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Economic Outlook of the United States and the European Union

The latest OECD survey on Economic Policy Reforms has been very critical of Germany and other EU countries and concluded:
Over the past two decades, living standards in a number of OECD countries, notably Japan and some Continental European economies, have fallen further behind the best performers. The social costs associated with this failure to converge are plain to see, and will only worsen with demographic ageing.
Washington Post Columnist Fareed Zakaria discusses this survey and writes about the "decline and fall of Europe":
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 E.U. has 170 million more people. Its per capita GDP is 25 percent lower than that of the United States, 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. (...) Two Swedish researchers, Fredrik 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.
This OECD survey was received with gloating by the bulls of Wall Street and the U.S. commentariat, writes Martin Hutchinson, a former international merchant banker with an MBA from the same school as President Bush. Writing for The Globalist, Hutchinson describes the European economies as "sluggish, but not uncompetitive" and considers the European economic model as "stronger than it appears -- and the U.S. model weaker."
The standard U.S. conservative criticism of the European model notes the high level of unionization, higher social security contributions (for public sector pensions and healthcare), shorter working week, longer vacations and lower entrepreneurship. U.S. conservatives conclude that Europe is hopelessly uncompetitive against the emerging Asian economies -- and doomed to become more so as European social security systems slip ever further into deficit.
There's just one problem. It is the United States, not Europe, that persistently runs balance of payments deficits with the rest of the world. And it is the United States, not Europe, whose public finances appear to be slipping ever further out of control.
Europe's model does not today involve markedly higher public ownership of the corporate sector than in the United States. Privatization in Europe has greatly reduced public ownership in the power and telecom sectors. In fact, some assets -- such as airports -- are publicly owned in the United States, but privately owned in some European countries.
Hutchinson criticizes the European economies and provides policy recomendations, but he also puts the OECD report in perspective. Living standards have indeed declined, "but the past two decades have also seen the liberation of Eastern Europe."
Does Britain combine the best of European and U.S. policies?
With a huge real estate bubble, a heavy trade deficit, resurging inflation and public spending that has shot up to European levels, rising by 5% of GDP in only a few years, Britain has the worst of both worlds.
Read his entire piece in The Globalist, a daily "online feature service that covers the biggest story of our lifetime -- globalization."


anglofritz on : The Tortoise And The Hare

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By way of the Atlantic Review, we have this article in the Globalist, which offers the solution to Europe's market woes. And it's not "be like America." By balancing government spending, taking advantage of cheap-but-highly-skilled Eastern European labor, and controlled...


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