Europe vs. America

http://www.nybooks.com/articles/17726

Mostly economics heavy, but a broad overview of the European/America divergence.

America’s cultural peculiarities (as seen from Europe) are well documented: the nation’s marked religiosity, its selective prurience,[1] its affection for guns and prisons (the EU has 87 prisoners per 100,000 people; America has 685), and its embrace of the death penalty. As T.R. Reid puts it in The United States of Europe, “Yes, Americans put up huge billboards reading ‘Love Thy Neighbor,’ but they murder and rape their neighbors at rates that would shock any European nation.” But it is the curiosities of America’s economy, and its social costs, that are now attracting attention.

Americans work much more than Europeans: according to the OECD a typical employed American put in 1,877 hours in 2000, compared to 1,562 for his or her French counterpart. One American in three works more than fifty hours a week. Americans take fewer paid holidays than Europeans. Whereas Swedes get more than thirty paid days off work per year and even the Brits get an average of twenty-three, Americans can hope for something between four and ten, depending on where they live. Unemployment in the US is lower than in many European countries (though since out-of-work Americans soon lose their rights to unemployment benefits and are taken off the registers, these statistics may be misleading). America, it seems, is better than Europe at creating jobs. So more American adults are at work and they work much more than Europeans. What do they get for their efforts?

Not much, unless they are well-off. The US is an excellent place to be rich. Back in 1980 the average American chief executive earned forty times the average manufacturing employee. For the top tier of American CEOs, the ratio is now 475:1 and would be vastly greater if assets, not income, were taken into account. By way of comparison, the ratio in Britain is 24:1, in France 15:1, in Sweden 13:1.[2] A privileged minority has access to the best medical treatment in the world. But 45 million Americans have no health insurance at all (of the world’s developed countries only the US and South Africa offer no universal medical coverage). According to the World Health Organization the United States is number one in health spending per capita—and thirty-seventh in the quality of its service.

As a consequence, Americans live shorter lives than West Europeans. Their children are more likely to die in infancy: the US ranks twenty-sixth among industrial nations in infant mortality, with a rate double that of Sweden, higher than Slovenia’s, and only just ahead of Lithuania’s—and this despite spending 15 percent of US gross domestic product on “health care” (much of it siphoned off in the administrative costs of for-profit private networks). Sweden, by contrast, devotes just 8 percent of its GDP to health. The picture in education is very similar. In the aggregate the United States spends much more on education than the nations of Western Europe; and it has by far the best research universities in the world. Yet a recent study suggests that for every dollar the US spends on education it gets worse results than any other industrial nation. American children consistently underperform their European peers in both literacy and numeracy.[3]


Very well, you might conclude. Europeans are better—fairer—at distributing social goods. This is not news. But there can be no goods or services without wealth, and surely the one thing American capitalism is good at, and where leisure-bound, self-indulgent Europeans need to improve, is the dynamic generation of wealth. But this is by no means obvious today. Europeans work less: but when they do work they seem to put their time to better use. In 1970 GDP per hour in the EU was 35 percent below that of the US; today the gap is less than 7 percent and closing fast. Productivity per hour of work in Italy, Austria, and Denmark is similar to that of the United States; but the US is now distinctly outperformed in this key measure by Ireland, the Netherlands, Norway, Belgium, Luxembourg, Germany, …and France.[4]

America’s longstanding advantage in wages and productivity—the gift of size, location, and history alike—appears to be winding down, with attendant consequences for US domination of the international business scene. The modern American economy is not just in hock to international bankers with a foreign debt of $3.3 trillion (28 percent of GDP); it is also increasingly foreign-owned. In the year 2000, European direct investment in the US exceeded American investment in Europe by nearly two fifths. Among dozens of emblematically “American” companies and products now owned by Europeans are Brooks Brothers, DKNY, Random House, Kent Cigarettes, Dove Soap, Chrysler, Bird’s Eye, Pennzoil, Baskin-Robbins, and the Los Angeles Dodgers.

Europeans even appear to be better at generating small and medium-size businesses. There are more small businesses in the EU than in the United States, and they create more employment (65 percent of European jobs in 2002 were in small and medium-sized firms, compared with just 46 percent in the US). And they look after their employees much better. The EU Charter of Fundamental Rights promises the “right to parental leave following the birth or adoption of a child” and every West European country provides salary support during that leave. In Sweden women get sixty-four weeks off and two thirds of their wages. Even Portugal guarantees maternity leave for three months on 100 percent salary. The US federal government guarantees nothing. In the words of Valgard Haugland, Norway’s Christian Democratic minister for children and family: “Americans like to talk about family values. We have decided to do more than talk; we use our tax revenues to pay for family values.”

