Europe's social contract faces collapse amid stagnant growth and housing crisis

Widespread protests involving significant numbers of minors across Europe signal a breakdown of the post-war social contract as housing prices have surged by over 50% since 2010. This economic instability, driven by low productivity and rising welfare costs for the elderly, is fueling deep resentment among youth facing limited social mobility.

Anxiety is at the heart of the large-scale protests continuing across Europe. Unlike in the past, demonstrations occurring in major European cities, including France and Germany, are seeing significant participation from students and minors under the age of 18. The anger of the European youth has reached a breaking point, evidenced by the fact that more than half of those arrested and detained during protests in Barcelona, Spain, were under 18. This pattern is being repeated in Milan, Italy, where Prime Minister Meloni has proposed legislation to increase accountability by requiring parents to directly compensate for damages caused by their minor children through protests or riots, or face cuts to family welfare benefits. France also maintains provisions requiring parents to compensate for damages caused by children living with them.

The crisis in Europe, analyzed by Dr. Choi Jun-young's Globe Institute, extends beyond mere public order issues to the fundamental collapse of the "social contract" that has sustained Europe since World War II. Following the Great Depression of the 1930s and the subsequent mass unemployment and poverty, post-war European leaders learned that such conditions could destroy democracy. Consequently, a social agreement was reached where the state took responsibility for the employment and welfare of its citizens, while citizens paid high taxes and followed community rules. This expanded the scope of democracy by increasing social insurance, pensions, and medical insurance while guaranteeing workers' rights. However, over the last 20 years, Europe has faced continuous crises, including the 2008 global financial crisis, the 2010–2012 European debt crisis, the refugee crisis following the war in Syria, COVID-19, the war in Ukraine, and the war in Iran. As these unresolved crises accumulate, social conflicts are becoming entrenched as fragmented interest groups reinforce their own perspectives through social media algorithms.

Stagnant Growth in Europe and the Productivity Gap with the United States

The most significant prerequisite for the European social contract model was "continuous growth." During the post-war golden age that lasted until the 1960s, Europe was able to simultaneously achieve wage increases for workers and the expansion of welfare based on high growth. This was because a larger economic pie increased tax revenue, providing sufficient resources to mitigate social conflict. However, the situation changed rapidly as growth slowed.

Data shows that from the 1890s to 2020, European labor productivity has never once surpassed that of the United States. Despite working longer hours than Europeans, the United States maintains overwhelmingly higher productivity. Europe now faces a structural contradiction where welfare costs continue to rise while growth remains stagnant. Dr. Choi Jun-yeong pointed out that the existing system, which requires money to function, has reached its limit in a state of low productivity and lack of growth, noting that the ability to secure the resources necessary to maintain the social contract has been lost. Due to these financial constraints, the lack of budget for schools, housing, transportation, and future industries is emerging as one of Europe's greatest concerns.

"No Dream of Buying a Home"... Housing Instability Swallows Equal Opportunity

At the core of the economic anxiety felt by young people is the issue of housing. The traditional life model envisioned by European youth was to obtain a job, become independent, and start a family. The most important prerequisite in this process is "stable housing." However, over the last 15 years (2010–2024), housing prices in Europe have risen by an average of more than 50%, and rents have soared by more than 25%. Compared to an inflation rate of approximately 30%, the rise in housing prices is extremely steep. The problem is so severe that in large cities like Madrid, Spain, young people have appeared protesting while sleeping on the streets in the middle of city squares.

The explosion of housing prices, which exceeds the inflation rate, is blocking social mobility. The frustration that one cannot afford a home even after receiving a diligent education and securing a job causes extreme polarization between classes. As the gap widens between those who can own a home with parental help and those who cannot, the "equal opportunity model"—the idea that one can design a future based on effort—has stopped functioning. This aligns with problems already experienced by South Korean society. Furthermore, economic anxiety among the youth is intensifying with the added job insecurity caused by recent developments in AI.

Welfare for the Elderly Becomes a Source of Grievance for the Youth

The current fiscal structure in Europe is deepening conflicts with older generations. Approximately 30% of the EU GDP is spent on social protection benefits, nearly half of which is concentrated on old-age pensions. While the state makes desperate efforts to keep its past promise to "guarantee old age," young people complain that there is no money to be spent on education, housing, and investment in future industries for them. The youth have come to perceive that they are being deprived of even the opportunity to dream of the future while receiving no directly felt welfare benefits.

As welfare spending for older generations is prioritized, the youth perceive that they are being deprived of the opportunity to dream of the future. Dr. Choi Jun-yeong raised a fundamental question regarding the sustainability of the existing social contract, stating, "We have reached a point where we must contemplate whether it is unconditionally right to continue fulfilling the promises of the past."

Source: original video (YouTube)