Posted by Sir Four at 12:09pm Jan 7 '10It's taken as a fact by many that Europe has traded away a lot of its potential for economic growth in order to have stronger social safety nets. Indeed many Americans fear that by instituting more liberal (in the American sense) policies, we'd "become like Europe" and be economically weaker.
However, in this New Republic article, a case is made against this conventional wisdom.
It is true that Europe's GPD has not kept pace with that of the US. This, however, is misleading. One thing to consider is, which countries are being counted as "Europe"? If our concern is with the economic strength of liberal democracies with strong social programs, it means we'd focus on countries that fit that profile, and not include Russia and other eastern European nations.
A second factor to consider is population. The population of the European Union grew only 7% since 1980, compared to 35% in the US. In order to have a fair comparison, you need to adjust for population growth. GDP per capita is the fairest comparison.
The GDP per capita of the 15 original members of the European Union grew by 58% since 1980. That figure for the US is 63%. So while it's still true that the US had stronger economic growth, the difference is quite small.
The author of the linked article goes on to say that Switzerland, Norway and Iceland (each strong social democracies not among the original 15 members of the EU) had 71% growth per capita since 1980, and if they were included the US vs Europe comparison would be even closer.
The conclusion is that European social policies do not actually harm economic growth.
However, in this New Republic article, a case is made against this conventional wisdom.
It is true that Europe's GPD has not kept pace with that of the US. This, however, is misleading. One thing to consider is, which countries are being counted as "Europe"? If our concern is with the economic strength of liberal democracies with strong social programs, it means we'd focus on countries that fit that profile, and not include Russia and other eastern European nations.
A second factor to consider is population. The population of the European Union grew only 7% since 1980, compared to 35% in the US. In order to have a fair comparison, you need to adjust for population growth. GDP per capita is the fairest comparison.
The GDP per capita of the 15 original members of the European Union grew by 58% since 1980. That figure for the US is 63%. So while it's still true that the US had stronger economic growth, the difference is quite small.
The author of the linked article goes on to say that Switzerland, Norway and Iceland (each strong social democracies not among the original 15 members of the EU) had 71% growth per capita since 1980, and if they were included the US vs Europe comparison would be even closer.
The conclusion is that European social policies do not actually harm economic growth.
Does Europe really have less growth than the US? - Sir Four