Examining the Modern Political Economy of the Europe and America

As Europe’s development accelerated in the early nineteenth century, public anxiety also increased sharply. Societies across Europe began confronting a growing number of social and structural problems, including widening inequality. The situation has now reached a point where these states can no longer be described purely as capitalist or socialist systems; rather, it would be more accurate to describe them as welfare states.

It must be remembered that a welfare state means providing citizens with extensive facilities such as free education, free insurance, pensions, and various other social benefits. Over time, people have not only become accustomed to these benefits but have begun to see them as constitutional rights. The problem is that sustaining such systems requires enormous budgets, which have now become difficult to control and manage.

In the nineteenth century, avoiding a fully socialist state while maintaining capitalist movements was a strategic decision. However, that same strategy has now turned into a trap for nation-states. Many of these countries are standing on the brink of bankruptcy, struggling with a wide range of social challenges such as inequality, declining productivity, and the rise of political extremism—issues that often trigger internal political crises.

Europe, moreover, is receiving little help from Donald Trump, as his focus remains firmly on an “America First” strategy. Whereas Europe was the first and foremost ally of the United States for over more than 70 yrs after the World War II. But now this has changed suddenly after Mr. Trump was elected as the President. I cannot say it is permanent but for the near future. Nonetheless it also raises an important question: how long can one nation-state continue to shoulder the burden of another? On one hand, the United States is grappling with its own political variability, while on the other side, China is emerging strongly on the global stage with its growing technological and military power. Are we going to see a multi-polar world? (I will leave that topic for another time).

I have previously written about how populism is taking root across Western countries. This phenomenon represents yet another factor that must be added to the growing list of challenges facing the West.

“A heart deprived of inner light remains untouched by illumination.”

The real question is not whether Europe—or the West in general—can sustain its welfare systems, but whether democratic capitalist systems can bear such massive financial burdens. By way of reminder, in 2024 the United Kingdom paid £104 billion in interest alone, while its defence budget stood at just £65 billion. This is the same Britain whose empire once boasted that the sun never set upon it.

In the same context, the United States paid approximately $880 billion in interest in 2024 on loans taken from international markets. According to a recent report by the Organisation for Economic Co-operation and Development (OECD), which includes 37 member countries, Western nations are now burdened with between $2 and $21 trillion in debt. The report notes the irony that none of these countries appears truly serious about defining or respecting limits on their borrowing.

The Western world is currently facing a deep and destabilising trilemma, in which the core pillars of its geopolitical identity—democratic governance, its prevailing economic system, and its established political structures—are locked in a fundamental and unsustainable tension.

The prevailing perception is that these elements have reached a fragile breaking point. Policymakers now face a zero-sum dynamic: any decisive step taken to protect or strengthen one pillar inherently undermines the stability of another, creating an ongoing cycle of unavoidable trade-offs and systemic erosion.

Policies designed in the early twentieth century are no longer compatible with today’s rapidly changing dynamics. Societies have become deeply dependent on welfare systems. The pressing question is whether governments should prioritise reforming welfare structures or focus instead on protecting their nations. This is not merely a policy dilemma but a crisis of institutional coherence, where maintaining democratic values, economic strength, and political legitimacy simultaneously has become an increasingly unworkable task—one for which there are no easy answers.

— Mohammad Minhajuddin Khan
New Jersey, USA