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The periodic trumpeting of superior US economic statistics by the English speaking economic news feeds used to have a slightly depressing impact on my mood, until I read an article dissecting the European figures versus the US ones in an article in the July 2004 edition of The Economist (unfortunately pay-to-view). The conclusion of the article was that the economic performance of the euro zone and the US has not been hugely different over the last decade.

According to the article:

The euro zone's GDP growth is consistently below the US but adjusted for population growth in the 10 years to 2003, average GDP growth per capita was 2.1% in the US vs. 1.8% in Europe (and excluding Germany, struggling with the consequence of the reunification, the figure would have been 2.1%).

After adjustments to make the figures comparable, average labour-productivity growth over the same 10-year period has been virtually the same, despite the US productivity miracle claims.

And if it is true that GDP per capita at purchasing power parity remains 30% below the US, the difference results mostly from more worked hours in the US. Europeans have used some of their increase in productivity to expand their leisure rather than their income. The average American works 40% more hours during his life-time than the average European.
"Who is better off?" says the article.

by Minstrel on Thu Jun 30th, 2005 at 10:01:17 AM EST
"The average American works 40% more hours during his life-time than the average European. "Who is better off?" says the article."

Tell me about it!! That's the "American Way (tm)"...which I am seeing more and more creep into Europe. I say: Don't go there...enjoy and appreciate the good quality of life you have here!!

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia

by whataboutbob on Thu Jun 30th, 2005 at 11:31:17 AM EST
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 I see too many households here who have to work two low paying jobs to make ends meet here. Don't be like that.

....because I would rather see us reduce the consumption of imported oil than have to send American boys to fight in the Persian Gulf. - John B. Anderson
by Anderson Republican on Fri Jul 1st, 2005 at 12:35:22 AM EST
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Amen, indeed. I don't mind to work hard or make long days when necessary, but I've always remained skeptical during my experiences with the American working frenzy. There's a time for work, and a time for relaxation and they should come in a good balance.
by Nomad on Fri Jul 1st, 2005 at 07:42:02 AM EST
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I wanted to refer to this article, too. Some more points:

  • That 1.8% for the Eurozone rises to 2.1% if we exclude Germany, which had its problems in large part due to the problematic reunification

  • (most important point in my view) European and American GDP statistics are actually incomparable: the USA makes heavy use of statistical tricks like 'hedonic price indexing', which adds the income of new technology industries into the GDP with a multiplier that is meant to express decrease of prices due to development (for example, PCs, 1995-2000: real rise from $23 to 87 billion, but with HPI, the latter became $240 billion); some stuff like companies' spending on computers is added to the GDP as investment in the USA, but substracted as spending in Europe, etc.

There is a further point about joblessness, too. After looking at the details, I became convinced that joblessnumbers are a sham: there are endless opportunities to exploit (and they are exploited) for statistical tricksery. Basically, the jobless number is the number of people without jobs who are tracked by some government agency and are recognised as such, be as people receiving benefits or applying for job-searching help. It would make more sense to look at the number of working people vs. all working-age people; and, IMO, even more sense to just look at working people vs. total population.

In effect, both in Britain and the USA, a lot of jobless people drop out of the statistics because jobless benefits are more scarce and apply for less time. The Bush-era development in the USA is particularly instructive: the jobless number is sinking for IIRC two years now, but the total workforce barely reached its early 2001 record level in total numbers, while the working-age population increased by millions.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Fri Jul 1st, 2005 at 04:42:22 AM EST
[ Parent ]
I separate out two less straightforward points, which could be unortodox, and I make them as an amateur economist so a professional (Jerome?) might correct me where I am wrong:

Point 1: I think the Clinton-era new economy bubble was a main part of a larger, global economic bubble, which boosted the US economy at the expense of the European (and Asian) economies in real terms, not just in perceptions - but this was an effect of the above mentioned false perceptions.

The new economic bubble went like this: a lot of naive investors invested into companies with only promises, thus their stock price went up, the higher stock price made them even more popular, later the higher stock price was also recycled in the company balance sheets and quarterly profit reports due to the new accounting preferences, which in turn made these stocks even sexier, so there was a positive loopback - further enhanced by companies actively tricking to boost their stock prices further with false reports.

This alone drew away a lot of capital from the rest of the world in an unjustified way. But the above mentioned differences in US and rest-of-the-world (especially European) methods of measuring econmic performance, details ignored by most, led through the false perception of the US outperforming the rest to further capital streams into the USA - I primarily mean the securities market.And this was the meta-bubble: the FED's combined statistical tricksery and laissez-faire attitude towards the practises on the stock market (not to mention accounting) created a positive feedback for investment into the USA. The more money went in, the more superior the US economy seemed.

Point 2: This is only tangentially a US vs European economy issue. It is about the supposed demographic effect. It is commonly argued that low child numbers in a country lead to an exploding retirement budget.

I don't see how. I think, first, this calculation leaves unemployment blatantly out of consideration. For, if the problem would be a shortage of workforce, there is a simple solution: raising the retirement age. But actual policy (either officially or inofficially) is often the opposite, older people look for but aren't given jobs, and companies often 'rationalise' by sending workers into early retirement.

Which leads to the thought: if retirement funds were to be decreased by raising retirement age, jobless numbers would soar - and so would jobless benefits paid out. Which leads to the idea that retirement funds and funds for jobless benefit should be treated together, as money paid by workers for non-workers.

If we are here, one could take this one step further. Children are also inactive economically, and tough much of the money spent on them is not paid by the state, it is a cost to the overall economy nevertheless. So it would be best to treat all non-workers who 'live off' active workers together.

And this is my point. The number of children is not the problem - change that, you only shift some percentage of the money flowing from active workers to non-workers from the elderly to the children. So unless I made a fatal error above[], there is no demographic problem, there is a deeper job shortage problem. (I have my ideas on that, but that would be another post.)

[] Higher productivity of young people could be an argument - however, (a) I don't think higher productivity is specially needed in that many jobs, (b) I'm not even convinced that there is such a big difference between old and young people - much of it could be a Jugendwahn, one of the many currently fashionable mores managers catch on with a herd instict, (c) older people can have their productivity advantages too: experience, (d) productivity itself is over-hyped: in the end, for a company, what matters is total value produced vs. money spent on paychecks and taxes, that is two half as productive people working for half the pay is just as good.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Fri Jul 1st, 2005 at 05:22:59 AM EST
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