Krugman on Europe: Social democracy = economic health?

[kylie]

           I'm interested in hearing general comments on Krugman's general review of European economic policy.  I would prefer this stays at a level that more people can read, and not dip far into specialist economic jargon and dense statistics at every turn.  If you want to offer a few technical points in a post, fine.  Just please, I'd ask then, be reasonably brief and explain them in terms or metaphors more people may understand.  Of course, anyone can make branch threads for more technical debates. 

          Please note:  Although the essay stems from the American health debate, I do not mean to open another thread primarily about US health care policy.  It's the overall representation of European markets and social order that interests me here.  If health care proves to be central to that, okay.  However, I'm not assuming the conversation must go there.  Also, I'd really like to hear more about the European situation than about the US per se.

          Below is the opening from the essay here:  http://www.nytimes.com/2010/01/11/opinion/11krugman.html?scp=2&sq=krugman&st=cse

As health care reform nears the finish line, there is much wailing and rending of garments among conservatives. And I’m not just talking about the tea partiers. Even calmer conservatives have been issuing dire warnings that Obamacare will turn America into a European-style social democracy. And everyone knows that Europe has lost all its economic dynamism.

Strange to say, however, what everyone knows isn’t true. Europe has its economic troubles; who doesn’t? But the story you hear all the time — of a stagnant economy in which high taxes and generous social benefits have undermined incentives, stalling growth and innovation — bears little resemblance to the surprisingly positive facts. The real lesson from Europe is actually the opposite of what conservatives claim: Europe is an economic success, and that success shows that social democracy works.

(Emphasis mine.)

          Speaking broadly then:  How is the EU doing generally?  Is the bolded line above supported?   

[September]

[kylie]

          Not to limit it to numbers by any means.  I would also be interested to hear say, general impressions of life in the EU and how confident people feel about the overall systems there.  But just batting this around...

          I see that Krugman mentioned GDP/capita rate of change.  I don't know whether the chart in Sept's post is the same as the "real" GDP Krugman mentions.  I'm also a little skeptical that everyone uses the same criteria to measure such things.  In any case, I don't see Krugman talking about absolute numbers for GDP and that's rather frustrating.

          I looked for a cost of living comparison.  Lost the link (grr), but I saw one general graph that seemed to have Western Europe higher than the US, and Eastern lower by about the same amount.
         
There's also a question of what people are getting with whatever they spend or give in taxes. 

I found one comparative quality of life ranking (pdf):  http://livingingreece.gr/wp-content/uploads/2007/09/2007-quality-of-living-ranking.pdf
It's also shown to top 50 and described with usual disclaimers here:  http://livingingreece.gr/2007/09/25/athens-greece-quality-of-living-2007/

          Unfamiliar with the agency that did this, Mercer.  For all I know, they might be relatively biased.  They did come up with a list of some 215 cities, including roughly 40 European ones and 20 US ones.  They placed 14 of the Euro ones in the top 20, and none of the US ones.  I do wonder about some of their criteria...  They put even Honolulu down at 28, when others have put it near the top of US-only lists.  Anyway, I wanted to introduce the question of how costs relate to quality at some level, too.  Not having as much money or private capital may not mean deprivation, if more money goes to reliable, accessible public services.

[consortium11]

It's hard to point to either the EU or the US and go "this one's doing better"; on one hand you have the political nature of that debate which often influences the figures (and means you often get dragged down into the jargon filled issues which we want to avoid) and on the other it means you're painting with too broad a brush; just as there are huge differences between states different countries in the Europe/the EU/the eurozone also have those differences.

As it stands Europe has 3 distinct types of states at the moment. You have those who invested heavily into finnancial sectors and therefore had the good times... and now the crash... such as Ireland, UK and Iceland (which is outside the EU). You have the Eastern bloc who are still developing as true economic powers and, while suffering from a drop in investment, haven't faired that badly (relatively) and you have "Old Europe" which are the states who for whatever reason didn't really have a financial sector and thus didn't have the heights of those who did... or the depth of the fall. The most prominant of these are probably France and Germany. Germany had its economy in the doldrums for much of the 90s and early 2000's and has only really started to poke its head out recently. France is hamstrung as an economic power due to its society and labour laws; on one hand you have the (at first glance strange) comination of business interests and poor immigrants who wish for more liberal laws, especially with regards to hiring and firing and the unions and student groups. Tension boiled over into the riots you may have heard about a few years ago... the media often sold it as an "immigrants/muslims are evil" type story, but the real issue was the fact France's laws meant they couldn't get jos.

For a notable poor example from the Eurozone, Greece has just had to call in the imf... and will probably end up being forced to take a bailout. Spain isn't that hot right now either.

As for spending power, it's hard to qualify. I watch a decent amount of US TV, so I get US adverts, and nearly everything seems to e cheaper over there to the UK. Pizza and the price of a PPV (for say boxing or mma) are slightly trivial examples, but the big one is almost certainly petrol... we pay a hell of a lot more over here. Now, alone that doesn't mean much... it's about spending power after all... but let me say this; if PPV's were priced at US levels ($45... so around £27) instead of UK levels (£15... so $24) and we had to pay for as many as the those in US do then I'd struggle to follow mma and boxing the way I do... and the UFC manages to get at least 400k buys for pretty much every event.

[Vekseid]

2008 data is a bit more relevant:

Luxembourg	78,559
Norway	58,141
Singapore	49,288
United States	46,716

By the World Bank, which is the most forgiving to the United States on these terms.

I have no idea where September got her data, census.gov gives DC $57,936 in per capita income. You'd have to claim the PPP adjustment was three times that of Maryland or Virginia.

