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Subsidy As a Way of Life

Article by James K. Glassman August 16, 2010 //   7 minute read

It's tough enough in the best of times, but right now, with a sovereign-debt crisis affecting Greece and threatening Italy, Spain, Portugal and Ireland, trying to make the case for the superiority of Europe's economic system is an exceptionally difficult task. Perhaps for that reason, Tom Geoghegan, who describes himself as a "union-side labor lawyer" and paints himself in this book as a vagabond in search of an alternative to the American way of life, makes only a half-hearted attempt. Instead of rigorous argument, "Were You Born on the Wrong Continent?" offers a meandering stream of consciousness in which Mr. Geoghegan, an admitted nonexpert who spent a couple of months recently in Berlin, details various boring conversations he had with anonymous Germans and Frenchmen he bumped into, drops a few statistics, cites some books and comes to the conclusion that we Americans would lead richer lives if only we adopted European social and economic policy—especially the part about high taxes, lovely benefits and tight restrictions on the decisions that businesses are allowed to make concerning the people who work for them. Early on, for example, he talks about an American expatriate living in Paris with her French boyfriend, a drummer in a band: "I wondered: If she went back to America, what would she do? First, she'd have to get a job. We don't subsidize the arts [the drummer gets state support]. It might be as a cashier. She'd have a no vacation. . . . No health insurance. Second, what if she had a kid? No paid maternity leave. No cornucopia of subsidies. Third, she'd have to pay for school. Unless she threw the child into the public schools. Fourth, no child care. No one to help her. Fifth, her rocker husband would have to work." It may be hard for some of us to bemoan America's unwillingness to transfer public money to rock-band drummers. But even the more plausible parts of Europe's subsidy-cornucopia are expensive, and those long vacations carry significant opportunity costs. Besides, universal health insurance and subsidies to rockers don't seem to make people happier. In probably the most detailed study of national happiness, the Gallup World Poll surveyed tens of thousands of respondents in 155 countries. On top were Denmark, Finland and Norway (European, yes, but each smaller than Wisconsin). The poor, benighted U.S. finished an impressive 14th. Mr. Geoghegan's beloved Germany was No. 33; Italy, 40; and France, 44. Europe's economic story in recent years—well before the current crisis—has been one of sluggish growth and high unemployment. As a result, a wide gap has opened up between Europe and the U.S. in the most revealing indicator of economic well-being, GDP per capita. For the U.S in 2008 (all statistics from the OECD), the figure was $47,200; for Germany, $35,400; France, $33,100; Italy, $31,252. In other words, the average American produces 43% more than the average Frenchman. The economist Mark Perry has noted on his blog Carpe Diem that citizens of America's poorest state, Mississippi, have a higher GDP than Italians; and Alabamans beat the Germans, French and Belgians. Why? In productivity, or output per hour, Americans have only a tiny edge over Europeans, but the average American works 400 more hours per year than a German and 300 hours more than a Frenchman. Americans retire later, too. Only 38% of the French age 55 to 64 are working, compared with 62% of Americans. These figures do not amount to a moral judgment, of course. They simply confirm that Europeans and Americans choose different ways of living. "It is time to stop pretending," wrote Robert Kagan in the first line of his book "Of Paradise and Power" (2003), "that Europeans and Americans share a common view of the world." He was talking about foreign policy, but his statement applies to economic and social policy as well. Europeans have traded leisure for wealth. The only problem with this formula is that Europe has tried to have its gâteau and eat it too. Creating wealth, if only to redistribute it, ultimately requires hard work. But Europe's welfare state, and its incentives for leisure, have continued to grow. (Never mind that America has subsidized Europe's domestic benefits for decades by bearing the lion's share of its defense costs.) Mr. Geoghegan portrays Europe as warmer, fuzzier, fairer, more intellectual, more healthy and less stressful than America. Perhaps so. But if Europe is a paradise, it is an evanescent one. I suspect that Mr. Geoghegan realizes this sad fact—the unsustainability of the whole arrangement. Near the end of this stay in Berlin, he meets an American friend, living in Germany, who asks him how his trip is going. "I've never been so happy in my whole life," Mr. Geoghegan replies. The only thing that makes him miserable, he says, is the thought that he has to go back to the U.S. and to a life of "work, work, work." "You'll poison the whole experience if you worry about that," his friend says. "Just enjoy it now. And when it's over, it's over." From this exchange Mr. Geoghegan arrives at a way of thinking about the European model. "Maybe one day," he writes, "Europeans will have to work till they drop as we do in America. So? Then the Europeans should just enjoy it now. When it's over, it's over." Hey, guess what? It is over. At the G-20 meeting in June, it was the Europeans who were pushing for austerity and the American administration that argued for keeping the public-spending spigot open. David Cameron, Britain's prime minister, wants to cut the budgets of government departments by 25%. Maybe we Americans can learn something from Europe after all; it's just not the lesson that Mr. Geoghegan had in mind. Mr. Glassman, former under secretary of state for public diplomacy and public affairs, is executive director of the George W. Bush Institute in Dallas.