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October 07, 2007
How Ya Doing, Europe?
By Ezra
Just fine, as it turns out. Steven Hill offers a quick overview of the European economy, and it appears to be doing rather nicely. Folks forget how big Europe is -- the largest trading bloc in the world -- and how well it's actually doing. Between 2000 and 20005, Europe's GDP growth was basically equal to ours. In 2006, they pulled ahead. Moreover, next time you hear about Europe's dread levels of unemployment, keep this in mind:
Half of the E.U. 15 nations have experienced effective full employment during this decade, and unemployment rates have been the same as or lower than the rate in the United States. Unemployment for the entire European Union, including the still-emerging nations of Central and Eastern Europe, stands at a historic low of 6.7 percent. Even France, at 8 percent, is at its lowest rate in 25 years.
That's still higher than U.S. unemployment, which is 4.6 percent, but let's not forget that many of the jobs created here pay low wages and include no benefits. In Europe, the jobless still have access to health care, generous replacement wages, job-retraining programs, housing subsidies and other benefits. In the United States, by contrast, the unemployed can end up destitute and marginalized.
Not all unemployment is created equal.
October 7, 2007 in Europe | Permalink
Comments
Anyone who has traveled widely in the US and Europe knows that the people in Europe are, on average, much happier.
Posted by: Gore/Edwards 08 | Oct 7, 2007 11:34:09 AM
Europe is an awfully big place. It would be nice to know who is driving the bloc's economic growth and who is holding it back. Just before Sarkozy's election, the New Yorker ran a piece that suggested people were leaving France in large numbers in order to have access to more entrepreneurial freedom in places like Britain. Does this study support that assertion? In short, where is the bloc creating the most jobs and why are those nations doing well?
Posted by: Unreal Veal | Oct 7, 2007 11:39:19 AM
"Not all unemployment is created equal."
Absolutely. That's why no one over here takes seriously anything anyone says about "European economies". There are at least 5 different types of European economy.
1) UK. Similar in many if not most ways to the US. Often called "Anglo Saxon capitalism". Low job protections and low welfare payments.
2) Nordic. Sweden, Denmark etc. Low job protections but high benefit payments if unemployed and high redistribution of income generally. Worth noting that all of these economies are small (4- 9 million people) so the taxation and distribution might not be as effective in less hetergeneous societies.
3) Rhineland. Germany etc. Unions and business work along with government, medium level protections for jobs, good welfare payments.
4) Mediterranean. France, Italy, Greece etc. High jobs protetions, low welfare levels.
5) Ex communist states: at so much a lower level of GDP that it's really unfair to use them (which is why the linked article uses some EU-15 numbers).
If you're not distinguishing between those different models then you're really not able to talk about "European economies". They're as, if not more, different than the US and Canada for example.
Posted by: Tim Worstall | Oct 7, 2007 11:58:54 AM
I think Unreal Veal poses a good question, but I would also advise that the questions he is asking be asked of our nation. For example, where are people making the most money, and where are they making the least. NE and SE, respectively, so far as I know. Just as Europe has some rather large disparities amongst its nations, the gap between rich states and poor states in the U.S. is remarkable.
Of course, it is the liberal states that make the most money, have the most rich people, and generally subsidize the economies of "true America" where wages are low and government largesse is most pronounced.
BTW, those are my thoughts, and do not flow from Unreal Veal's point. My point is that wealth flows towards those in control, while wealth is created by those who don't control.
Posted by: abject funk | Oct 7, 2007 12:00:27 PM
Let's not forget the immense prison population in the US that doesn't count to the unemployment statistics.
Posted by: Josh | Oct 7, 2007 1:00:29 PM
The prison effect on unemployment isn't as big as you'd think. The prison population is a little over 1% of the labor force. But if all prisoners were freed, they wouldn't all be unemployed. Economists Katz and Krueger cite evidence that their unemployment rate would be 35%, meaning that freeing them all would raise the unemployment rate from, say, 4.5% to 4.9%. The huge increase in the prison population from about 1985 to 2000 lowered unemployment rates by less than 2 tenths of a percentage point, they say.