The followup is that Europe’s real problem isn’t money; it’s doing fine there. It’s the burgeoning segregated Arab underclass.

These are Europe’s real challenges. The EU may be, as Reid and Rifkin suggest, a luminous model of trans-state cooperation, justice, and harmony.[13] But it will not be easy for the EU to integrate its ethnic and religious minorities, regulate immigration, or admit Turkey on workable terms.[14] Yet should it mismanage the permanent crisis on its eastern and southern borders, Europe is going to be in very serious difficulties indeed. And that, not some sort of atavistic anti-Americanism or rocket-envy, is why many reasonable Europeans and their leaders are utterly enraged by President George W. Bush.

To the Bush administration “Islam” is an abstraction, the politically serviceable object of what Washington insiders now call the GWOT: the Global War on Terror. For the US, the Middle East is a faraway land, a convenient place to export America’s troubles so that they won’t have to be addressed in the “homeland.” But the Middle East is Europe’s “near abroad,” as well as a major trading partner. From Tangier to Tabriz, Europe is surrounded by the “Middle East.” A growing number of Europeans come from this Middle East. When the EU begins accession talks with Turkey, it will be anticipating its own insertion into the Middle East. America’s strategy of global confrontation with Islam is not an option for Europe. It is a catastrophe.

Really wanted this to be a poll.

I say America in straight sets.

(though since out-of-work Americans soon lose their rights to unemployment benefits and are taken off the registers, these statistics may be misleading)

I’ve always wondered about that… is there any solid guesswork on this point?

It’s 80%, I believe, and the parents get half of it each, but can transfer days to each other (though 60 days are currently exclusive to one parent).

I think the 13:1 figure is a bit old, the increase in top-level salaries and such have been up for debate a while.

Very nice summary article.

Where’s Canada in all this?

Where do i move to now?

Well, the OECD “standarized” unemployment rate diff for 2004 was 3.5 points. Where are you guys in the business cycle over there?

http://www.oecd.org/document/43/0,2340,en_2649_201185_33703595_1_1_1_1,00.html

Methodological Notes
The OECD standardised unemployment rates, compiled for 27 OECD member countries, are based on definitions of the 13th Conference of Labour Statisticians (generally referred to as the ILO guidelines). Under these definitions, the unemployed are persons of working age who, in the reference period, are without work, are available for work and have taken specific steps to find work.

The uniform application of the definitions results in estimates that are more internationally comparable than those based on national definitions. National unemployment data in some countries only include persons registered at government labour offices. Under the ILO definition, persons without work who are seeking employment through other means can also be classified as unemployed and registrants can be excluded if they worked or were not available for work. The standardised unemployment rates shown here are calculated as the number of unemployed persons as a percentage of the civilian labour force (i.e the unemployed plus those in civilian employment). The standardised unemployment rates are seasonally adjusted.

No adjustments for the US boom in disability claims, but there you go.

Here’s an interesting pdf trying to decompose income by hours worked, labor force participation, and whatnot.

France’s GDP per hour worked is actually a little higher than the US’s…

Now if I could just find median income numbers. The US’s crazy Gini coefficient makes things misleading.

As far as Germany is concerned, I don’t think we have such a thing anymore. Projected national growth rate is 1.9% for the new year, same as… for as long as I can recall, really. Unemployment is expected to continue rising as well.

The OECD figures are slightly lower than what I see reported here, but the unemployment rate they state for Europe is still nearly twice that for America. Looks like Tony Judt quite deliberately neglected to quote figures when he implied that the difference wasn’t really that big. Or else he knows something that we don’t.

Where does he say or imply the difference isn’t really that big? He states that job creation in the US is better, and unemployment is lower, but notes that some of the figures that presented may be misleading due to the way they are calculated. I don’t see anywhere that he says or implies the difference is very little.

Yeah, normally it’s framed as “double digit unemployment!” vs. americas “much better unemployment.” Although historically the UI NAIRU until the 1990s was considering to be in the 6% range, compared to Europe’s “10% or so.” Only very recently has that gap expanded with the Fed discovering that no, inflation really is dead.

