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Big Spending: What America Can Learn from Germany

"Since the Berlin Wall fell, the old GDR has been showered with money. Overall, some $2 trillion has been pumped in — the equivalent of about 4% of Germany's economic output every year," writes TIME Magazine and draws three lessons for the United States from Germany’s attempt to spend its way out of a major economic slump: What Germany got for Its $2 Trillion.

The Tapmag blog summarizes those three lessons and discusses other articles, which compare the economic policies of Germany and the United States, some of which where discussed on Atlantic Review as well.

Endnote: According to the New York Times Thriving Norway Provides an Economics Lesson as well.

Are Americans now more open to learn from other countries economic systems, incl. those "socialist" European economies?

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Pat Patterson on :

In regards to comparing Norway to the US it should be noted that the former has a population of 1/2 that of LA County and barely 10% higher GDP per capita. Also unless immigrants are planning on swimming the Baltic or hiking over the Scandanavian Mountains from Sweden there is little chance of the dislocation caused by legal and illegal immigration. Yet because of the increase in applications Norway just recently cut back how many were allowed in below that of 2008, est 6,500. Norway has done an excellent job with a lucky streak going back to the 60's but it also should be noted that many formerly state run industries are now privately owned and that Norway takes on average of over 50% of wages in taxes. Even the OECD describes Norway as welfare capitalism and not socialism as the article implie. Interesting article but not much in the way of use to the US. Unless of course we actually start exporting petroleum again an issue that the NYT would have a heart attack over.

David on :

"Are Americans now more open to learn from other countries economic systems" The answer is yes, and you will see this over the next months as we debate reforming our broken health care system. There will be discussions about the pros and cons of systems in Canada and Europe. One thing is for sure: the US can no longer afford to be the only industrialized country without universal health care for its citizens. Concerning the Norwegians, I am not at all surprised that they are thriving while the rest of us are suffering, I used to live in the Norwegian section of New York City, where they still have the Norwegian Day Parade each May (tomorrow, in fact) and my son attended a Norwegian nursery school. My neighbors struck me as very practical, modest and frugal - hardly the type to speculate in hedge funds or credit default swaps.

Pat Patterson on :

With a 50%+ personal tax rate there probably isn't much capital left for the Norwegians to invest. However if the US began exporting its oil again then it too might have a surplus. Though with oil at $56 a barrel even the Norwegians are feeling the pinch and the result is less money for unemployment, healthcare and education. But again how can anyone honestly compare a commodity country with slightly over 4 million in population with a country that has 300+ million. But thank goodness I don't make cultural judgements on the basis of neighborhoods or national saint's days.

John in Michigan, USA on :

Would a German or other European please explain to America how you intend to pay for your entitlements for the next 30 or so years? Also, we keep hearing how great European social programs are. But why is Italy, with all its history and assets, and after decades of aid from the rest of Europe, still so poor? It seems to us that the German or Norwegian lesson only works for part of Europe, not for all of it. It's not that Americans are unwilling to learn from Europe, its just that most of what we hear either a) ducks these questions or b) would never work in American culture. For example, voters in America simply wouldn't stand for being taxed as much as Europe, and would remove from office any politician who tried. Our last Norwegian-American presidential candidate, Walter Mondale, campaigning in 1984 against Reagan, famously said "Mr. Reagan will raise taxes, and so will I. He won't tell you. I just did." It cost him the election. Reagan did go on to raise some taxes by a tiny amount; his successor, Bush Sr., attempted to raise them further and it cost Bush Sr. his re-election.

Zyme on :

Well it isn't very fair to point at Italy as an example. Their money transfers to the south usually sink in mafia holes. A country that gets a new government every year in average can hardly be the spot to look at when you are looking for effective government. They surely benefit most from every governmental competence transferred to Brussels. Didn't they recently have to use the army to clear out the slums around their cities? I mean how long do the responsible authorities have to sleep until that point is reached..

John in Michigan, USA on :

We in the US have a mafia problem too. Not as bad as Italy, but still. My point is simply that you have to compare like with like. If you want to compare US and Europe, you have to compare ALL of the US with ALL of Europe. For a few more years I can see excluding central Europe from the comparison, under the theory that they are still in transition from the Iron Curtain and haven't yet achieved normality. But with Italy I can see no such basis for making an exception. And long term unemployment and other social pathologies in regions like Sicily are an utter disgrace. Even in our inner cities we have nothing like that. If the European social model works, why is it only working in some places and not others? Also I can't help noticing that it wasn't social welfare that ended the conflict in Northern Ireland, and helped Spain progress in a way that Italy has not. It was prosperity, especially low taxes, and also politics. Granted, Spain and Ireland are feeling more pain than Germany or Norway right now...but that pain will end in a couple of years when prosperity returns. Whereas, the pain caused by failure of the social model in Italy will still be there. I don't mean to pick on Italy, I am trying to point out that I think the rest of Europe has let Italy down. But, the answer isn't more spending in Italy, that has been tried every year and hasn't resulted in the kind of changes that are needed.

Zyme on :

" And long term unemployment and other social pathologies in regions like Sicily are an utter disgrace. Even in our inner cities we have nothing like that. If the European social model works, why is it only working in some places and not others?" As far as I know these social problems mainly arise due to the failed integration of gypsies into the italian society. Among the ordinary Italians it is not as bad as you depict it - they mostly accept this way of life for themselves, maybe another reason why so little changes. "Also I can't help noticing that it wasn't social welfare that ended the conflict in Northern Ireland, and helped Spain progress in a way that Italy has not. It was prosperity, especially low taxes, and also politics." Others might argue that decades of pumping structural aid from Brussels has helped Spain to get on its feet. "I don't mean to pick on Italy, I am trying to point out that I think the rest of Europe has let Italy down." So what kind of help do you suggest? The kind of help we provided Greece with when they ran out of tear gas to fight civil unrest? (sending them additional tear gas)

John in Michigan, USA on :

"As far as I know these social problems mainly arise due to the failed integration of gypsies into the italian society." Hmm...any other Europeans care to comment on this? It is certainly a...how to put this...[url=http://en.wikipedia.org/wiki/Parsimony]parsimonious theory[/url]. Sicilian = Gypsy??? Most Sicilian-Americans would shudder at the thought. Has something changed since they left? Besides, aren't we supposed to say Romany now?

Pamela on :

We're already hearing stories about people fleeing New York (state and city). The wealthiest resident, whose name escapes me, is worth over $1 billion and he's changing his legal residence to Florida. A local liberal described his action as 'selfish'. Staying in NY would have cost him another $1 million in taxes/year. He's not the only one. We've got family also leaving and their financial means are considerably more modest. NY has hit it's tipping point I think, as has California apparently. They've lost more (legal) residents in the last 3 years than they've gained. I'm waiting for someone who thinks this behavior is 'selfish' to try to make moving to a lower-tax domicile illegal on the grounds of tax-avoidance.

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