do anything except genuflect to and adapt to the rest of the world. But it was always characterized by being a small state in a violent continent where your neighbors, whether they be France, if you were German, on your Western border, or Russia stroke Poland on your eastern border, always those races were aggressive towards each other, expansionist towards each other, etc. Now, of course, our historical link is with the expansionists of Britain. That was largely the only threat to Ireland in the sense that we weren't going to be invaded by anybody else. So consequently, our relationship with Britain became the absolutely central relationship.

8:11it. And for the last 50 years, we have negotiated with the European Union as a block with the European Union, I would say largely because we wanted to get away from London. I would say that was the real urge at the very beginning. Now it's changed, it's mutated, it's matured, all that sort of stuff, right? But now what we're looking at is, to your question, is can any nation be an island nation. I think psychologically, we can't, number one, because we need to be tuned into the rest of the world, because our market economically is so small, but also our market intellectually is small as well, right?

8:54In fact, you know, if we only expose ourselves to ideas from within the borders of Ireland, we'd be a very, very dull place. And I also feel that we have to embrace the rest of the world. But to get back to the theme of the podcast, how has that world changed since 2025? I'll tell you, John, I was here last night. I arrived in late. And you know, I'm not a great TV watcher. But I just turned on the box.

9:21David McWilliams: It was a bit knackered. And there was a documentary about the Irish presidential election, which only happened five weeks ago. But in the context of what we're about to say, the debates of the presidential election seemed very old-fashioned. It seemed as if we were living in a sort of a Cold War world where there were two superpowers, you know, where the Soviet Union was still playing a role. Like 1980s-style stuff. Kind of like, it was like watching Green and Common with smartphones. Do you remember Green and Common? I like that. But you know what I mean? Like, it was kind of like, it seemed like there was the politics of the 1980s.

10:00David McWilliams: it was talking about kind of America bad and leftism good and we can be neutral and we can opt out and you know what we can because we're Irish and we have a few soldiers who go into the UN we're treated differently from everybody else and should we be in the Eurovision or should we be you know all this sort of frankly la la stuff yeah in the context of the world in which a A, America is pulling away from Europe. B, America is not only pulling away from Europe, John, but is aggressively anti-European. Yeah, becoming more so, yeah. Just released a new national security strategy document from the White House.

10:42Yeah. It is viciously anti-European. Yeah, I actually downloaded it and started going through it. Yeah, nerd.

10:49David McWilliams: Let's talk about it. Let's talk about it. It is scary. You're absolutely right. But that's what I mean. The whole rulebook playbook has been torn up. And, you know, and our heads are left spinning going, woo, shit, now what? And Ireland is still talking about the Eurovision and neutrality. Yeah, yeah, yeah. Okay, so let's talk about it. So today's podcast is going to be, one, about the American withdrawal from Europe at a time when Ireland is the most American exposed country in the European Union. We know that. Not only are we culturally very close to the Americans, we are linguistically very close to the Americans, but as we've been saying ad nauseum on this podcast, we are Connecticut with shitty weather.

11:34Our economy is American adjacent.

11:37David McWilliams: Whether people like that or not, and lots of people have no opinion, some people have a very strong opinion, but most people say, oh yeah, actually we are good mates, the Yanks, right? If the Yanks are pulling out of Europe, that's a big deal. And it means that Ireland has to make choices which might not necessarily be the same choices a Lithuania makes or a Poland makes or a Czech Republic makes because geography matters, which is why being the island nation sitting here looking at this storm, Bram, matters. Number two, Europe is physically under threat from Russia. It looks as if the Americans are about to sign the capitulation of the Ukrainians.

12:16What does that mean for Europe? And number three, Russia wouldn't be a problem if Russia wasn't a front now for China. Because Russia, it's 140 million people. It's got a GDP of about$7 trillion. In contrast, the European Union is about, if you put the Brits in there as well, is about 520 million people. We have a GDP of about 33 trillion euros, which is more or less the same size as the United States. on a purchasing power parity index. So we shouldn't be afraid of Russia, but we are afraid of Russia because Russia, A, is an aggressive state, but B, more importantly, Russia is now doing China's bidding.

