Benefits of the European Economic Model

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.