The Dominance of the American Economy
Hopefully our post, when published, will provide readers with an understanding of the state of the U.S. economy and why as President Bush said: “the American people have turned in an economic performance that is the envy of the world”.
Until then, this one quote from Going for Growth, a report produced by the Paris based Organization for Economic Co-operation and Development (OECD), sums up our findings:
Over the past decade, the gap in GDP per capita relative to the United States has widened in a number of countries, including the large continental European economies and Japan.Today we came across an article by Fareed Zakaria in Newsweek that goes to the heart of our discussion about the U.S. economy in comparison to our European counterparts. Zakaria’s article, The Decline and Fall of Europe, highlights some of the findings of the Going for Growth report and its stark conclusion – “Europe is in deep trouble.”
Europe is in deep trouble because many of the economic and social polices the left in the United States clamors for are in fact the root cause of Europe’s decline. Perhaps this is why many “progressives” refuse to acknowledge the success of the American economy and attempt to discredit any U.S. tax, economic or social policy that is the antithesis of those typical in Europe.
The following are some key points from Zakaria’s piece:
It's often noted that the European Union has a combined gross domestic product that is approximately the same as that of the United States. But the EU has 170 million more people. Its per capita GDP is 25 percent lower than that of the U.S. and, most important, that gap has been widening for 15 years.
If present trends continue, the chief economist at the OECD argues, in 20 years the average U.S. citizen will be twice as rich as the average Frenchman or German. (Britain is an exception on most of these measures, lying somewhere between Continental Europe and the U.S.)
People have argued that Europeans simply value leisure more and, as a result, are poorer but have a better quality of life. That's fine if you're taking a 10 percent pay cut and choosing to have longer lunches and vacations.
But if you're only half as well off as the U.S, that will translate into poorer health care and education, diminished access to all kinds of goods and services, and a lower quality of life.
Two Swedish researchers, Frederik Bergstrom and Robert Gidehag, note in a monograph published last year that "40 percent of Swedish households would rank as low-income households in the U.S." In many European countries, the percentage would be even greater.
Talk to top-level scientists and educators about the future of scientific research, and they will rarely even mention Europe. In the biomedical sciences, for example, Europe is not on the map, and it might well be surpassed by much poorer Asian countries. The CEO of a large pharmaceutical company told me that in 10 years, the three most important countries for his industry would be the United States, China and India.
In 25 years, the number of working-age Europeans will decline by 7 percent, while those over 65 will increase by 50 percent. One solution: let older people work. But Europe's employment rate for people over 60 is low: 7 percent in France and 12 percent in Germany (compared with 27 percent in the U.S.). Modest efforts to allow people to retire later have been met with the usual avalanche of protests.
What does all this add up to? Less European influence in the world. Its dwindling defense spending weakens its ability to be a military partner of the U.S. or to project military power abroad even for peacekeeping purposes. Its cramped, increasingly protectionist outlook will further sap its vitality.
The decline of Europe means a world with a greater diffusion of power and a lessened ability to create international norms and rules of the road.
Think of the dollar. For years people have argued that it is due for a massive drop as countries around the world diversify their savings. But as people looked at the alternatives, they decided that the chief rivals, the euro and the yen, represented economies that were structurally weak.