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October 12, 2006

The More You Know

Dean Baker:

Everyone knows that the dynamic U.S. economy generates new jobs at a much faster pace than the sclerotic economies of "Old Europe." Well everyone is wrong. Since 2000, Old Europe (the EU-15) have generated jobs at a 0.9 percent annual rate compared to a 0.7 percent rate in the U.S.. This follows a decade in which job creation was considerably more rapid in the U.S. than Europe, but for at least the last half decade, Old Europe has been winning the job creation race.

October 12, 2006 | Permalink


This is interesting, but the study cited doesn't seem to actually support what Baker and you claim that it does.

First off, the term 'Old Europe' isn't generally synonymous with the 'EU.' Typically when one speaks of 'Old Europe' one is talking about France, Germany and to a lesser extent the Scandanavian countries. In particular, Ireland's economic miracle is frequently lauded by conservatives as support for their policy prescriptions. France and the Skandanavian countries did worse than the U.S. according to this and Germany did absolutely horrible. Ireland of course was one of the leaders, along with Spain (whose economy I don't know a whole lot about.)

Beyond that, choosing 2000 as the cut off between before and after seems somewhat suspect to me. 2000 was the height of the economic boom, followed by a mild recession and a recovery. Those who support economic dynamism, and claim that America has more of it than Europe, would predict that in a recession America would shed more jobs but grow their jobs faster afterwards while a more statist economy would be unable to shed jobs, but also unable to take much advantage of growth afterwards.

A year by year comparison, which we only have in the case of France, would provide more insight. The French graph does appear to show that France didn't have the negative factors following a recession, but also was unable to take advantage of the post recession.

Certainly the unemployment rate in France is not one to admire, and is part of the trouble with the immigrant situation there. One would suspect that this would be a problem with a non-dynamic economy as it would be structured to keep the haves in a stable situation, and by extrapolation also keep the have-nots in a stable situation.

Posted by: Dave Justus | Oct 12, 2006 12:20:55 PM

Dave Justus,

Glad you pointed out the unemployment aspect.

Something else to keep in mind is: Where did both subjects begin and end? If the EU began with a lower rate of employment then they can post great *comparative* strides without really getting anyplace very fast.

During the period covered the USA unemployment rate was pretty close to or under 5% with many in the unemployment ranks not staying there very long.

Posted by: Guy Montag | Oct 12, 2006 12:51:26 PM

I was thinking much the same kind of thing Dave, only much less of it because I'm less familiar with the issues. It seems, though, that these figures need to be put into the constext of things like unemployment rates, stability and quality of jobs created, where an econmy is relative to any recent recessions, new political openings that affect the economy in a way that isn't normal, etc. What is the comparison over ten or twenty years? By themselves the figures given don't tell us much.

Posted by: Sanpete | Oct 12, 2006 12:54:08 PM

Those who want the US to emulate France and Scandinavia's economic practices would do well not to even try to cite empirical evidence. Appeals to emotion are much more effective.

Besides, Europe does some things that liberals don't really approve of, so I fail to see what the attraction is. THey have stricter abortion laws, stricter immigration policies, and more controls on freedom of speech. Scandinavia especially is also very pro-business. The welfare state is funded primarily by personal income taxes. Meanwhile, liberals in America complain that corporations aren't paying enough in corporate taxes(this while our corporations have to foot the health care bill).

Posted by: Adam Herman | Oct 13, 2006 3:25:07 PM

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