The no vote on the EU Constitution by the French, then the Dutch. The fall, or seeming fall, of the Schröder government in Germany. Is Europe melting down? My friend V in Berlin says, “Relax–it’s just democracy.” Yet there is alarmist talk now that the EU might break up, or the euro be withdrawn.
To hear the violent rhetoric from the business elites in Frankfurt and London, Europe’s a shambles. In fact, things are pretty nice. Yes, French unemployment is at a very distressing 10 percent. But in Europe, while it can be much harder to get a job, it is much harder to lose one, too. In a two-year period, your chance of being jobless, laid off, is probably greater in America than it would be in France, and certainly greater than in many European countries. We may have lower unemployment at any given point, but it is a kind of “rolling” unemployment, shorter but still heart-stopping, that over time will affect a larger proportion of us. Would French workers want “lower” US-style unemployment, which means a greater likelihood of layoffs, firings, drop-offs into poverty for a half-year at a time every other year? I think not.
Indeed, except for Germany (dragged down by the cost of unification), Europe or the “euro-zone” part of it has been doing at least as well as the United States in the past ten years. This is among the stunning findings of a January 2004 Goldman Sachs study, Euroland’s Secret Success Story. As set out in the study, it’s true of productivity growth–a bit under 2 percent a year in both, if adjusted for the business cycle. It’s true for growth in GDP per capita (2.1 percent). And, yes, it’s true even for investors: In Europe you get the same return on capital. It’s true despite Europe’s higher nominal unemployment and shorter workweek. Indeed, if one could put a cash value on this extra leisure, one could argue the standard of living is going up faster there.
But that understates the case for Europe. While too few of us in America experience any rising GDP per capita in our own lives, the egalitarian Europeans do. Outside Britain, their people at the top are not doing nearly as well as ours. That may explain the violence of their rhetoric. In France the gap between “top” and “bottom” is slightly decreasing. It might have continued to do so in Germany, too, but for the skewing of all measures by East Germany. Yes, German unions have had to keep wages down of late. But that’s at least in part because in the early 1990s they pushed them up too high, even by my left-of-center standards. In total job growth, too, Europe’s been doing better than the United States.
Some economists even argue America overstates its productivity growth and GDP per capita. For example, Europe doesn’t get our unfair productivity boost from people working off the clock. Or the GDP growth from building far more prisons. It’s plausible that in the past ten years most of Europe has done better than the United States–even as Europeans keep working fewer hours.