EUROPE: By Russell A. Berman and Arno Tausch Europe is rich, but the United States is richer. By Russell A. Berman and Arno Tausch.
The heightened tensions between the United States and
Europe since 2000 have been widely discussed in
terms of competing foreign policy visions. The Bush
administration’s insistence on a robust and independent response to
terrorism contrasted with the frequently more cautious European policies.
At the end of the day, these complex alternatives seemed to boil down to a
choice between unilateralism and multilateralism, a distinction that took
on a polemical sharpness during the U.S. presidential election.
Although different approaches to terrorism,
Afghanistan, and Iraq—not to mention the
conflict between Israel and the Palestinians—have contributed
significantly to the transatlantic distemper, there is also an economic
dimension that underpins European suspicion of
the United States and encourages a
rhetoric of anti-Americanism in intra-European political discourse.
Performance Anxiety
In 2000 the European Union initiated its so-called
Lisbon Process, with the stated goal of
becoming “the most competitive and dynamic, knowledge-based economy
in the world, capable of sustainable economic growth, creating more and
better jobs and greater social cohesion” by the year 2010. To aspire to a more dynamic economy is hardly controversial,
but the Lisbon Process was also, in
effect, a unilateral declaration of competition with the United States. The
race between the euro and the dollar on world currency markets added to the
sense of competition between two systems that had once been considered part
of an integrated “Atlantic West” in the not-so-distant years of
the Cold War.
The tension between Europe and the United States has
been accompanied by
a rising chorus of generalized anti-Americanism in European streets,
largely with the pretext of the war in Iraq but
in fact based in deeper structures independent of the war. This
anti-Americanism grew precisely in the years in which the newly launched
Lisbon Process turned into a failure. In terms of
economic productivity, job growth, and other factors, both “Old
Europe” (the
Western European member states before enlargement, or “EU-15”)
and “New Europe” (the
“EU-25,” including 8 former communist states along with Cyprus
and Malta) are far from becoming “the most competitive and dynamic .
. . economy in the world.” When one thinks of Europe today, the word dynamic does not come quickly to mind.
By and large, Europe has not participated in the world
economic expansion of 2004, especially relative to the spectacular growth
in China and the growth in the United States (aided by the recent tax
cuts). GDP growth in the EU-15 in 2003 was a very sluggish 0.8 percent,
followed in 2004 by an unimpressive 2.3 percent. More important, however,
is the long-term perspective: Europe has simply failed to reduce the
productivity gap with the United States. Political rhetoric
notwithstanding, Europe was never a genuine competitor, let alone a threat
to U.S. economic predominance in the global economy, and Europe continues
to lag behind the United States after the initiation of the Lisbon Process
just as much as it did before. Since 1995,
differences in economic growth have grown wider in every year except 2001.
Billfold Envy
This difference in economic performance translates
into a big difference in income. When we try to understand the bitterness
with which some Europeans have come to view the United States, it would be
foolish to ignore this factor. How big is the difference? Consider the
latest data only for Old Europe (the wealthier
Western European countries) and leave aside the much poorer New Europe still recovering from the devastation of
communist policies and the difficult transitions to market economies. Even
with this handicap built in, European real purchasing power is quite sorry.
Between 1995 and 2004, European per capita income ranged between 70.1 and
73.7 percent of U.S. real income. With that in
mind, anti-Americanism begins to look very much
like basic human greed and envy.
To be sure, one might counter that even Old Europe
includes some exceptionally poor regions (such
as Greece and Portugal) that bias the results.
Country-by-country comparisons provide a more detailed picture. According
to United Nations statistics, per capita purchasing power in the United
States in 2002 was $35,750, which was surpassed only by Luxembourg, Norway, and Ireland among E.U. nations. The two most vocal
opponents of U.S. foreign policy are way down
the list: Germany ranks 14th at $27,100, and France comes in 16th at
$26,920. The average French citizen, in other words, earns 75.3 percent of
what the average American earns. Despite the ambitions of the Lisbon
Process, there is no indication that this difference is going to narrow. On the contrary, given the inability of the
Europeans to carry out significant
structural reforms, the gap may grow larger. Even the poorest 20 percent in
the United States enjoy a higher real income than do the poorest in Italy,
Spain, the United Kingdom, Greece, and Portugal.
The Social Welfare Myth
A common explanation for the difference between the
European and American economies is the claim that European nations provide
much greater social benefits: the so-called “safety net” of
various payments for health, unemployment, and retirement. American
liberals typically look with admiration at this European generosity, while
conservatives focus on the deleterious consequences of the welfare state.
However, this explanation of the productivity gap is not fully convincing.
A recent study by the Chamber of Labor in
Vienna—surely an unexpected source, as
Austria is one of the most established and elaborate of the European
welfare states—yields some surprising results. If one considers gross
spending, it is true that European states spend much more than the U.S. federal government: whereas European states dedicate on
average 29 percent of GDP to social welfare,
Washington contributes only 16 percent. As soon as one factors in direct and indirect taxes and private charitable
sources, however, the difference dwindles very
quickly. Taking into account all levels of government, including the
states, the difference shifts considerably in favor of the United States.
Because European countries are typically much more centralized than the
United States, the regional administrative units—the corollaries to our state governments—are of much less
significance. Similarly, the nonprofit sector
has always been less developed in Europe than in the United States. In the
United States, considerable social welfare payments come through the states
and nonprofits. Therefore the caricatured contrast between the socially
generous European states and a neoliberal America lacking in compassion
turns out to be untenable.
In fact, the comparison between Europe and the United
States becomes especially interesting when the different tax structures are
taken into consideration. The European states
may generously pay out greater percentages of
their national income in the form of social welfare benefits than does the
United States, but because European tax rates are so much higher, the benefit of the higher welfare payments is sharply reduced. In
fact, after factoring in the impact of the
higher European taxes, and including the value of private social spending, the United States comes out slightly
better. In Old Europe net total social spending comes to 24 percent of GDP,
whereas in the United States the corresponding figure is 24.5 percent.
Although the after-tax impact of social spending in
the United States is quite comparable to the
result in the high-tax welfare states of Western Europe, the European perception of the United States nevertheless depends
on this myth of American selfish heartlessness. Indeed this is one of the
core pieces of anti-Americanism. When German Chancellor Gerhard
Schröder campaigned for reelection, he
conjured up the stereotype of nefarious “American conditions” in order to mobilize his welfare-state base.
Meanwhile in France, the L word is largely an epithet of
disdain because there liberal means the opposite of what it does in the United States: In
France the term means neoliberal, a commitment to the market and the private sector,
which are held in deep disdain by the French political class.
Much discussion has been devoted to the transatlantic
foreign policy differences and the deep
cultural differences between Europe and the United States. As explanations
for anti-Americanism, these aspects are of course indispensable. It is
equally important, however, to keep in mind the quite different economic
structures and levels of productivity: these differences are unlikely to
change much, despite the Lisbon Process and regardless of electoral
outcomes. On the contrary, the economic divide will continue to provide
points of recurring irritation in relations between the United States and
the European Union.
Special to the Hoover Digest. Available from the Hoover Press is Anti-Americanism in Europe: A Cultural Problem, by Russell A. Berman. To order, call 800.935.2882 or visit www.hooverpress.org. Russell A. Berman, the Walter A. Haas Professor in the Humanities at Stanford University, is a senior fellow at the Hoover Institution. Arno Tausch is an adjunct professor of political science at the University of Innsbruck. |
QUICK LINKS: TOOLS: |