I don't know of a good study, but I know that at the same time we filled up our prisons, we were emptying our mental hospitals. So I'd guess that a lot of people sent to prison today would have been in mental institutions 30 years ago. And I bet that if US prison inmates had been born in Europe instead, a lot of them would be in mental hospitals today rather than prisons.
Posted by: Ragout | Oct 7, 2007 1:53:35 PM
The US unemployment rate is also 8.6% (U6) and 1.6% (U1).
Posted by: BruceMcF | Oct 7, 2007 2:21:41 PM
"Anyone who has traveled widely in the US and Europe knows that the people in Europe are, on average, much happier." Somebody's projecting mightily. Typifies the bias being thrown out by the biased person.
Oh yeah, somebody forgot to tell these paradise dwellers to procreate. Their reproduction rate is causing a steep decline in population. Who's going to work & pay taxes to support the next generation's lavish social benefits?
I remember that old socialist mantra, "what has posterity done for me?"
Posted by: daveinboca | Oct 7, 2007 2:36:35 PM
http://news.bbc.co.uk/2/shared/bsp/hi/pdfs/28_07_06_happiness_map.pdf - there you go.
Which socialist exactly said that? Groucho Marx supposedly once said "Why should I do anything for posterity? What has posterity ever done for me?" Or maybe it was Ronald Reagan as Ben Stein seems to think: http://www.nytimes.com/2006/06/25/business/yourmoney/25every.html?_r=1&pagewanted=print&oref=slogin.
Hardly socialist either of them - but maybe Groucho's last name confused you?
As to the birth rate: http://en.wikipedia.org/wiki/Image:Birth_rate_figures_for_countries.PNG so without immigration you would have the same problem. And I'm sure there's lots of people who would love to come to Europe if that became necessary.
So, in short, try a bit harder next time mkay?
Posted by: Mike in Denmark | Oct 7, 2007 4:00:00 PM
Mike in Denmark,
As to the birth rate: http://en.wikipedia.org/wiki/Image:Birth_rate_figures_for_countries.PNG so without immigration you would have the same problem.
Nonsense. The U.S. total fertility rate, at 2.09, is almost exactly replacement level. The EU fertility rate, in contrast, is far below replacement level, and falling. The rapid decline and aging of the population is a serious concern for the near-term future of Europe.
And I'm sure there's lots of people who would love to come to Europe if that became necessary.
I'm sure there are lots of people (mainly poor and uneducated people) who would love to emigrate to Europe. But Europeans don't seem to want them. Immigration is already a huge issue in Europe. There is huge opposition even to intra-EU immigration from poorer European countries like Poland to richer ones like Britain, and growing opposition to ever-larger numbers of Muslim immigrants from outside the EU. It seems rather unlikely that you'll be putting out the welcome mat for large numbers of people from Africa and Asia.
So, in short, try a bit harder next time mkay
Take your own advice, 'mkay?
Posted by: JasonR | Oct 7, 2007 4:30:37 PM
Mike in Denmark,
http://news.bbc.co.uk/2/shared/bsp/hi/pdfs/28_07_06_happiness_map.pdf - there you go.
Did you look at that chart? The U.S. is in the highest happiness of category, and most European countries, including all the major ones, are in lower categories. This contradicts "Gore/Edwards 08"s claim that "people in Europe are, on average, much happier."
Posted by: JasonR | Oct 7, 2007 4:40:04 PM
I think it is a bit rich to start throwing detailed data at people regarding the state of the EU economy and quality of life.