13:02And number three, China is eating Europe's lunch when it comes to manufacturing industry. And this all stems from listeners of the podcast will remember Dan Wong the other day saying that Europe felt like a mausoleum, that China is fronting up to America in all areas, and America is still preeminent in the digital space,

13:27David McWilliams: in biotech, tech itself. But how long does that last? So that's the podcast, John. It's going to be looking back, looking forward, 2025. Okay. And here we go. Okay, so let's begin with, I mean, when I was flicking through that policy document, what they were really pushing was this idea that Europe is under threat from immigration and the white Christian Europe is losing its Christianity and it's under threat from Islam and all the rest. Let me ask you this. I know immigration has been, you know, not just the European problem, but a global problem for the last few years. But this change in policy, because it's very unusual, the American national security policy hasn't changed since the Second World War much.

14:17Yeah, you're absolutely right. So this is a huge departure. So what sparked this? Or has this always been there and it's just the likes of Trump has allowed it to come to light? Okay, it's a fascinating question because this is, so just to give the listeners a little bit of background, the National Security Strategy document was released. and typically american policy documents are about economics and security as in is there a physical or military threat to the united states or is there an economic threat and if there is we react to it this one is the first of the maga era and what it puts into the document are things like western civilization which it never did so before cultural assimilation these are words used it actually explicitly says we need to urge and move toward the end of mass migration, right?

15:16So it's absolutely changing the context through which the Americans see their national security. So let's just step back and say, okay, the American relationship with Europe is and has

15:31David McWilliams: been very, very strange, let's say for 100 years, and it has really, really changed over the last 100 years. So you might remember we were talking about Carnegie and Frick. Remember? We were talking about Henry Frick and Carnegie last week, right? See you in hell. Exactly. I'll meet you in hell. Their final rivalry, this is interesting, the context, right, was over the League of Nations, right? So they hated each other and they were big American magnates. They were very close to political power and all that sort of stuff, right? They were very much the mover and shakers, the oligarchs behind the American throne.

16:05Yeah. Now, fascinatingly, at the end of their lives, they diverged on another issue. And this was the issue of the League of Nations. So Carnegie, Andrew Carnegie, was a huge supporter of the League of Nations. And the League of Nations was the forerunner of the United Nations. And what Carnegie saw in the First World War was the way in which the European nations set upon each other was so appalling that all wealthy men, he was very much one, should actively try to engage a sort of a community of nations, a league of nations. And that's why he supported Woodrow Wilson, the American president, hugely.

16:49Now, Woodrow Wilson, interestingly,

16:51David McWilliams: was more Irish-American than John F. Kennedy. Really? This is an interesting thing. Really? Yeah, but we don't embrace him because he was a prod from Tyrone. He was in Strabant. Right, yeah, yeah. But his parents left Stravan, whereas it was JFK's grandparents left here. So Woodrow Wilson was more Irish than JFK, and nobody talks about it because of our obsession, Irish historically with religion, whether Catholic immigrants or Protestant immigrants. They were both Irishmen, but from different backgrounds. So Woodrow Wilson was, and again, Wilson being, you know, Sean's mother's surname, very popular up the north.

17:29David McWilliams: Oh, okay. Yeah, yeah, yeah. Very popular name. The interesting thing is, ironically, Wilson is the son of William. Mac William, Mac Williams, is also the son of William Wilson. Right. So in a way, we were bonded by two bizarre versions of the same second name. Anyway. Brothers with a different mother. Exactly. So let's go back to it. So Carnegie was in the League of Nations, and he wanted America to be fully involved in the world. Frick, on the other hand, was part of the isolationist trend in the United States, very much 19th century thinking, that said, look, we are not Europeans, although we are ethnically Europeans, we are not actually part of them.

18:13David McWilliams: They are our rival, and we should stay away from that. Also, Frick thought, hold on a second, America is becoming so powerful after the First World War. Why would we dilute our sovereignty by getting involved in a League of Nations with he thought was getting involved with lesser nations? Right. So this has always been a conflict. And the League of Nations was basically torpedoed in the United States and that never really took off. And Wilson lost the elections. And Americans went back in the period after the First World War because Americans were very angry with Wilson for getting them into the First World War.

