Tue Sep 9th, 2008 at 09:17:31 PM EST
In one of Jerome's diarys on daily kos, the comments drifted to the question, if a political system needs some kind of competition to keep the elite responsible, in a way the USSR was a competitor to the western political course.
When I suggested, that for the US todays Europe is sufficiently different to take a role as competitor, I got a response, which was interesting, despite the it didn't get any mojo so far. Actually I didn't say Europe, but mentioned the Rhenish countries and Scandinavia, for not having to deal with UK and Italy, of which I indeed think they have some problems.
Interesting, because it probably portrays the view of quite a number of non-left Americans about Europe, and may explain, why Americans don't want to follow our way of live. The comment said
- We are more bankrupt than the USA
- Our population is shrinking
- Our growth has consistently underperformed that of the USA
- Our jobless rate is higher
- We are sick of socialism and want to become like the USA
Well the last point wasn't said literally, but it was implied as you will see below the fold.
Of course anybody reading ET knows, that Europe.Is.Doomed, but as it happens my European patriotism has triggered me to introduce some real word factoids into the debate, which you can find below the fold. For having an easy handle on statistics and having made a compromise beween the countries I mentioned and the responder, who used the term 'Europe', I took the EUROZONE data to argue the case, for which a lot of data is available at the ECB. Of course compared with Europe, the Eurozone is cherry picking, because it doesn't include 'New Europe', but the reasons for Poland, Hungary or Slovakia to be behind in some statistics, obviously may have other reasons than the current govt's socialism.
First I want to make clear from what I took the last point in the list:
"Europeans have been voting for more market oriented politicians of late, Sarkozy in France, Merkel in Germany, Berti in Italy and soon, Cameron in the UK. The top corporate tax rate in Europe is lower in every EU country when compared to the US. And the US rate is going up. Europe is becoming less socialistic even as the US is becoming more so."
So Sarko is the new Regean, Merkel the new Thatcher, and Europeans finally 'got it'?
OK, now I start with the analysis
We are more bankrupt than the USA
There is no single variable, which can be used to check this easily, but I have some variables, which can give hints:
- The International Investment Position (IIP), the assets hold by all entities in a country minus their liabilities, is less negative for the Eurozone than for the USA. This is relevant, as the economy as a whole has interest influxes/outfluxes. If the wealth is in private hands, instead of in public hands, the gov can tax wealth and make the private one public. The question, who exactly holds the wealth is only a second tier issue for the bankrupcy of a country.
- The public debt, which is cited in the media, currently 67% of GDP in the Eurozone, is the full gross public debt. Even when you consider the social security trust fund in the US not as public debt, you would have to add all state bonds and - more significant - all municipal bonds to compare the number with the European numbers. The underlying assets, such as roads, stadiums, state owned enterprises,... are in Europe as well bigger than in the US relative to GDP, so the balance sheet is stronger. I might add, that Italy, a country I didn't mention as good example but is in the Eurozone significantly worsens this statistic.
- The deficit numbers, both current account as fiscal, are worse in the US than in Europe. While this numbers can change relatively fast, they give a trend and indicate greater necessity to act in the US than in Europe.
- The slower growth (yes growth) of population allows for less savings to keep the same per capita capital base. To give a practical example: If you have only one sibling, your parents can bequeath you half of the house, in which they are living. Your spouse inherits another half house and you can concentrate on improve an existing house instead of building a new one. With another sibling you will inherit less than half a house. The same of course is true for the public infrastructure leading to that house and so on. When you have to build up less capital, of course you can spend your income on other things, like the higher share of care Europeans have to provide for their older society. Again of course the distribution of the wealth inside the society is a second tier issue for the question of bankrupcy of the country.
Our population is shrinking
Neither the population of the Eurozone nor of the EU nor of geographical Europe is shrinking. Eurozone population is growing 0.6% a year compared with 0.9% in the USA. The EU has ~0.3% population rise yoy.
As well the significance of an aging society as a problem is overblown in the US (hugely, see Paul Krugman's blog and his discussion of social security as the problem which doesn't exist). Macroeconomically children are more expensive than an average retired person, as children not only have to eat and drink and have a shelter, but need more often new clothes and must be educated. If people work a little longer more of this education can be utilised.
[Just to mention again the connection with bankrupcy; when expenses for children are made privatly and expenses for elderly are more often public, you have a second tier problem, as it is distributional, not an overall wealth problem]
Our growth has consistently underperformed that of the USA
There is some merit to this, even when real lefties might argue, that the difference goes away, if you subtract the top 0.1% earners, but some reasons for the perceived difference undermine the nearly all ideas connected to it
- 0.3% less population growth: Does it really matter to live in the overall bigger economy? Are the Chinese better off than the people of Norway, because China has a bigger economy or would you prefer to live in 4 million people Norway?
- Better statistics: In the US the first cited GDP growth numbers have slight upwards bias, later corrections down occur more often than later corrections up (please compare the numbers for each quarter in 2005/2006/2007 in this comment from Jerome a Paris). By then of course the lower growth numbers for the more accurate Europeans are already in your head. Looking back, looking on the GDP growth per capita in the last 10 years, the growth advantage of the US is nearly gone, compared with the US. Well, you may say nearly, but
- The US has had a bigger debt fueled asset bubble than the Eurozone. It is unlikely that this will go on for ever, it seems more like it is coming to an end (soon, very soon). Lets look on the next 5 years, and I'm nearly sure the per capita growth in Europe will be higher than in the US.