What you're forgetting is that America is an idea, rather than a national identity or ethnicity. We're held together by a group of founding myths, one of which is the story of our ancestors coming here from Europe for a better life and more freedom. To argue with data that life in Europe is not some hellacious carnival of stagnation and woe is like explaining to a Muslim that Mohammed isn't really a prophet of God-- the argument is pointless because you're trying to explain away the very supposition of the person's identity in the first place. If someone didn't believe Mohammed was the prophet, he wouldn't be a Muslim. If someone didn't believe that Europe was awful, he wouldn't use Europe's woes as the basis of his identity as he does. Argue about European economic statistics, and you're basically attacking an American's very identity. Being American is ultimately a choice, and saying that life in Europe is good is basically saying that someone made the wrong choice. Much like endless Ford vs. Chevy debates.
(for the record, western Europe's highest birthrates are in countries with robust social safety nets and supports, while Europe's lowest birthrates are in those countries that lack them)
Posted by: Tyro | Oct 7, 2007 4:48:21 PM
Tyro,
for the record, western Europe's highest birthrates are in countries with robust social safety nets and supports, while Europe's lowest birthrates are in those countries that lack them
More wishful-thinking-presented-as-fact. There is no clear relationship between fertility rates and social safety nets among European nations. The UK, for example, whose social welfare policies probably most closely resemble those of the United States among major EU nations, has a higher fertility rate than Sweden, which has one of the most highly developed social welfare systems in Europe. And the United States, whose welfare state is less developed than that of most or all EU nations, has a higher fertility rate than all of them.
In general, higher fertility is associated with lower levels of economic development and higher levels of economic insecurity. We would therefore expect that wealthy countries with highly developed social welfare systems would tend to have lower fertility rates. And that's what we find. There are various exceptions and anomalies to this pattern, but the basic relationship is clear.
Posted by: JasonR | Oct 7, 2007 5:28:35 PM
Regarding Steven Hill's piece that Ezra cites, it just seems to be more of the usual cherry-pick-and-spin economic analysis that is typical of sources on the left. Ezra, of course, just uncritically repeats Hill's claims (Hill is not an economist and provides no sources for his factual claims).
It's true that economic performance in parts of Europe, notably Germany, has improved significantly in recent years. But this is mainly because of the economic cycle, not the merits of its economic policies. Germany has grown fast recently mainly because its economy is heavily dependent on exports and it has thus benefited from the strength of the global economy. Over the longer term, covering the full cycle, its economic performance is dismal. Its GDP grew at an average of only 1.4% a year between 1995 and 2005.
For a more honest and realistic assessment of the state of and prospects for the European economy, see this piece from the Economist. Quote:
The unpalatable truth remains that Europe's economies need substantial further reform if they are to prosper in an ever more competitive, globalised environment. And the recent upturn may make it harder for political leaders to get their voters to understand this.European economic growth has been lagging behind U.S. growth for decades, and without substantial increases in fertility, or massive immigration (which seems unlikely), their populations are going to decline.We would therefore expect that wealthy countries with highly developed social welfare systems would tend to have lower fertility rates. And that's what we find.Posted by: JasonR | Oct 7, 2007 6:14:37 PM
The comments on birth rates have been pretty strange. First we get what I presume is a wingnut suggesting that European social/economic systems are bad in some way because they haven't led to birth rates below replacement level. Everyone then proceeds to miss the relevant response, which is that there is in general no positive correlation between birth rates and things like happiness, productivity, equality, education. If anything, the opposite is true and the less educated, happy, wealthy and employed a population, the higher the birthrate tends to be. In particular, low education and life prospects among women are strongly correlated with high birth rates. Amartya Sen has repeatedly written on this.
Is there any reason to doubt that the higher US birthrate can in part be explained by the greater poverty, social dysfunction and lower education among the lower half of the socio-economic scale in US? I don't think we have anything to brag about here.
The trick is to achieve replacement level birth rates among women who are well-educated and are able have rewarding (and time consuming) careers.