18:50Americans didn't want to get into the First World War. And it was more or less Wilson thinking strategically, we have to do this. We have to back the British against the Germans because the British are our friends. But then you think, okay, after the Second World War, a totally different world emerges, right? The Americans want the Europeans to be essentially a buffer state against the Soviet Union. Yeah. So I've always believed, and I remember when I was at the College of Europe studying all this stuff, and lots of European federalists said, you know, isn't it amazing that the European Union, one of the great things the European Union did, and I think it's probably true, was prevent war between Europeans that had been going on for hundreds of years before that, particularly between Germany and France.

19:33But I always felt that it wasn't that they prevented it. It was the Americans. Because the Americans came in with NATO and basically said, we're the adult in the room. You Germans are going to do this. You French are going to do this. You Brits are going to do this. And it was actually under the American umbrella of security that Europeans stopped fighting each other. It wasn't some sort of uniquely European thing. The Americans said, you can't keep going like this. Because I don't think without the American security umbrella from 1945 to 1995 that the European Union would have existed in the way it did.

20:07Oh, right. Because I think what the Americans did is they said, look, we look after the big shit, right? The military, foreign policy. You guys figure out your union of steel and coal and your internal market and all that. Anyway, Americans were involved in Europe because, A, it was a massive bulwark against the Soviet Union. Second thing is Americans did a hell of a lot of trade with the European Union. Yeah. It was America's major trading partner for most of the period after the Second World War. And thirdly, you have this point about civilization, John, which is what you're pointing out. that Americans said, well, you know, we're all historically more or less white Europeans who left Europe.

20:53And therefore we have a cultural similarity to the Europeans. And if you want to know where we came from, you go back to Europe, which is, of course, why so many Irish Americans come here in the summer and so many Americans travel to Europe full stop. Because you even think you're a freak in Carnegie. Carnegie was Scottish and Frick was German, where they're coming from, right? Yeah, yeah. Okay. So that's the prevailing reason that the Americans were involved in Europe in a massively disproportionate way after the Second World War. The question is now, you know, the Soviet Union is no longer a threat to the United States.

21:37Yeah. So Europe no longer occupies that geographical space in the American mind as a buffer state between it and its eternal enemy, the Soviet Union. So the Soviet Union is now gone. It has been replaced by Russia, but Russia is not a threat to America anymore. Russia is a threat to Europe. The idea of an intercontinental ballistic warfare between Russia and the United States is not on the cards because the United States' big rivalry now is China. China, yeah, of course. So a second reason for American involvement in Europe disappears. First reason is a buffer state against Russia, our Soviet Union.

22:20Soviet Union's gone, so that's gone. Second one is, is Russia enemy number one for the Americans? No. In fact, the way Trump is going on, Russia looks like their best mate, right? Yeah, yeah. And then why is that? And this is because, and this is the interesting thing, is because the MAGA movement looks at Russia, they look at Putin, say Putin is a strong leader, a religious leader, because Putin's pretending, even though he's an atheist, that he's really embedded in the Russian Orthodox Church, a nationalistic leader who fights for his own borders, even though he actually invades other countries.

22:59And this is where your point, a white leader in a white country. And that's a lot of the MAGA thing. And they look at Europe now and they think, hold on a second. We used to think that Europe was the font of our civilization, of white Christian, as you said, European-ness. All that is great in European history has been taken by America and amplified and made greater. But essentially, we are white Europeans. And if we want to go back to our roots, we go back to Europe. Now what they're looking at, they're looking at Europe in the era of what they call mass immigration. They're looking at the Islamization of certain parts of Europe.

23:43And they're all now supporting the MAGA, the right-wing movements, the nationalist movements, whether it's reform in the UK, or Le Pen, or Maloney, or the AFD, or here, the embryonic nationalist movement here, right? So I think that's the

23:58David McWilliams: interesting thing. But they're putting this into the mix, John, for the first time ever, as part of their security strategy. Yeah. So let me ask you then, just to pull this apart a little bit. I mean, the overall immigration to Europe is in around 15, 16%, isn't it? Yeah. But my question is that, I mean, on the face of it, it looks like an issue of two strongmen. So Putin driving Russia. If Putin wasn't there, would Russia be the same threat? Similarly, if Trump wasn't there, would America be pursuing this same? I know there's the MAGA movement, there's the J.D. Vance and all those guys, but would they be pursuing the same kind of ideology in such a strong way?

