Tuesday, July 26, 2005

Inferiority of the European social model?

When between friends I criticize US politics (Bush, Chaney, Rice and friends) I am far from making a judgment about the US economic model. As European, I have lived quite satisfied with the European model, although sometimes worried with its rigidity and its lack of openness for reform. Nevertheless, the distance from the US does not mean to me (as should not mean to other Europeans) a lack of interest in the good things of the American model. We have much to improve also. But this is just an introduction to the post of today.

In a recent speech, Roger Kerr of the New Zealand Business Roundtable compares the robust performance of Anglo-American economies with the stagnant - and statist - economies of Japan and continental Europe. Kerr cites the recent work of Olaf Gersemann's Cowboy Capitalism: European Myths, American Realities to dispel myths that American success is associated with social costs.

Here is an abstract: The big world story of the last two decades of the twentieth century was the demise of communism as an economic system and power bloc, and with it the end of the cold war between East and West. At the same time, another story has been unfolding, not as dramatic as the ending of an entire political and economic system but still of great long-term significance. That story is about the pre-eminent success of the Anglo-American economies (which include not just the United States but also Canada, Australia, New Zealand, Ireland and the United Kingdom) and the relative failure of the various versions of the so-called social market economy or managed capitalism in Continental Europe and Japan. In the last dozen years or so, economies based on free trade, private ownership, light regulation and moderate taxation have opened up what looks increasingly like a decisive lead over economies characterised by active state partnership with business and trade unions in steering the economy, high levels of taxation and social spending, a greater role for banks than for stock markets in corporate ownership and control, and intrusive regulation of business. I fully expect American ideas and practices to continue to exert in the twenty-first century the all-pervasive influence they did in the twentieth century and to set the standards by which all societies are judged, however much they may also be resented and subject to bogus criticism. It seems unlikely that hard-working Chinese, Indians and other Asians will be attracted to the European model.


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