[originally published in Washington Post, Outlook section Sunday, October 7, 2007; Page B03]
In the global economy, today's winners can become tomorrow's losers in a twinkling, and vice versa. Not so long ago, American pundits and economic analysts were snidely touting U.S. economic superiority to the "sick old man" of Europe. What a difference a few months can make. Today, with the stock market jittery over Iraq, the mortgage crisis, huge budget and trade deficits, and declining growth in productivity, investors are questioning the strength of the U.S. economy. Meanwhile, analysts point to the roaring economies of China and India as the only bright spots on the global horizon.
But what about Europe? You may be surprised to learn how our estranged transatlantic partner has been faring during these roller-coaster times -- and how successfully it has been knocking down the Europessimist myths about it.
1. The sclerotic European economy is incapable of leading the world.
Who're you calling sclerotic? The European Union's $16 trillion economy has been quietly surging for some time and has emerged as the largest trading bloc in the world, producing nearly a third of the global economy. That's more than the U.S. economy (27 percent) or Japan's (9 percent). Despite all the hype, China is still an economic dwarf, accounting for less than 6 percent of the world's economy. India is smaller still.
The European economy was never as bad as the Europessimists made it out to be. From 2000 to 2005, when the much-heralded U.S. economic recovery was being fueled by easy credit and a speculative housing market, the 15 core nations of the European Union had per capita economic growth rates equal to that of the United States. In late 2006, they surpassed us. Europe added jobs at a faster rate, had a much lower budget deficit than the United States and is now posting higher productivity gains and a $3 billion trade surplus.
2. Nobody wants to invest in European companies and economies because lack of competitiveness makes them a poor bet.
Wrong again. Between 2000 and 2005, foreign direct investment in the E.U.-15 was almost half the global total, and investment returns in Europe outperformed those in the United States. "Old Europe is an investment magnet because it is the most lucrative market in the world in which to operate," says Dan O'Brien of the Economist. In fact, corporate America is a huge investor in Europe; U.S. companies' affiliates in the E.U.-15 showed profits of $85 billion in 2005, far more than in any other region of the world and 26 times more than the $3.3 billion they made in China.
And forget that old canard about economic competitiveness. According to the World Economic Forum's measure of national competitiveness, European countries took the top four spots, seven of the top 10 spots and 12 of the top 20 spots in 2006-07. The United States ranked sixth. India ranked 43rd and mainland China 54th.
3. Europe is the land of double-digit unemployment.
Not anymore. Half of the E.U.-15 nations have experienced effective full employment during this decade, and unemployment rates have been the same as or lower than the rate in the United States. Unemployment for the entire European Union, including the still-emerging nations of Central and Eastern Europe, stands at a historic low of 6.7 percent. Even France, at 8 percent, is at its lowest rate in 25 years.
That's still higher than U.S. unemployment, which is 4.7 percent, but let's not forget that many of the jobs created here pay low wages and include no benefits. In Europe, the jobless still have access to health care, generous replacement wages, job retraining programs, housing subsidies and other benefits. In the United States, by contrast, the unemployed can end up destitute and marginalized.
4. The European "welfare state" hamstrings businesses and hurts the economy.
Beware of stereotypes based on ideological assumptions. As Europe's economy has surged, it has maintained fairness and equality. Unlike in the United States, with its rampant inequality and lack of universal access to affordable health care and higher education, Europeans have harnessed their economic engine to create wealth that is broadly distributed.
Europeans still enjoy universal cradle-to-grave social benefits in many areas. They get quality health care, paid parental leave, affordable childcare, paid sick leave, free or nearly free higher education, generous retirement pensions and quality mass transit. They have an average of five weeks of paid vacation (compared with two for Americans) and a shorter work week. In some European countries, workers put in one full day less per week than Americans do, yet enjoy the same standard of living.
Europe is more of a "workfare state" than a welfare state. As one British political analyst said to me recently: "Europe doesn't so much have a welfare society as a comprehensive system of institutions geared toward keeping everyone healthy and working." Properly understood, Europe's economy and social system are two halves of a well-designed "social capitalism" -- an ingenious framework in which the economy finances the social system to support families and employees in an age of globalized capitalism that threatens to turn us all into internationally disposable workers. Europeans' social system contributes to their prosperity rather than detracting from it, and even the continent's conservative political leaders agree that this is the best way.
5. Europe is likely to be held hostage to its dependence on Russia and the Middle East for most of its energy needs.
Crystal-ball gazing on this front is risky. Europe may rely on energy from Russia and the Middle East for some time, but it is also leading the world in reducing its energy dependence and in taking action to counteract global climate change. In March, the heads of all 27 E.U. nations agreed to make renewable energy sources 20 percent of the union's energy mix by 2020 and to cut carbon emissions by 20 percent.
