Europe is entering the most significant economic and geopolitical transformation since the mid-20th century. The global system that defined the last four decades is shifting, and the choices made now will determine whether Europe adapts, falls behind, or leads the next phase of global economic governance.
Key Points:
- The global economic system is undergoing a fundamental reboot.
- Europe faces a unique dilemma between the US, China, and its own internal social expectations.
- The old economic models no longer satisfy political or societal demands.
- Decisions made in the 2020s will shape Europe’s economic future for decades.
The restructuring of the global economic system has begun. The question is what software we will write for it, writes Ambassador Clyde Kull in Postimees.
Read this article in Estonian: Mis saab Euroopast?
Today’s global economy works like a giant supercomputer. Every day, it processes billions of price signals and production decisions, calculates revenues, wages, and profits, and ultimately answers the question of who will become rich and who will remain poor. The “hardware” of this machine consists of markets, institutions, and rules; the “software” consists of ideas through which society decides what the economy is actually for and who it works for. This question lies at the heart of Europe’s economic future.
From time to time, this system crashes. Usually, a software update is enough: new economic ideas to solve new problems. But sometimes the hardware also changes: rules, the international system, the division of labor, the balance of power. That is exactly where we are today. The global economy has reached the Control–Alt–Delete point, and every sign points to a new version of the global economic order, the basic code of which is still being written.
Three Reboots: How the Global Economic System Reinvented Itself
Over the last century, the global economy has undergone three major reboots.
The first took place after the Great Depression of the 1930s. America and Europe decided that the central goal of the economy should be full employment. The state regulated the movement of capital, taxed wealth, and invested in public welfare. The result was a “golden age” – a period when productivity, wages, and tax revenues grew in parallel. The market economy software had a new commandment: jobs and security first.
The second shift took place in the 1970s and 1980s, when this system collapsed due to overheating. Inflation, pressure from trade unions, and falling profits led to the birth of neoliberalism, a new idea that the goal of the economy is not employment, but price stability and the free movement of capital. Thatcher and Reagan rewrote the software, focusing on market forces, deregulation, and financial freedom. This world, later called globalization, lasted for nearly four decades.
The third reloading began with the financial crash of 2008. While the previous system was based on the idea that markets are self-correcting, the crisis showed that it was actually the state that saved the markets. The independence of central banks and massive cash injections stabilized the system, but led to an unfair distribution of economic benefits: asset prices rose, but wages did not. The political reaction was not long in coming – Brexit, Trump, the rise of extremist parties in Europe. This was a signal that the prevailing economic ideology no longer met society’s expectations.
Trump’s Return and Regressive Modernization
Donald Trump’s return acted as a catalyst for a reboot, a random but powerful force that brought the old system crashing down. Trump’s policies, especially in his second term, are a kind of regressive modernization: an attempt to restore industrial America, coupled with the social hierarchy of the 1950s and the economic nationalism of the 19th century.
Trump’s economic plan is based on three pillars: tariffs and trade wars as a tool for bringing back industry, restricting immigration and “domesticating” the workforce, and a traditional family model that should increase the supply of labor through “stay-at-home” women.
The result, however, is not a new economic model, but a hybrid of different eras, a “patchwork of old pieces.” The promise of reindustrialization may be fulfilled to some extent, but robots will replace jobs. And social regression—the exclusion of women and immigrants—is not economic innovation, but a return to the past.
Yet there is a logic to this project. Trump’s political base is not looking for technocratic solutions, but moral revenge. The neoliberal world, where production moved to China and profits to the stock market, left the American working class without economic security or symbolic dignity. Trump’s “America First” appeals to those who felt that globalization was a zero-sum game.
Paradoxically, the same structural discontent is also reflected by his ideological opponents, those who see the problem not in immigration or the green revolution, but in the inability of the prevailing economic order to ensure an affordable life. Zohran Mamdani’s rise to mayor of New York is a vivid example of this: the political left is responding to the same economic crisis with a different, more socially inclusive language. While Trump promises to restore lost dignity through industrial nostalgia politics, Mamdani talks about access to housing, education, and healthcare, and the cost-of-living crisis that unites very different voters. In both cases, the subtext is the same: the feeling that the current economic model no longer works for most people and needs a new social contract.
A Systemic Crisis in the Global Economic Order
The current crisis in the global economy is not just a cyclical downturn, but a systemic turning point. If the market economy is a supercomputer, then the hardware has started to break down – global supply chains are fragmenting, the hegemony of dollar trade is weakening, climate change is altering the physical basis of production, and an aging population is calling into question labor and tax systems.