24:45David McWilliams: I'm not sure. I'm not sure. But I think that Russia has had two phases since 1990. The first phase was the Yeltsin sort of post-Gorbachev. Russia is going to be part of the Western world. It is going to be a Western-friendly country. It's going to be friendly with Europe. It's going to be part of the G8 and the G10. And it's really going to be part of the Western world or the American world. But that hasn't happened. Now, The interesting thing about Putin is the first 10 years of Putin, he was very much the guy they can do business with. He was very much the darling of the West. He was regarded as a new type of Russian leader and a Russian leader that they could all sit down with and understand.

25:31Obviously, since then, Putin himself has articulated a hurt that Russians feel after the end of the Soviet Union, that they feel besmirched and degraded and humiliated and taken for granted. and you know what? We are a totally different type of regime to the regime that you guys want. But does the average Russian feel that genuinely? Or is it just his cohort?

25:59David McWilliams: Again, it's very, very hard to say. I mean, I had a very interesting conversation. I was in Switzerland doing a speech on Thursday, John, in a little place called Luzan. It was actually a book. It was a book launch, which was really nice. It was the Swiss book launch, but it was very small, right? You've had more launches than Elon Musk. I know. Exactly, exactly. It's SpaceX from economics, John, right? But it was really nice. And the Irish ambassador turned up, who is an ambassador called Aoife McGarrity. Very nice. We had a bit of a laugh, had a good chat, and that was nice. But what was fascinating for me was that apart from Irish people in the audience, the rest of the audience were Russian.

26:44Russian emigrant Russian Russian Russian Russian buying this book on the history of money right right and I had long conversations with them I would say the audience was 30 percent Irish let's say 20 percent Swiss 50 percent Russian wow immigrants who wanted to learn about and have been reading this book so this was really interesting were these sorry can Can I just ask you, were these kind of oligarchs or sons of oligarchs or whatever? No, I don't think so. Or were they people just getting away from Putin's Russia? I think Switzerland is full of Russian financial people, right? Now, Russian financial people is a large catch-all for all sorts of characters.

27:34But in general, these are the people who got out of Russia when the Soviet Union collapsed, probably got Swiss visas

27:46David McWilliams: because Switzerland is the safest country. Would there be an overlap with oligarch money? I suspect yes, maybe there is, but I'm not too sure. But again, when I sat down with them, it gives you a sense. Now, these aren't the average Russians. They've left. But Russian-ness, Russian exceptionalism is there all the time in their thinking, which is interesting. That's the first thing. The second thing now is to think, okay, why is Europe worried about Russia? And why is Europe worried about the relation between Trump and Putin? And why have the Americans put this Western civilization thing into their strategic review of the world?

28:30And it is because the MAGA movement, to answer your question about Trump, right? The MAGA movement is real. It is a ground swell of American opinion. I'm not sure it is the dominant one. I think that the next couple of elections may not go necessarily the way the MAGA movement want,

28:50David McWilliams: but it is a white nationalist movement. Yeah. And that dovetails with white nationalist movements all over the world. And of course, Putin, when you strip everything back, is a white nationalist figure. Yes. And that's why they're all proximate, right? And that's why they're all coming together. and the sacrificial lamb on the altar of white nationalism, ironically, is another white nationalist country called Ukraine, right? Because Ukraine is not a bastion of immigration. But the issue of immigration is for these white nationalists in America, it is that Europe has become, and I use this word advisedly, but I use it descriptively, contaminated with non-white people.

29:36That's what they see. And therefore, why would America have to go out on a limb to support Europe and the European Union, which has been contaminated by non-white people, in a battle against the whitest of white countries, Russia? Because Russia is very white.