[Regular readers of ET are aware of the debt fueled economy, as well known as Anglo Disease]
Our jobless rate is higher
True, but the gap is less wide than perceived.
- Different unemployment accounting methods: It is more honest to take the employment population ratio than the unemployment rate, as this number is less biased against the methode used to determine it. This number is as well better in the US, but in the last 8 years Europe has closed the gap quite a bit. Issues with the unemployment methodology include the exclusion of disabled, people who have given up to find a job out of disbelieve to find one, the massive jail population in the USA, and other stuff.
- Europeans don't like to move. They are less likely to move or take a very long commute to work than Americans. This leads to gains, you don't account for. Living closer to your long term friends, being integrated in a community is not valueless, even when it is difficult to give a specific amount of money to which it would equate.
We are sick of socialism and want to become like the USA
This was based on our recent voting patterns. I want to remind that the question originally was, in the dispute if Rhenish and Scandinavian countries can count as good examples for the USA. So is Sarko really a Reagan and Merkel a Thatcher? And what about Berlusconi and Cameron? I can't look into each country, as this requires hardly aggregatable data.
Berlusconi is the head of the circus, which sometimes is called Italy. If that were representative for Europe, we would have a problem.
The very likely election of Cameron in the near future is more an expression of the poor British election system than an expression of the wish of Britons, to abolish NewLabour socialism. TINA is the problem, not the hate of solidaric elements in the society.
To judge Sarko (difficult for me as I don't follow French domestic politics) and Merkel, one has to put into account the initial state. When some claim Obama is the most left wing presidential candidate since FDR, then this might be true wrt the actual political center, but the Texan Republican president and five star general Eisenhower had a higher income tax, and was for sure much much less willing to use the American military in countries neighbouring Russia than Obama plans to. Moreover Sarko has promised to use a capital gains tax increase to finance a negative income tax for the poor (call me on it, if this isn't true). Merkel's gov't has not only increased the VAT, but as well the top income tax rate (for single making more than 250,000 EURO per anno), reduced the tax deductability of several things, and increased the time the higher unemployment benefit is paid for elderly people (after the previous leftwing gov't has reduced the income tax to the lowest rate ever, and restricted welfare very strong in the agenda 2010, has brought Germany for the first time since WW II into a war (Kosovo) and started the now so unpopular engagement in Afghanistan).
I think there are some things, which we take as incorporated to the social contract, which holds together our very countries, which exist not, or to a significant less degree in the USA.
- Affordable health care for everybody, financed by the taxpayers solidarity if necessary. This exists only very rudimentally in the US. Obama will improve the situation, but not to the level it is here in Europe.
- Timely unlimited help for those who don't find a job or are too ill to work. Yes you will find homeless here, but there are often mental problems causing this. The best social security net can't stop children running away from their parents. But the number of homeless people you will find is much lower. This kind of welfare was killed in the US under Bill Clinton. So far nobody has tried to revive it. I don't mention Clinton to denounce Democrats as wose than the Republicans. But the Democrats clearly have been complicit.
- A number of temporary hardship or leisure regulations, such as paid maternity leave, paid vacations; the Merkel gov has introduced one year partially paid (by the gov) educational leave (taken a Swedish law as example), there is more public financing of culture (theatres, concert halls, museums).
I'm not aware of details in the US, but it seems to me that the variety of benefits and community infrastructure is much broader in Europe than in the US. As well as the Republican family values haven't led them to the conclusion, that families might need the support of the gov.
For those who want further details on the question, what kind of soldaric laws are perceived as common ground, despite it is true, that there are some, who do embrace the 'American way of gouverning', I refer to redstar's diary Change I can believe in
, but generally it means that the big risks of live, age, illness, joblessness, should be shared by the community to prevent really ugly forms of poverty. While this doesn't work always, I stay by my phrase, the social net in Europe has imperfections through which people fall, the social net in America are barely ropes, where those who are strong enough can hold themselves and the strongest even climb up.
How is this possible, lower corporate taxes and more benefits, well, we don't pay for 45% of the worlds military as the US does, security is a much smaller issue (only ~1/10. as much people in jail, no gated communities).
Other things like the better oil efficiency of our economy will benefit us in the future as well. So, no, Europe is no paradise, but to claim a better gov is not absurd, especially when focusing on the issues which are actually influenceable by todays gov'ts.
And when comparing gov'ts, not name tokens (fiscal reponsibility e.g. is conservative in my book, and clearly more pronounced in Europe than in the USA), then the 'European socialsim', which is so often cited by people like Mitt Romney, is clearly prefer to the American socialism, which exists as well in form of wingnut welfare, banking bailouts, dollar devaluation policies, and the military Keynesianism.
So please, my American friends, you may declare "The USA is the greatest country in the world", "This can only happen in America", "America, the only indispensible nation", but don't complain, there wouldn't be countries with gov'ts in the world, which help their people to live a less painful live than the one in the USA.