Following up on my prior post about the European economic model, the Wall Street Journal reported Saturday that the German economy is expected to grow 3.5% this year, its best performance since reunification. Moreover, much of this growth is coming from internal demand, balancing the economy away from its already strong export base. In other words, the high wage, high tax rate German economy has already recovered from the global recession and is starting to kick our ass.
Salon recently interviewed Thomas Geoghegan, author of Were You Born on the Wrong Continent?: How the European Model Can Help You Get a Life, a book which, in addition to having a ridiculously long title, discusses the benefits of the European economic model (higher taxes, generous benefits), particularly in terms of improved quality of life. I haven’t read the book, but he made some interesting points in the interview.
He notes that while Germany (his main focus within Europe) has high wages and strong unions, it is also a leading exporter. With one-third the population of the US, Germany still manages to export more than we do. Thus the claim that America can only be competitive with low wages and weak unions is belied by Germany’s success.
He also takes on the GDP statistics that seem to indicate that America is much wealthier than Europe. He notes that GDP doesn’t measure things like leisure time, or a free college education, or liberal parental leave rules:
“One day we’ll get beyond that and see that the European standard of living is rising. You can pull out these GDP per capita statistics and say that people in Mississippi are vastly wealthier than people in Frankfurt and Hamburg. That can’t be true. Just spend two months in Hamburg and spend two months in Tupelo, Mississippi. There’s something wrong if the statistics are telling you that the people in Tupelo are three times wealthier than the people in Germany…..So much of the American economy is based on GDP that comes from waste, environmental pillage, urban sprawl, bad planning, people going farther and farther with no land use planning whatsoever and leading more miserable lives. That GDP is thrown on top of all the GDP that comes from gambling and fraud of one kind or another. It’s a more straightforward description of what Kenneth Rogoff and the Economist would call the financialization of the American economy.”
That quote makes me wonder: if you took out all the casino components of real estate and wall street speculation, what would the US GDP statistics look like then? I’m sure that someone has done this analysis, but I couldn’t find it online.
Geoghegan makes clear that he is an American and that he loves America and loves living here. He merely notes that when we discuss, as we are in the current election, those great American values of individualism and free markets and the heroic capitalist, we should remember that there are benefits to other systems. Germans work, on average, nine weeks less per year than we do (two months!), and yet they seem to have a pretty nice standard of living. I’m not saying I want to move to Frankfurt tomorrow, because I don’t. I too love living in America. But there is no reason we shouldn’t learn from other countries and from what they do well.
Slate recently ran an article by Anne Applebaum claiming that the division that now matters in Europe is no longer east vs. west, but instead north vs. south. According to Applebaum, communist east vs. capitalist west no longer matters. The important division is austere northern countries that manage their budgets and affairs vs. profligate southern countries that spend like drunken sailors, hoping others will pick up the tab.
As Applebaum puts it:
“The South contains all those countries whose political classes have not been able to balance their national budgets, whose bureaucrats have not been able to reduce their numbers, whose voters have not learned to approve of austerity….The North contains the budget hawks”
After reading the Slate article, I read Michael Lewis’ article in Vanity Fair about the Greek financial crisis. Lewis describes Greece as less of a country than a national pool of corruption in which the entire populace knowingly plunders the government treasury.
Pairing these two articles really made me think about this dichotomy between governance and chaos, between bureaucrats who do their jobs and those whose job is merely a path to a bribe. And it’s really just a small leap from governance vs. corruption to civic good vs. selfishness and then to democracy vs. despotism. But once I started expanding Applebaum’s dichotomy into a broader range of behaviors, I started to wonder whether her north vs. south division could be expanded beyond Europe. I think it can be.
After all, the northern hemisphere is generally a lot better managed than the southern: Canada vs. Venezuela, Estonia vs. Syria. Of course, Russia is really far north, but it acts south. And North Korea vs. South Korea reverses the pattern. But I think if you were to average across the hemispheres, Applebaum’s north vs. south dichotomy holds. Germany is to Greece as Greece is to Zimbabwe? Even within the US, the southern states tend to be far more profligate than the northern, as in this awesome blog entry, or this table showing which states spend more federal dollars than they pay in taxes.