29:57David McWilliams: Even though, as we've said before, the whole Siberian part of Russia is Asiatic. Yeah, yeah, yeah. And Islam is the fastest growing religion in Russia as well, from around Dagestan and all those places, down towards the Caspian Sea. But be that as it may, in the mind of the white nationalists in America, Russia is a white country. In the mind of the white nationalists in America, the European Union, by letting in many, many millions of non-Christian, non-white people, is becoming contaminated. Now, what they won't accept is that the reason that there are so many immigrants coming from Islamic nations are, one, America pulled out of Afghanistan, which precipitated a mass migration of Afghanis because they were afraid of the Taliban.

30:49David McWilliams: And number two, America supported profoundly the destabilization of Arab countries called the Arab Spring. And the Arab Spring, particularly in its most aggressive manifestation in Syria and in the war in Iraq, these two issues so destabilized the Arab countries that it prompted the mass migration of refugees out of these countries. because while the Americans urged regime change, they got the change of the old regime, but they never put in a new regime that was stable. And so people have fled. So the Americans don't seem to acknowledge is that part of their geostrategic initiatives have pushed people towards Europe because Europe is on the front line geographically.

31:43And then it was easy for the likes of Russia to weaponize immigration. Exactly, exactly, exactly.

31:50David McWilliams: So all that's coming together right now, which I think is kind of, it's absolutely fascinating. And then, John, the second part of this discussion, let's just discuss the economics of what's going on. And then we'll conclude. So we've got the culture and the history and the geostrategic stuff. But we also have some serious economic threats to Europe, which are emerging.

32:31We'll be right back.

32:43Grainger, click Grainger.com or just stop by. Grainger, for the ones who get it done. Still waiting in line? Again? That's time you will never get back. Save time and money with Stamps.com. Over 4 million businesses have skipped the line with Stamps.com. Join them to save up to 90 % off carrier rates from your computer or phone right now. Print postage for certified mail, registered mail, and packages in seconds. Then schedule a pickup right from your home or office. For a limited time, go to stamps.com and use code podcast for a free welcome gift. Taxes and fees apply. Parles-tu français? Hablas espanol?

33:22Parli italiano? If you've used Babbel, you would. Babbel's conversation-based technique teaches you useful words and phrases to get you speaking quickly about the things you actually talk about in the real world. With lessons handcrafted by over 200 language experts and voiced by real native speakers, Babbel is like having a private tutor in your pocket. Start speaking with Babbel today. Get up to 55 % off your Babbel subscription right now at babbel.com slash ACAST. Spelled B-A-B-B-E-L dot com slash ACAST. Rules and restrictions may apply. So, Mac, we're talking about the recent publication of the National Strategy Document from America, which is a complete departure from any of the other strategy documents that any American administration has published since the Second World War.

34:18Now, we've just spoken about the kind of the cultural part of that. But what are the implications then now politically, particularly economically, for Europe and for Ireland and actually the whole world? Okay, big question.

34:37David McWilliams: Big question. It's a big question. Small amount of time to answer it. As we're sitting here in Clonokilty, about to go into the Barra's Bar. So where else would you be? For a couple of scoops. So first thing is, so Russia is a threat, we know. But what makes Russia much more of a threat than it actually is, because Russia is reasonably, population-wise, as I said, there's about 130-odd million of them, vis-a-vis 500 million Europeans. We shouldn't be afraid of them. Yeah. But what we are afraid of is the fact that Russia's manufacturing base is now China. Yeah. So the Chinese are deploying the Russians to threaten Europe at a time when China's industrial might is also threatening Europe.

35:25And this is the key thing. So Europe is caught with two major problems. One is Donald Trump's tariffs and his trade ideas, which have accused the Europeans of being an enemy of the United States, number one. And number two is China's decision about 10 years ago to become a high-tech manufacturing powerhouse. Both of these have slowly but very rapidly in recent years become apparent to Europe. And the key number for listeners to look at is the German trade deficit of China. Oh, yeah. The reason this is important is that for the first 20 years of China's opening, since Deng Xiaoping decided to open up China, Germany was by far and away the major beneficiary of what was happening.

36:27So what was happening was the Chinese needed high-tech capital machinery to basically kickstart their enormous potential economy driven by their enormous population. But their technology was very backward because they had, during the Cultural Revolution, they had 30 or 40 years of isolation, right? So then they open up, and who is the first country to benefit? It is the country that is exporting the most sophisticated capital goods. And that happens to be not the United States, Germany. And what I would call the proto-German economies of, and this is what I was talking about in Switzerland to these Russian geezers, the proto-German economies of Austria, Denmark, Netherlands, and Switzerland.

