Even as the American Left pushes the Euro style social model of greater job protections and larger social welfare programs, Western Europe itself is limping along the road to stagnation. And even though there's more than enough intellectual kinship between the American Left and European politicians, there is no denying the increasing anxiety among them about Western Europe's economic performance and future.
Since the late 1980s, when a major divergence appeared, the American and European economies have taken separate paths. Right now, most of those economies have growth rates that are a third to a half that of the US. The EU produces only about 70% of the US GDP per capita. It has a smaller portion of its population in the workforce and much higher unemployment among those wanting to work.
There's a growing cottage industry on both sides of the Atlantic denying this growing discrepancy in economic performance. But their reasoning denies logic and experience. Higehr taxes and less flexible labor markets lead to less investment and slower growth. But the leaders have a difficult road to tread... the public does not want to give up their "benefits", yet without higher economic growth their model is unsustainable. It's quite the catch-22.
Most of the reforms being quietly pushed are superficial and simply barely decrease the cost of the welfare state, but doesn't actually increase output. Personally, my opinion is that the Europeans -maybe less so for the UK which seems to have a clue and is closer to the US- are willing to accept inferior economic performance and growth for the economic security of their social-welfare model. Of course the supporters aren't willing to acknowledge that such a choice confronts them, but there's no getting around it.
So if things don't change in a fundamental sense, Europe will continue to have a diminished role as an economic player. Simply trying to create an ever larger economic union will not change the facts of reality. This is a cautionary tale for the US, where instead of the government providing absolute economic security, we here can enhance the alternative in which individuals are more empowered to obtain economic security for themselves. This is the way of the future, because this is the way to CREATE wealth rather than merely distributing it.
Final analysis: Europe will stagnate as the US and Pacific Rim continues to outgrow them.
Since the late 1980s, when a major divergence appeared, the American and European economies have taken separate paths. Right now, most of those economies have growth rates that are a third to a half that of the US. The EU produces only about 70% of the US GDP per capita. It has a smaller portion of its population in the workforce and much higher unemployment among those wanting to work.
There's a growing cottage industry on both sides of the Atlantic denying this growing discrepancy in economic performance. But their reasoning denies logic and experience. Higehr taxes and less flexible labor markets lead to less investment and slower growth. But the leaders have a difficult road to tread... the public does not want to give up their "benefits", yet without higher economic growth their model is unsustainable. It's quite the catch-22.
Most of the reforms being quietly pushed are superficial and simply barely decrease the cost of the welfare state, but doesn't actually increase output. Personally, my opinion is that the Europeans -maybe less so for the UK which seems to have a clue and is closer to the US- are willing to accept inferior economic performance and growth for the economic security of their social-welfare model. Of course the supporters aren't willing to acknowledge that such a choice confronts them, but there's no getting around it.
So if things don't change in a fundamental sense, Europe will continue to have a diminished role as an economic player. Simply trying to create an ever larger economic union will not change the facts of reality. This is a cautionary tale for the US, where instead of the government providing absolute economic security, we here can enhance the alternative in which individuals are more empowered to obtain economic security for themselves. This is the way of the future, because this is the way to CREATE wealth rather than merely distributing it.
Final analysis: Europe will stagnate as the US and Pacific Rim continues to outgrow them.
