Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
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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