This (apparently perpetual) difference of 4-5% is still not too shabby, though. A more interesting question would be about the quality and wages of the jobs that Americans take on to stay employed. Ultra-low wage jobs like stuffing bags at WalMart are basically unknown over here.

I think low-end jobs in the US are pretty unique when it comes to the first world. Barbara Ehrenreich’s book is probably the best description of Wal-Mart jobs out there.

http://www.econlib.org/library/Enc/DistributionofIncome.html

20% of families here make less then $16k. Which is rougly $7/hour, assuming a single earner working 52 x 40. I’m still digesting Barb’s comments on the near-ubiquity of living in weekly rent motels when you work those jobs. Jesus.

Edit: Wikipedia so rules



http://www.well.com/user/srhodes/ehrenreich.html
http://www.cjr.org/issues/2003/6/ehren-sherman.asp

From that econlib link: “The degree of income inequality is not much greater today than it was at the end of World War II.” Just putting it out there for the “the poor get poorer while the rich get richer” crowd.

Yeah, but that’s because we’ve been going backwards since 1969 or so.

YES BUT YES BUT YES BUT.

I’m not saying it’s good, I’m saying that the sky isn’t falling quite yet.

That’s not much of an endorsement, is it? “We’re not back in the gilded age quite yet!” Well shit, break out the champale.

Someone said something similar on the Senate floor today about Soc Sec. He said “We’ll be fine for 50 years” I thought that was like an airline pilot saying “We’ll be fine for 6 minutes, so we’ll start working on getting the engines started back up when we’re good and ready”. If the trend is toward serfdom for the lower class, then it’s something to be dealt with now, not later. It’s about the housing. People can’t afford to live near the low-paying jobs. How about a minimum wage based on average land values in the proximity of the workplace?

Nickel and Dimed was a very good book, but she deliberately avoided trying to build mutual assistance networks with other people, getting a roommate, etc. Life is not quite as bleak as she paints it, I think, not that that says a lot.

The single largest critique I’ve seen of N&D’d has been “Yeah, but she didn’t convert to Christianity and go get aid from a church, so her results are totally bullshit and she was trying to make things seem bad. Why didn’t she get all up in the Jesus? I mean, duh!”

Doesn’t seem like a very fair stone to throw.

She didn’t try to find honest people to room with, she didn’t stay in any one place long enough to establish relationships, I don’t think she applied for any aid program of any kind (I think food stamps are very easy to get). The situation of the working poor is bleak, but not quite as bleak as she paints it.

The problem with 50-year time horizons for Social Security is that we can’t reliably get even close on 10 year budget projections; why should we pay attention to 50 year budget, GDP, and demographic projections? We should probably just come up with some sort of 5 year reconciliation process.

By contrast, the working poor are getting screwed right now, so it kind of demands immediate attention.

Nickel and Dimed was a very good book, but she deliberately avoided trying to build mutual assistance networks with other people, getting a roommate, etc. Life is not quite as bleak as she paints it, I think, not that that says a lot.

None of the people she meets have do have roommates & friend networks seem to be in much better shape; they’re living in weekly-rent hotels too.

How about a minimum wage based on average land values in the proximity of the workplace?

Communist!

What I find inexplicable is that bottom of the barrel wages don’t increase to match the rents…oh, how about this:

  1. Without the minimum wage, the massive employer power at the bottom would probably result in a real minimum-wage of $2 an hour or something.
  2. However, employers can’t do that, they can’t pay less than $7 or whatever it is.
  3. Ah, but what if rent skyrockets? It’s not like the employers are going to pay more; all that’s keeping them paying $7 is the law.
  4. Probably what’s also going on in the burgeoning unpaid overtime business at those wage levels, too. Not like the government is stopping them.
  5. Throw in the end of welfare chopping out a significant amount of money from the community (whether that’s good or bad, doesn’t matter for this particular point), and there you go.

Hypothetically, annual adjustments to the minimum wage to match inflation (shitty) or GDP growth (much better) would help significantly; what we’re basically seeing is “real” cost of living increases anywhere near major cities outrun the bottom-end increases in the minimum wage. The minimum wage now is half what it was in the 1950s, adjusting for inflation, much less overall wage growth. I’m starting to put more credence in Eric Schlosser’s theory that the decline of the minimum wage & labor power at the bottom is behind the refusal of lots of businesses reliant on cheap labor to automate (California fruit industry).