In pursuit of these goals, the continent's landscape is slowly being transformed by high-tech windmills, massive solar arrays, tidal power stations, hydrogen fuel cells and energy-saving "green" buildings. Europe has gone high- and low-tech: It's developing not only mass public transit and fuel-efficient vehicles but also thousands of kilometers of bicycle and pedestrian paths to be used by people of all ages. Europe's ecological "footprint," the amount of the Earth's capacity that a population consumes, is about half that of the United States, for the same standard of living.
So much for the sick old man.
Steven Hill, director of the New America Foundation's political reform program, is writing a book comparing Europe and the United States. He also is author of 10 Steps to Repair American Democracy (www.10steps.net).
Pretty damn disgusting.
Unemployment, which is very high, is officially at slightly less than 10%. That is a lie, since many have been prodded into early retirement, sent to useless re-training programs or live at poverty levels, trying desperately to avoid being officially unemployed.
The college I teach at does not contribute to my health insurance or anything else besides paying me under-wage for my teaching hours. I know many others here in Germany who are payed poorly.
In the last years the gap between big and small earners is steadily growing. Already, more than 13% of Germans are classified as existing relatively below poverty.
One good thing is the health care system, which isn't overpriced and easily accessible. Transportation is becoming more expensive. Right now, railway strikes are on.
Germany are having less and less children each year. In the near future, we will be seeing many old retired Germans (retirement now at 67 yrs. old) and many unemployed and poorly educated foreign youth.
Germany is a top weapons exporter. Through their USA based subsidiaries (i.e. Siemens), German firms were among the first to profit from the war in Iraq.
Even though the situation is getting worse in Germany, I choose to remain because of friends and family. I have cut back tremendously and have adapted to a lifestyle below the poverty level.
The official term in germany is 'social market economy'. Socialism,as a political viewpoint, is perhaps accepted by more people than in the USA, but is still highly controversial. It's usually 50-50 between freemarketeers and conservatives on one side and socialdemocrats and socialists on the other. The main difference between Europe and the USA is, that the conservatives - often inspired by christian ethics (especially the catholics) - are less engaged in the war against the poor. That is also due to the fact that freemarket-policies usually have an approvalrating of 5 to 15 percent.
The word socialism is nevertheless controversial, mainly because what you call communism, europeans mostly call socialism (Soviet-union etc.).
unchecked capitalism will destroy the middle class to benefit the haves and have mores.
the middle class bought into reagan's trickle down theory. suckers.
wall street now runs many american corporations for quarterly profits at the expense of the long term success of the company.
will americans wake up in time with a voter revolution. no we are more interested if a politican wears a flagpin.
the repubs keep telling the voters how good the economy is. will they buy it. yes just keep the circuses coming and dont forget the peanuts.
give them a circus and peanuts and they will be content. still works.
you mention socialist in this country and they go home and look for commies under their beds.
brainwashing works on the naive and if there is a more naive and arrogant group of people in the industrialized world than americans I have not found them.
that last bit is a lie.
In Belgium an estate passes to a deceased person's heirs in two ways:
Following strict laws on inheritance that benefit family members (descendants, parents and brother and sisters) and the spouse in a fixed order of succession
Following a person's own wishes on the disposal of their property, as expressed in their will
It's possible we invaded Iraq as a competitive measure against the EU, with WMD possibilities as a convenient excuse. Saddam was about to have sanctions lifted and sell oil in Euros. We pre-empted that with our invasion.
If you think Europe is so much better you should go and not come back
I am surprised at the 3rd world infrastructure American has.
And people still have dial up in America?
Unbelievable.
As an excuse: Europeans don't have to deal with the ghetto youth+Latino students. This helps.
But USA has terrible secondary education and the best university education. It's really a schizoid system. In Europe it's almost the reverse, amazing high schools, (esp.gymnasiums) but the university system is quite limited ( except British top-tier).
At least in germany the overwhelming majority of schools are public. Though through underfunding them, we have a tendency towards private schools, but in most european countries, the public schools still outnumber the private ones (who are often for wealthy people with dumb children).
14 are European.
2 are North American.
2 are from the Middle East
1 is from East Asia
1 is from Oceana
1 Luxembourg 87,955 2005
2 Norway 72,306 2005
3 Qatar 62,914 2005
4 Iceland 54,858 2005
5 Ireland 52,440 2005
6 Switzerland 51,771 2006
7 Denmark 50,965 2005
8 United States 44,190 2006
9 Sweden 42,383 2006
10 Netherlands 40,571 2006
11 Finland 40,197 2005
12 United Kingdom 39,213 2005
13 Austria 38,961 2006
14 Canada 38,951 2006
15 Belgium 37,214 2006
16 Australia 36,553 2004
17 France 35,404 2006
18 Germany 35,204 2006
19 Japan 34,188 2005
20 United Arab Emirates 33,397 2003
Reason I'm asking is, since the $ has continued it's rapid decline, the figures are most likely getting worse for the US. Just as a fer instance, the Loony has accumulated about 6% of value in just the last month. That would demand a recalculation for the Canadian GDP figures to somewhere in the near $41.5 K range, cutting the previous US "advantage" in half.