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Friday, January 29. 2010

Anything You Can Do I Can Do Better

Posted by Andrew Zvirzdin in International Economics on Friday, January 29. 2010

The health care debate in the United States has recently spurred a tangential conversation among pundits: Is America's or Europe's economy better? The controversy was initiated by Jim Manzi who recently wrote that Europe's bloated welfare state has destroyed its competitive advantage:
From 1980 through today, America's share of global output has been constant at about 21%. Europe's share, meanwhile, has been collapsing in the face of global competition - going from a little less than 40% of global production in the 1970s to about 25% today. Opting for social democracy instead of innovative capitalism, Europe has ceded this share to China (predominantly), India, and the rest of the developing world.
Paul Krugman has responded in kind, arguing:
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.
Economists and journalists have been busy debating the question. Greg Mankiw cites GDP figures to question Europe's wealth, Mark Perry compares European countries to US states, Noah Millman asks why we are asking this question, and Clive Crook says the question is unanswerable.

The debate over the economic prowess of the US and Europe recurs at regular intervals. But it rarely leaves us with any new information. To some extent, the debate sounds like two teenage students trying to prove which one is at the top of the class. At the end of the day, the economies of European countries and the United States are closely intertwined, as the recent financial crisis has demonstrated. Unfortunately, the debate over the "right" economic system may cloud the bigger opportunity: how will Europe and the United States lead the global economy in coming decades?

What do you think? Who has the better economic model? Is that the right question to be asking?
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Pat Patterson - #1 - 2010-01-30 00:57 - (Reply)

Krugman, remember, was touting Enron right up to the day all the phones were ripped out of the wall. As a seer his record has been less than prescient considering in the first sentence of this almost three week old op/ed piece states that, "As health care reform nears the finish line..." Obviously Sen Reed and Speaker Pelosi are declaring victory and going home as it now appears that this particular health care reform, as Monty Python would phrase it, "...is extinct." It seems, if polls and actual votes are to be trusted that Americans have not entered the debate because as far as they are concerned the whole issue is moot.

As to the rhetorical device of asking was London, Berlin or Paris dirty then I would ask if Mr Krugman has been to Marseilles or even off the main streets of Paris or Berlin where it is quite obvious that some of those vaunted social services must have forgotten to visit?

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David - #2 - 2010-01-30 02:10 - (Reply)

"It seems, if polls and actual votes are to be trusted that Americans have not entered the debate because as far as they are concerned the whole issue is moot."

I can assure you that for me and the millions of Americans who cannot get health insurance because of "pre-existing conditions" (I have Type 1 Diabetes) the situation is most decidedly not moot. There are 46 million of us without insurance and a like number that are woefully underinsured.

I would definitely not be in this position in Berlin or Marseilles - or in Stockholm, Tokyo, London, Madrid, Toronto, etc.

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Joe Noory - #2.1 - 2010-02-19 16:53 - (Reply)

Erratum corrige: there are NOT 46 million people in the United States who are not insured because of pre-existing conditions, as you are trying to imply.

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Pat Patterson - #3 - 2010-01-30 02:33 - (Reply)

Well? And since you loved polls before the election now they are the tools of Satan? At most, and I posted this once before, there are probably only 10-15 million without insurance that want it. The rest are statistical anomalies that do get insurance within six months of losing their old package, those inelgible because of immigration status, those too lazy to take advantage of state run health plans and the wealthy that don't really see the need for insurance.

My original and still main point is that only a minority of Americans want a European style system. Which in itself is confusing as there are several different types and at least two running such great deficits that coverage is being cut back by either delaying treatment or making certain types of treatments unavailable. And that most Americans, either 225 years ago or today came to the US to get away from Europe.

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Andrew Zvirzdin - #3.1 - 2010-01-30 18:22 - (Reply)

Are you aware of any poll that asked just such a question? I would be very interested to see the numbers of Americans who would move to a European country and vice versa. But even if we did have those numbers, would that prove which economic system was better?

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Pat Patterson - #4 - 2010-01-30 21:22 - (Reply)

Yes, I think it would as word of mouth by the immigrants themselves would filter back to friends and relatives over which was better. As to the number of Americans moving, not necessarily becoming citizens of another country, the State Department's website says that the numbers are so small as to be irrelevant. In fact the only country in the world that is attractive for Americans to move to is Israel. But there are still more Jews living in the US then in Israel itself so that would seem to indicate some awareness of which system is more successful.

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Pat Patterson - #4.1 - 2010-01-31 00:09 - (Reply)

I did a little more checking and it appears that the largest number of Americans that move do so either to Canada or Mexico. Some 600,000 to 1 million in the last decade. But one fact gives the game away in that most of these Americans are retirees and moving is more at matter of looking for a lower cost of living. While the average age of immigrants coming into the US, legal I would assume, are 25-30.

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