37:11And what I say proto with German is because all of those countries feed into the German export machine. That's what the industrial base of Central Europe is. So all these countries did extremely well, but mainly Germany. So they were exporting capital goods to China. And the Chinese were doing what the Chinese always doing. They were copying. They were importing the goods. They were figuring out what was made. They were figuring out how the Germans made them. They were figuring out years of German technological innovation, and they were beginning to do it better themselves. And so what you see is the German trade surplus with China, which was enormous from 1990s all the way through the 2000s.

37:56In fact, you could argue that Angela Merkel's entire political strategy was based on Germany always having a surplus with China, which threw off lots of money, which allowed her to do lots of things. Okay. So she was a bit short-sighted then. But she was just being a politician. She was just like, this is what's happening. Why don't we just play this game? Right? Yeah. I mean, I don't think anybody's reputation has been as relentlessly hammered after office, any political person, than Angela Merkel. She resigned as the heroine of Europe. Yeah. She is now regarded in Germany as a total disaster.

38:40And that's only 24 months in the difference, right? Now, the second thing, so the German trade position with China goes into a deficit about four years ago. Last year, 2024, they ran a deficit of 66 billion euros with the Chinese, right? Wow, yeah. It's estimated that this year's trade deficit will be 85 billion euros. And what that is suggesting is the Chinese are taking that bit of Germany's manufacturing base, which was capital-intensive exporting. And just to give you a figure, in general, Chinese capital-intensive goods, now these are machine tools.

39:23David McWilliams: These are massive big machines that run big industrial complexes. We're not just talking about Mercedes and Audis here. We're talking about the back-end machines that run the factories that produce the goods. They probably cost about, on average, 30 % less than the German equivalent, right? So the Chinese are not only cheaper, but technologically and quality-wise, they seem to have caught up. Because for the first about 10 or 15 years of China's opening, the kind of shorthand was, you can make stuff in China, but it's always going to be shite, right? Right. It's going to be less good than the Germans.

39:59David McWilliams: And now it's as good as the Germans. Like you're talking mostly about Germany there, but it's more or less the same kind of figures across Europe. Yeah. So basically what you have, you've got to understand, is that the central European economy, that goes from Western Poland, Southern Sweden, Finland, Germany, Netherlands, Belgium to a degree, Austria, Czech Republic and Switzerland is basically all Germanic. It feeds into the German export industry and the German export industry is where you see the final products. So when Germany is hit in such a dramatic way, these other German adjacent economies are hit too.

40:46Yeah. But I'm trying to understand the kind of the push and pull of all of this. What I'm thinking is that with a population of, what is it, 350 million in Europe and one of the biggest GDPs as a region, we are a massive market. China needs that market, as do America. We are wealthy at the moment. But if we are depleted by this kind of economic activity by China and America pulling out, and Europe goes down the Swanee, well, then they're almost shooting themselves in the foot as well. Yeah, you're absolutely right. You're absolutely right. You know, you're right. You're right. So, I mean, if you go back, Europe has about 520 million people living in it.

41:35This is Europe of the extended European Union and associated countries, right? So it is still the biggest consumer area in the world. It is the biggest middle-class population in the world. It is a massive potential source of innovation.

41:54David McWilliams: It is a massive potential source of military activity, if that's the way you want to go. It's a massive potential source of educated labor forces. There is nothing wrong with the European Union that can't be fixed. But the question is, can it be fixed by the European Union? The present structures of the way in which we do business are does it need to be a much more heavily integrated Europe, right? If you see Europe as one block. And this, and we'll end here, John, is where I think Ireland's got to make choices. Because Ireland is what I call, it's a kind of a quasi-European, quasi-American economy.

42:34The reason that we aren't feeling the pinch that Germany is feeling and that Austria is feeling is because our industrial base is American. And our industrial base is that part of America that America is preeminent in, which is high-tech services, biomedical equipment, and education. So if you take, we are in the part of the American economy that is in effect Silicon Valley.

