Archive for June 14th, 2011

Europe’s Bright Future?

Old myths die hard, and for a long time after the fall of Communism many thought that the US with low taxes, small social welfare system and de-regulated economy was a vision for a better future.   Europe with high taxes and expensive social welfare systems was seen as being out of touch with economic reality.   The argument that seduced both the left and right was that the market gets it right, and that the state should stay out as much as possible.

Though the economic crash of 2008 has shown glaring holes in that argument, many people still criticize President Obama for allegedly trying to bring “European socialism” to the US.   The term socialism is used their loosely — fiercely anti-socialist European conservatives tend to get called “socialist” by some Americans, simply because they believe in having a national health care system and a strong social safety net.   But while Europe-bashing remains popular for many on the right, the reality is that Europe is in the midst of a transformation that suggests a very bright future.

Consider:  since 1999 Europe has created 14 million jobs.   The US has created 8 million.   Europe has gotten ahead of the US in many innovative technologies, including green technologies Europeans forced themselves to produce when they vowed to meet (and did meet) the Kyoto accord goals.   I’ve even seen people claim that the Kyoto agreement was a European effort to slow down the US economy by stifling it with regulations.   The reality is that the US neither signed nor met the Kyoto goals, Europe did meet them, and Europe has produced more jobs.    Kyoto has turned out to be a net plus for the European economy.   That myth — that action to fight global warming will hurt the economy — has been debunked.

Europe also leads in the regulation of toxic chemicals in food, skin products and packaging.   In the US an ideology of deregulation alongside the power of the chemical industry has made it extremely difficult to limit the use of toxins in all aspects of our life.    If you want to read a sobering analysis of what this all means, click here and order this book by McKay Jenkins.   My wife and I read it and have started a massive project of changing how we care for our lawn, clean our house, and feed our family.    It’s not that there is proof all of this will harm us, but a lot of evidence suggesting the likelihood that problems such as cancer and increased autism rates can be linked to the chemicals that have become a daily part of our lives.

What does this have to do with Europe?   The Europeans have put regulations on many of these chemicals protect their citizens from possible harm.   They recognize the market can’t really handle this because information about the impact of chemicals is hard to get and most people don’t understand the science.  The US has rejected such regulation, reflecting the power big business holds in the US regulatory scheme of things.   In that sense the US looks more like a third world country, willing to expose its citizens to harm in order not to anger big money.    The good news is that most European products sold in the US follow EU guidelines so if you buy European produced skin products you too can be protected by EU regulations.

Military spending is another area where the Europeans are criticized.  Earlier this week Secretary of Defense Robert Gates chided the Europeans for continuing to cut defense spending.   European defense spending has been declining dramatically in the last decade, even as conflicts rage throughout the Mideast.   This threatens to make NATO irrelevant, as the US will see no reason to spend its resources to protect a Europe unwilling to spend theirs.    Gates may well be right — perhaps it is time to brush NATO aside and for the US to devote less emphasis on Europe.  The Obama Administration has been more overtly focused on Asia and the Mideast than on Europe, a clear shift in US priorities.

But is this bad for Europe?  If you’ve got the aspirations of French President Sarkozy, who pushed for the Libyan intervention and now is calling out for action in Syria, yes.   If you have global ambitions without the resources to follow through, then it sets up failure.    On the other hand, what exactly does Europe need to defend itself from?   War with Russia or China is virtually unthinkable, terrorism can’t be stopped by a large military force, and despite Mideast turmoil it’s not like the Arab world is going to launch an invasion of southern Europe.   Moreover, European armies are very well equipped and trained — they are far behind the US, but ahead of the rest of the world.  If a threat started to rise, they could respond and rebuild their armed forces quickly.   The danger of having too big a military is that one gets tempted to use it in cases where its not necessary.  That can be costly.

Meanwhile, despite the recession, southern Italy shows signs of economic life as they seek to shift towards new technologies and undo decades of stagnation.  East European economies have recovered from Communism and show real productive potential — a few are even in the Eurozone already.    Europe’s emphasis on alternatives to fossil fuel is making them less vulnerable to oil shocks, and deals with Russia and China connect them to new global markets.

So while Euro-bashing may be popular in some circles (often with wildly absurd claims like ‘the Muslims are taking over!’), an economic shift of power from the US back to Europe may be undereway.  While the US still maintains a kind of rivalry with China and Russia, the EU is promoting deeper connections.    Like us, they have problems to over come.   They need to reform their social welfare systems to reflect demographic change as well as find a way to help problem countries over come difficult economic conditions.   They have to cut budgets and continue to balance common EU policies with decentralization of power in terms of local affairs.

Finally, contrary to what US pundits often say, Europe isn’t dominated by leftists.   Great Britain, France, Germany and Italy all have conservative governments.   Rather, both left and right in Europe have taken pragmatic turns since the ideological clashes of the Cold War era.    This pragmatism yields public debate in Europe that is refreshingly common sensical in comparison to the ideological bombs hurled by the left and right in the US.    I think what makes me most bullish on Europe is the sense of realism that both the left and right show.    For the most part they agree about what the problems are, and want evidence based solutions.

Don’t get me wrong — I think the US can bounce back, I don’t think our best days are yet over.   But don’t buy it when the pundits dismiss or belittle Europe.