Right. PPP also counts things like Norway's better cell phone coverage, cheaper plans, and wider distribution of better broadband access as nothing special. This despite being Norway.

A more pertinent statistic is income per hour of labor, and combined with that, income distribution. Norwegians work less and make more than Americans do, across the board. We send them three billion dollars a year, which they buy our bonds with.

Foreigners own over twenty trillion dollars worth of assets in the United States.

Europe has severe resource shortages, half of it is still recovering from a communist economy and an aging populace to boot. It opens up to immigration and gets Islamic fundamentalists. Despite this, certain 'liberal' portions are doing extremely well.

Ultimately, healthy people are more productive, just as educated people are.

[September]

I have no idea where September got her data

http://politicalcalculations.blogspot.com/2007/11/first-time-visitor-to-political.html

[Celestial Goblin]

GDP is a bad way to measure success itself. The creator admitted it himself from the beginning.

[kylie]

It's hard to point to either the EU or the US and go "this one's doing better"; on one hand you have the political nature of that debate which often influences the figures (and means you often get dragged down into the jargon filled issues which we want to avoid) and on the other it means you're painting with too broad a brush; just as there are huge differences between states different countries in the Europe/the EU/the eurozone also have those differences.

Yeah, I realize it's a kind of overbroad question.  I didn't really mean to hunt for evidence that one or the other must be doing "better" per se.  That sort of reaction seems to breed itself in the politics forums to an awfully high degree...  People point out a factual difference (or even a similarity) between things to start, and instantly the same old sides come out shouting: "This one has to be better than the other!"  Really though...  That isn't precisely what I meant to ask for. 

          More in line with Krugman's comparison...  I'm curious about how Europeans feel about their economies -- are most Europeans satisfied on some specific counts?  (I think there's a sense of day to day experience and values involved, not so much endless number-crunching.)  And, by which general standards might others reasonably say they might or might not like a few pages from the European book to be adopted.  (I know, there will be some hem and haw over numbers there, but ideally that can be included without making the whole thing too illegible.)  Ideally, standards we can translate into day to day stories that living people might confirm or deny. 

          I have to admit I am intrigued by Krugman's notion that the American right has mostly blown smoke about the state of Europe, representing it for domestic political points as if it were akin to a watered-down version of Soviet failure...  So in that sense:  I don't mean to invite people to produce rants on what may be isolated cases of European difficulty (a la, some single person who had an extra long hospital wait with no context)...  Plenty of that has been done in US politics, and I don't believe it answers the big questions.  However, perhaps if someone has experience of actually living in Europe and swears that every day there's a longer wait for everybody (and perhaps feels it's totally not worth it), or more or less quality/efficiency in some systems (not meaning to limit it to hospitals)...  Then, that is something other people with experience there can discuss the likelihood or context of it.

[adventurer]

Living in Europe I agree with Krugmann.

Europe has its own challenges however.

Important for me that no single cultural space has an a priori superiority.

Learning from each other and educating about cultural complexity, without bashing this or that, is a great opportunity.

A.

[September]

Important for me that no single cultural space has an a priori superiority.

I think some cultures are superior to others, though.  For example, Sweden seems superior to Somalia in every measure I can imagine.

[consortium11]

A few general points from England;

Our education system (at least at the higher/further level) seems much better than the US's. No-one over here that I've ever met (and I have a pretty damn varied social circle) has any of the issues with getting funding or dropping out of Uni that you can see in the B&U forum here. The worst that generally happens is occasionally people have to work a few extra jobs, but those who I know who have been forced to drop out almost always did so because they simply didn't like their Uni or the lifestyle... not due to pure finnancial constraints. Recieving my student loan was a simple task and my friends who needed bursuries got them without real issue. We have our own issues... there was an attempt to put 50% of all students through University which led to a devaluing of a degree. In addition to that student debt skyrocketed... and then throw in the huge number of university graduates looking for graduate jobs, nearly all with £10k+ debt and the economic circumstances leading to a reduction in the jobs offered and we're going to have a real issue in 5 or 10 years time.

I'm no fan of the NHS. In truth I'm a fairly outspoken critic. That said, from both reading personal horror stories and looking at the facts I think I prefer it to the way the US is set up right now. From what I understand, if you can get the care then the US system is the best in the world. The issue is that few can. Personally I like the Swiss and Singapore systems.

Now, there's one big issue to be faced. After the next election the UK will have to have massive spending cuts. For over a decade we've had tax and spend policies that relied upon the good times and kept nothing back for a rainy day. Both major parties are desperately trying to claim that certain areas will be ring fenced, but I think that if the parties actually stick to their promises to cut spending we're going to see large reductions virtually across the board. In 5 years the set up for education and the NHS may be very different as the UK has to adjust to getting spending under control.

Another major factor in the UK economy will be the finnancial sector. As it stands nearly all the parties are playing a game of kick the banker... which is good for grabbing votes but not for long term economic viability. We've already seen many of the top people at RBS leave for Asian banks (and these were the profitable people...) as the government clamps down and in todays world if the government pushes too far then it's not a stretch for most of the big players to leave... enough other countries will welcome them with open arms. The issue is heightned by the controls the EU wishes to place on banks as a whole. London is pretty much the only major finnancial hub left in Europe... so any restrictions to the city really only apply to London. It's a worrying thought that politicians can vote something into being that will have no direct effect on their constituents (although we in the UK have got used to that with the West Lothian question...)

[adventurer]

@September:

Right,

its not as easy when Canada, US and Europe do compare.:):)
and then..within Europe...

A.