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.
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.
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.