Posted by: jd | Oct 7, 2007 9:39:36 PM
Is there any reason to doubt that the higher US birthrate can in part be explained by the greater poverty, social dysfunction and lower education among the lower half of the socio-economic scale in US?
"In part," perhaps not. But that part may be quite small. Then again, perhaps U.S. levels of socioeconomic inequality are necessary to produce a fertility rate at replacement level or higher without draconian social engineering by the state. Maybe the citizens of countries with low levels of inequality and generous welfare systems will not be induced to have enough children to maintain their populations without huge incentives or penalties. France has apparently had some success at inducing its women to have more babies, but the long-term viability of that program remains to be seen.
Posted by: JasonR | Oct 7, 2007 10:03:28 PM
What we find, as I remember, is that countries like Spain and Italy have the lowest fertility rates and countries like France and Sweden have much higher ones. As mentioned above by Tim Worstall, Italy (and Spain, I believe) is notable for having low social welfare/safety net provisions.
Other countries with high fertility rates: the paradises of Mexico and the Palestinian authority. Woohoo!
But this is all a distraction from the fact that, well, many countries in the EU are extremely nice places to live. Why, it was just a few years ago that the conservatives were loudly carping about how the Euro was on its way to being totally worthless currency. Ah, a more innocent time, to be sure.
Posted by: Tyro | Oct 7, 2007 11:42:27 PM
What we find, as I remember, is that countries like Spain and Italy have the lowest fertility rates and countries like France and Sweden have much higher ones. As mentioned above by Tim Worstall, Italy (and Spain, I believe) is notable for having low social welfare/safety net provisions.
As I said, there is no clear relationship between fertility rate and social welfare among European nations. Britain and Ireland, for example, both have higher fertility rates than Sweden and Germany, despite having less developed social welfare systems. Indeed, Germany has a highly developed social welfare system, but one of the lowest fertility rates in Europe.
But this is all a distraction from the fact that, well, many countries in the EU are extremely nice places to live.
Sure, but they're fading. European economic growth has been lagging behind U.S. growth for decades, and without substantial increases in fertility, or massive immigration (which seems unlikely), their populations are going to decline. I don't think there's any serious prospect of the "End of Europe" or of Europe becoming Islamicized ("Eurabia") as some on the right have suggested, but the continent is facing some really huge demographic problems in the coming decades that aren't nearly as serious in the U.S.
Posted by: JasonR | Oct 8, 2007 12:43:55 AM
I think that you have to look at the type of social welfare system that different European countries have. Spain, Italy and Greece devote a very large proportion of their social spending to pensions, while France - which has the highest birth rate in Europe after Ireland - also spends a lot on pensions but also on assistance for families.
My reading of the literature on demography and social policy is that the crucial difference across european countries is how easy it is for mothers to combine employment with family life. Family policies in the Nordic countries and France appear to be a lot more effective at this than are Mediterranean countries or the moddle-european countries.
but there are exceptions like the US to some extent
Posted by: Disinterested Observer | Oct 8, 2007 6:18:58 AM
Can't have anyone trashing Europe. Who else can we libs worship?
Posted by: El Viajero | Oct 8, 2007 8:35:27 AM
One might point out that Japan, also, has a low birthrate. What they both have in common is that fact that the EU countries (and I specifically mention that to discount Russia and former Soviet Republicans) are extremely densely populated. Even in the US, where population growth is tied very closely to immigration, people complain about the strain placed on society by population growth. I suspect the overall birth rate issue (in Italy, it's a genuine problem. Germany, not so much) is just a fetishization of fertility. The last time Europe had high birth rates, they were leaving in droves to head to the United States.
We talk about europe "lagging in growth," when we're talking about GDP growth. The thing is, however, that GDP growth is a matter of both population growth and productivity increases. If you take away the population growth from the equation, obviously GDP is going to be lower.
