If there’s one thing most American capitalists agree on it’s that Europe’s economy is a disaster. It never grows, it takes years to fire lazy employees, there’s no entrepreneurialism and innovation, they tax they living hell out of you, etc.
And yet look who’s recovering first?
And look who didn’t even bother with a stimulus (Germany). And look whose citizens enjoy basic services that many Americans can only dream of (Europe). And look whose income inequality just hit an all-time high (U.S.)
Our free market is tuned to encourage maximum growth, maximum competitiveness, and maximum wealth for corporate owners. Europe’s economy is tuned to balance growth with employment, services, and wealth distribution.
Over the long haul, the performance of Europe’s stock markets hasn’t been much worse than ours. Plenty of Europeans have plenty of money, and most of those who don’t have any money still have decent healthcare and other social services. The heavy government spending (and taxation) provides a natural counter-balance to the cyclical private sector (when markets crash, government spending keeps cranking right along).
So is Europe’s economy really that much of a disaster? Is ours really so great?
Yves Smith at Naked Capital weighs in:
It was conventional wisdom in the US and UK financial press that Europe was dong a hopelessly bad job of responding to the economic downturn, that it needed to do vastly more in the way of fiscal stimulus, that it was consigning its citizens to continued recession, and the Te Germans in particular were to blame for their conservatism re emergency fiscal measures. German readers begged to differ, pointing out the Germany (and the rest of Europe) has large automatic stabilizers (very generous unemployment insurance, for instance), making discretionary fiscal spending less necessary.
I was travelling along the Danube and Rhine in June, and saw far fewer signs of distress (like vacant retail stores) then I see is TARP-supported Manhattan. I thought this was merely sample bias, the vagaries of being in tourist areas (albeit before tourist season was in full swing) and discounted my impressions.
Turns out my sample may not have been so unrepresentative. The Wall Street Journal reports that Europe appears on the cusp of a bona fide recovery, with France and Germany both showing decent second quarter growth, while the US is trying to pretend that “things are getting worse less quickly” is tantamount to recovery.
Now are any of the Euro bashers about to give the EU authorities some credit? I doubt it.
And this disparity, if it persists, points to a much deeper issue. The US chose to deregulate across a wide range of activities and let the devil take the hindmost. Europe cares more about institutional frameworks and collective outcomes. US commentators regularly describe Europe a sclerotic. But if the EU winds up delivering better growth, what justification do we have for a system that seems best at redistributing income to the top…
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