Toward Europe?

Townhall.com Michael Barone November 28, 2005

Will the United States become more or less like continental Europe? That’s one way to frame the central question of domestic policy. In Europe much higher percentages of gross domestic product are absorbed by government; welfare state protections and restrictions on labor markets are greater, health-care and pension provisions are dominated by the central government. The result, say advocates of the European model, is greater leisure and greater protection against risk. The result, say advocates of the American model, is economic stagnation and high unemployment. Over the last 25 years, the number of jobs has increased by 57 million in the United States. The figure for Europe is 4 million. Unemployment is around 5 percent in the United States. In France and Germany it tops 10 percent.

Given those numbers, Americans, through the workings of the political marketplace, are not likely to choose the European model. But certain features of our society — the aging of our population, the increasing percentage of gdp any affluent society will spend on health care — move us in a European direction, unless some effort is made to counter that trend. One question to ask, as we approach the end of the fifth year of the Bush administration, is to what extent it has countered that trend.

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Comments

  1. Dean Scourtes says:

    Because they both have serious flaws I don’t see how one can totally defend either the US or European model.

    Let’s start with Europe. It has an economic model that promotes high unemployment through suffocating business regulation, inflexible labor laws, overly generous unemployment benefits and anti-competitive agricultural subsidies. Europe’s unemployment situation can only get worse as low-wage labor competition from Eastern Europe and Asia increases, and their generous entitlements could become more difficult to fund as their populatons continue to age.

    Now for the US. Our health care system is slowly sinking like the Titanic, and private sector remedies amount to no more than a rearranging of the deck chairs. More and more employers are refusing to purchase health insurance for their workers or pushing so much of costs on to their workers, as to make seeking health care financially impractical. Hospitals are absorbing more and more unreimbursed costs for the uninsured. Medicaid and Medicare costs are exploding and the refusal of Congress to allow the government to use its purchasing power to negotiate lower drug prices means that pharmeceutical companies will continue to drive health care hyper-inflation.

    Our nation’s physical infrastructure is crumbling and not just on the banks of Lake Charles, LA. Maintenance of roads, bridges and railroad lines have all failed to keep pace with the needs of a modern 21st century economy. Inner city and rural schools continue to be underfunded and the cost of a college education is soaring beyound the means of most children of the middle-class. Employers are increasingly complaining about a shortage of skilled and educated labor, yet our educational institutions have failed to develop apprenticeship programs or tailor their educational offerings to the needs of industry.

    Investment capital for Research and Development projects is deplorably lacking in the US because public funds for such ventures have dried up, and private funds seek a more rapid a return on investment than most R&D projects can deliver. So badly needed technologies in this nation, like alternative energy and electronic medical records, are begging for funding and developing at the snail’s pace.

    Only a total ideologue could completely champion one economic model over the other, without an honest appraisal of the respective weaknesses of each, and that is what Michael Barone clearly does.

  2. Dean, don’t worry so much. A free market is the best adapted to find resolutions to these problems.

  3. Dean Scourtes says:

    One advantage for the US is that Americans work harder. James Surowiecki, provides this insight in the New Yorker:

    “In the American model, then, you work more hours and use the money you make to pay for the things you canâ??t do because youâ??re working, and this creates a demand for service jobs that wouldnâ??t otherwise exist. In Europe, those jobs donâ??t exist in anything like the same numbers; employment in services in Europe is fifteen per cent below what it is in the U.S.

    Service jobs are precisely the jobs that young people and women (two categories of Europeans who are severely underemployed) find it easiest to get, the jobs that immigrants here thrive on but that are often not available to immigrants in France.

    There are many explanations for the estimated forty-per-cent unemployment rate in the banlieues that have been the site of recent riots, but part of the problem is that voluntary leisure for some Europeans has helped lead to involuntary leisure for others. The less work that gets done, the less work there is to do. Helping some people get off the labor treadmill can keep many people from ever getting on the treadmill at all.”

    http://www.newyorker.com/talk/content/articles/051128ta_talk_surowiecki