In such a situation, it is no longer enough to rewrite old ideas. We cannot simply patch up the neoliberal code or restore the welfare state of the 1950s. We must decide what the economy exists for. Is the goal profit, employment, climate neutrality, regional balance, or something else?
Europe’s Dilemma and Europe’s Economic Future
In Europe, this question is even more acute. While America can afford to reboot itself through the election of a single political leader, the European Union is a system based on consensus, not revolution. But here too, pressure is mounting. The EU stands at the crossroads of three opposing forces: Trump’s America demands commercial loyalty and security policy subordination, China offers markets and technological dependence but not a value-based partnership, and the European public expects an economic order that creates justice, not just stability.
Von der Leyen’s Commission has attempted to respond with a new “green-industrial” agreement – the European Green Deal and industrial policy based on the logic of the Inflation Reduction Act introduced by the Biden administration. However, this is more reminiscent of preserving the old system with new slogans. If the EU does not formulate a new economic goal, such as a version of a democratic market economy that combines the green transition, social solidarity, and technological sovereignty, it will remain a passive object between the US and China, rather than an independent system architect.
The Economy as a Social Contract
What could be the “new software” that the global economic order needs? In the European context, there are three options to consider.
Status quo – technocratic stability based on the hope that Trump and the wave of extreme populism will pass and the old world will be restored. This would be a convenient but illusory choice. The concentration of income and power, growing inequality, and the ecological crisis do not allow the system to return to “business as usual.”
The left-populist response – a new social contract. The movements of Sanders and Ocasio-Cortez in America, as well as several European green and social democratic parties, are trying to formulate an alternative in which the state actively intervenes in the economy to distribute resources and create strategic investments. But the question is whether this project can also engage the entrepreneurial middle class, not just young and educated voters.
Liberal thinking offers the idea of an “Abundance Agenda,” which seeks to combine market dynamics with a social goal: reducing bureaucracy, promoting innovation, but at the same time directing growth toward the common good. In Europe, this could mean a new industrial policy that brings science, green technology, and infrastructure investment together in a single strategic framework.
The most realistic model for the future may well be precisely this kind of hybrid: a fusion of populism and a political, rather than technocratic, “abundance agenda.” This would mean an economic model that does not abandon markets, but redefines them: not as an end in themselves, but as a means of creating collective well-being.
Geopolitics as the New Framework for Economics
The global economic order has never been purely economic; it has always been geopolitical. The post-war economic order of the 20th century was based on American security guarantees. Neoliberal globalization worked because the US controlled the financial system and secure sea lanes. Today, these assumptions no longer hold true.
Parallel market economies are emerging between China and the US, one state-capitalist and authoritarian, the other market-capitalist and populist. Europe must decide whether to build a third way or remain dependent between these two systems.
The supercomputer metaphor is appropriate here: hardware changes when energy markets, supply chains, and military security become political weapons. In a situation where the US and China use the economy as an extension of their power, Europe’s only option is the autonomy of its “operating system.” This requires a new economic order that can combine a market economy with strategic self-defense, the economy as an extension of security.
A reboot of the system is inevitable, but which version of the global economy will prevail depends on political choices. There have always been moments in history when society decides what the primary goal of the economy should be. In the 1930s, it was jobs and stability. In the 1980s, it was controlling inflation and restoring profits. In the 2020s, we must decide whether the goal is continued growth or sustainable existence.
The problem is not knowledge or ideas, of which there is plenty. The problem is political courage. If societies allow new “hardware” to be filled with populist regression, we will end up with an economic order that is more reminiscent of the 19th century than the middle of the 21st century. However, if we can formulate a new social agreement that combines the green transition, digital innovation, and social equality, we can lay the foundation for a third era of sustainable market economy.
Who Will Write the Code for the Future?
The global economic order is not an anonymous system that operates on its own. Every reboot has been a political choice. The post-war economic order was born out of fear of revolution, neoliberalism out of fear of inflation and labor unrest. Now, the reboot is being born out of fear of geopolitical, ecological, and social disintegration.
The market economy has always been able to reinvent itself. But writing its software is in the hands of political decision-makers, who will determine whether the economic order of the future will be regressive, techno-utopian, or socially inclusive. Time is limited. Every delay increases the likelihood that the new economic order will be born not out of choice, but out of chaos. This issue will determine Europe’s economic future in the decades ahead.
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