43:04David McWilliams: So that's why we seem to be kind of sailing through this unmolested and our problems are actually problems of infrastructure and housing and immigration and getting all that right. They're not problems of demand. So Ireland is in effect a European country that is not European in anything but geographic location. That we are an Atlantic race stuck onto Europe by virtue of the North Atlantic, rather than by virtue of any real integration with the European economy. And real integration with European philosophy and real integration with European culture. Which is what I say is that, is Ireland's future with Lithuania, with Poland, with the Czech Republic?

43:56I'm not sure. I mean, if we're really honest with ourselves. Wow. I think what we've got to do, I think what we've got to do is play all these off each other. You know, I think we should be even encouraging the European Union to actually let the Brits back into the single market as quickly as we possibly can. I think we've got to switch our position on that.

44:15David McWilliams: You know, during Brexit, we were very anti-British because they were very anti-us. And we found ourselves going with the likes of France and Italy. Yeah. But now I think, you know, it's in our interest for the Brits to come back into Europe very, very quickly. It's also in Europe's interest for the Brits to come back into it. And maybe we should be the conduit to try those negotiations, to be lying between the Europeans and the Brits and say, come back into the fold. I think there's going to be a huge momentum in Europe for a fiscal union. That's something that Ireland is shit scared of because a fiscal union means that being outside of Europe on a tax basis is going to be very difficult to sustain unless we decide that we're going to become the Delaware of Europe.

45:03Delaware, as you know, is a small state, the United States, which is driven by tax exemptions all the time. They can do this. And then the final point, and we'll probably conclude here, is the defense discussion that's going on at the moment. Because Europeans are saying, screw you. How dare you say to the Poles that increasing NATO expenditure is warmongering when the Poles are the first line against the Russians? How dare you say to the Czechs that you are an aggressive, or the Slovaks that you are an aggressive militaristic power when they're beefing up their military and the Czechs have a historical memory of being carved up by the big boys at Munich.

45:49How dare you say to the Baltic nations that you are warmongering when you're actually beefing up your defenses because you're shit scared of Moscow. Yeah. Well, I mean, I've always said it. I've said it on the podcast before. Like, I would like to consider myself a peaceful kind of guy, but we cannot be naive and we have a responsibility to protect the undersea cables for Europe and all the rest. But we also have, we are Northwest Europe and we have to protect that seaboard for ourselves, for immigration, for drugs cartels, for even just looking after our own fisheries, you know, and we don't have a proper Navy.

46:38At the very least, we don't have a proper Navy. It's a joke. We need to plow money into defense. And that's not in any way warmongering. It's just being responsible. Well, I always think that warmongering is expression used by the extreme left against any country that wants to stand up against Russia and against Russian interests. And you hear that. I've heard that all through the last couple of weeks in Ireland, right? I would much prefer us to stay neutral. I think it's part of what we were brought up with. I think it aligns with our post-colonial sense of, look, we were subjugated for years, isn't it better to be neutral?

47:24But I'm not sure that neutrality, in the way in which Ireland wants it, which is basically the best of all worlds, is feasible in this world that we've just highlighted, where Europe is threatened. by America leaving, number one, by Russia interfering, number two, and by China gradually watching from outside thinking, you know what, at the end of the day, wouldn't it be great if every car in Europe were Chinese? Wouldn't it be great if every machine tool in Europe was Chinese? Wouldn't it be great if, in effect, we turned Europe into a tourist destination for rich Chinese tourists who are made rich on the back of manufacturing exports to Europe.

48:13You're right. That can't last for a hundred years, but it could certainly last for a few decades. And all the while, Ireland is continuing to talk like members of Greenham Common with smartphones, as I said to you before, right? While at the same time being completely exposed to the United States. These, John, are the big challenges for the next couple of decades. And I think that you're right. I think that conversations in Ireland are going to change dramatically. And I think this slightly self-indulgent that we're exceptional and we're different and we can get bogged down discussing who's the right to be in the Eurovision or not.

48:52I think these discussions are be seen by our real partners as not only fallacious, but a little bit infantile. Yeah.

49:01David McWilliams: So let's leave it there and we'll talk to you Tuesday. Right, so.

49:22We'll be right back.

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