The Comeback Continent By Paul Krugman

[Demeter]

http://www.informationclearinghouse.info/article19074.htm


14/01/08 "New York Times" -- - Today I’d like to talk about a much-derided contender making a surprising comeback, a comeback that calls into question much of the conventional wisdom of American politics. No, I’m not talking about a politician. I’m talking about an economy — specifically, the European economy, which many Americans assume is tired and spent but has lately been showing surprising vitality.

Why should Americans care about Europe’s economy? Well, for one thing, it’s big. The G.D.P. of the European Union is roughly comparable to that of the United States; the euro is almost as important a global currency as the dollar; and the governance of the world financial system is, for practical purposes, equally shared by the European Central Bank and the Federal Reserve.

But there’s another thing: it’s important to get the facts about Europe’s economy right because the alleged woes of that economy play an important role in American political discourse, usually as an excuse for the insecurities and injustices of our own society...Since 2000, employment has actually grown a bit faster in Europe than in the United States — and since Europe has a lower rate of population growth, this has translated into a substantial rise in the percentage of working-age Europeans with jobs, even as America’s employment-population ratio has declined...In particular, in the prime working years, from 25 to 54, the big gap between European and U.S. employment rates that existed a decade ago has been largely eliminated. If you think Europe is a place where lots of able-bodied adults just sit at home collecting welfare checks, think again...I don’t want to exaggerate the good news. Europe continues to have many economic problems. But who doesn’t? The fact is that Europe’s economy looks a lot better now — both in absolute terms and compared with our economy — than it did a decade ago.

What’s behind Europe’s comeback? It’s a complicated story, probably involving a combination of deregulation (which has expanded job opportunities) and smart regulation. One of the keys to Europe’s broadband success is that unlike U.S. regulators, many European governments have promoted competition, preventing phone and cable companies from monopolizing broadband access.

What European countries definitely haven’t done is dismantle their strong social safety nets. Universal health care is a given. So are a variety of programs that support families in trouble, helping protect Europeans from the extreme poverty all too common in this country. All of this costs money — even though European countries spend far less on health care than we do — and European taxes are very high by U.S. standards...In short, Europe continues to be a big-government sort of place. And that’s why it’s important to get the real story of the European economy out there... the next time a politician tries to scare you with the European bogeyman, bear this in mind: Europe’s economy is actually doing O.K. these days, despite a level of taxing and spending beyond the wildest ambitions of American progressives.