And, if we're willing to say "Europe's growth is lagging behind the US's", (the EU's GDP growth rate hovers between 2% and 3%) why aren't we concerned that our GDP growth (which is at around 3.x%) is being consistently outstripped by India and Malaysia, which are projected to grow at 5% ever year through 2020? I don't think that anyone claims that the way to better growth is by imitating India's infrustructure.
What the EU did to approach their growth issues was the rational decision-- bring in developing eastern European countries into their orbit reform their economies and help build infrastructure to attract more foreign investment, and stimulate growth. That their population is relatively stable, which by definition cuts into their GDP growth, is just a "gotcha" by would-be Eurabia fear-mongers, whether you deny a connection to them or not.
Posted by: Tyro | Oct 8, 2007 11:23:24 AM
Tyro,
I suspect the overall birth rate issue (in Italy, it's a genuine problem. Germany, not so much) is just a fetishization of fertility.
Here's an idea. Instead of "suspecting," why not just take the two minutes required to actually LOOK UP THE DATA? Google is your friend. Fertility rate data is readily available on the web. This applies to many of your other comments also. You seem to think guessing is a substitute for actual facts and figures. It isn't.
If you had actually taken the small amount of time needed to learn something about the subject you're blabbering about, you would see that fertility is a problem for both Italy (TFR 1.29) AND Germany (TFR 1.35). These are both well below replacement level. Both countries are projected to shrink significantly in population over the coming decades.
We talk about europe "lagging in growth," when we're talking about GDP growth. The thing is, however, that GDP growth is a matter of both population growth and productivity increases. If you take away the population growth from the equation, obviously GDP is going to be lower.
I'm talking about growth in both GDP and GDP per capita. Europe has been lagging behind the U.S. on both metrics.
why aren't we concerned that our GDP growth (which is at around 3.x%) is being consistently outstripped by India and Malaysia, which are projected to grow at 5% ever year through 2020?
Huh? Why do you think we should be concerned about that?
Posted by: JasonR | Oct 8, 2007 1:29:05 PM
Jason, you're simply wrong. There is a strong positive correlation across European countries between social safety nets and birthrates. The casuative variable actually seems to how easy it is for a woman to work and have children at the same time, (which is something that employment regulations are hugely helpful with, so you get a correlation with social safety nets.) In places like Italy and Germany where that's difficult, women are choosing not to have children. There's a fair amount of literature on it.
Posted by: Kali | Oct 8, 2007 6:41:07 PM
kali,
Jason, you're simply wrong. There is a strong positive correlation across European countries between social safety nets and birthrates.
No there isn't. Here is a table of fertility rate by country. Show me this "strong positive correlation" you claim exists.
The casuative variable actually seems to how easy it is for a woman to work and have children at the same time,
Also false. In fact, the highest fertility rates tend to exist in the poorest countries in the world, where employment regulations and social welfare services tend to be the weakest.
Posted by: JasonR | Oct 8, 2007 7:48:46 PM
I can't say for certain whether Europeans as a bloc are happier than Americans. After all, you have to take those black-clad existential Frenchmen into account, right?
But as an American who lived in Europe for almost five years, I think I can say pretty confidently that Europeans know how to juggle the work-life balance a helluva lot better than Americans do. I would have been drawn and quartered at my workplace in Prague if I'd shown up as sick as my co-workers regularly do now that I'm back in the U.S. Nobody there wants somebody hacking and coughing all over their keyboard, and here it's a mark of weakness if you take a sick day. And that doesn't even start to go into things like maternity leave and guaranteed paid vacation.
Europeans work to live. Americans live to work. We think it makes us happy, but I'm betting that it's actually the increasing levels of Prozac in our municipal water supplies.
Oh, and to short-circuit the question, I left Europe because of U.S. economic policies--after the Bush administration abandoned the dollar to its free-fall, I couldn't afford to live there on my dollar-paid salary.
Posted by: Nicole | Oct 9, 2007 4:38:45 PM
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