By Steven Hill, European View, Volume 11, Issue 1, July 2012, Centre for European Studies
The transatlantic relationship has been the most important of the post–Second World War era, a relationship in which both sides have shared and learned many things. In this new era of post–economic collapse, Europeans and Americans still have much to learn from each other. This paper focuses on a few key areas where Americans can learn from Europeans, including health care and family supports, the economy, environmental sustainability and political and economic democracy. Then the article briefly outlines some areas where Europeans can learn from Americans, specifically racial integration and forging a political and economic union.
The twenty-first-century world is facing two immense challenges: how to create a desirable quality of life for a burgeoning global population of 7 billion people; and how to accomplish this in a way that does not burn up the planet in a Venus-like atmosphere of our own creation, due to excessive carbon emissions, pollution and other downsides of development. This is a tall order, yet it is the defining task of our insecure times.
As the economic crisis that began in 2008 has shown, no single nation has a monopoly on the solutions to these challenges. The post–Second World War era, in which two superpowers dominated the world, has passed into the mists of history. Today we live in a multipolar world where each nation has an opportunity to learn from others and to adopt practices that are the best hope for fostering economic development in a way that is environmentally sustainable.
The transatlantic relationship has been the most important of the post–Second World War era, a relationship in which both sides have shared and learned many things. In this new era of post–economic collapse, what more can Europeans and Americans learn from each other? Quite a lot, it turns out.
What the US can learn from Europe
Real family values via health care and social support.
In this economically insecure age, European nations have done more than any others to reduce inequality and provide the best health care and social supports for families and workers (OECD 2011a). Europeans today enjoy universal health care, decent retirement pensions, an average of 5 weeks paid vacation (compared to only two in the US, though some working Americans get no vacation), paid parental leave and sick leave (in the US neither is mandatory), low-cost higher education and a shorter work week with comparable wages. Social spending in Europe runs 35 % higher per capita than in the United States (whereas military spending in the US is more than double that of the EU) (Before austerity 2011).
Not every country provides the same high level of family supports, with citizens in Western Europe generally receiving more than their counterparts in Central and Eastern Europe (though the latter regions have been catching up). But even in Greece, despite its economic woes, people still have more of these supports than many Americans. Forty-seven million Americans (16 % of the nation) live below the poverty line and fifty million Americans lack health care other than a hospital emergency room (and in some cases not even that). Not only is coverage in the US spotty, but health care is expensive; European countries spend about half the amount (per capita) on their non-profit health care systems as the U S spends on its for-profit system (OECD 2011b).1
Yet Europeans manage to provide universal coverage and get better health results. Despite spending far more money, the quality of US health care is ranked 37th in the world—just ahead of Cuba and Kuwait, truly an indictment of the US’s for-profit system (World Health Organization, 2000).
The US can take great credit as the inventor of the middle class, but Europe has figured out how to put the middle class on a more solid footing by providing supports for families and workers, and by reducing inequality and the number of people in poverty. Contrary to conventional wisdom, research has shown that the US not only has greater inequality but also less economic mobility than ‘old Europe’ (Isaacs et al. 2008). Researchers also have shown that inequality in turn dramatically affects other quality-of-life factors such as infant mortality, crime, homicide rates, incarceration (the US incarcerates 7–10 times more people than European nations do), life expectancy, mental illness, drug abuse and more (Wilkinson and Pickett 2009). These social ills are expensive to treat and an additional drain on the US’s economy and social fabric.
The typical criticism of Europe has been that these levels of support for workers, families, communities and the environment are unsustainable and make the European economies uncompetitive. The economic difficulties of the eurozone have only increased these criticisms. However, even after the economic collapse of 2008, Europe still has the largest economy in the world, producing over a quarter of the world’s gross domestic product, as large as the US and India combined. It has nearly as many Fortune 500 companies as the US and China together (Global Fortune 500 rankings 2011),2 and some of the most competitive national economies (World Economic Forum 2009). The EU is now the largest trading partner of both the US and China (Yueh 2008).
Europe’s economy actually has more small and medium-sized enterprises (SMEs) than the US and they provide two-thirds of Europe’s jobs, compared to half the jobs in the US (Rifkin 2004). In many European countries, the SMEs are world-class exporters, making products that are crucial to industrial growth all over the world.
While several European economies—the so-called PIIGS (Portugal, Ireland, Italy, Greece and Spain)—have had difficulties, the rest of Europe is gradually recovering from the largest economic collapse since the Great Depression. Despite having challenges—what economy today doesn’t?—social capitalism has performed better than Wall Street capitalism in many ways: the eurozone has no trade deficit (the US has an enormous trade deficit), a much lower fiscal deficit (4 % of GDP for the eurozone compared to almost 10 % for the US) and per capita growth over the past decade that has been about the same as in the U.S. (Gros, 2012).
European states can offer services such as health care, childcare, education and other social supports at a much lower cost than in the US because they collect their tax dollars into pools of ‘social insurance’ which allows them to design relatively efficient, cost-effective systems. But the US has created scattered, hodgepodge systems, many of them for-profit and privately financed, which are inefficient, expensive and lacking in quality. Compared to Europeans, Americans pay twice as much for healthcare, at least six times as much for childcare (Care.com 2009),3 20 times as much for a university education (American students graduate tens of thousands of dollars in debt) (Deutsches Studentenwerk 2012; College Board 2012; Morgenson 2008),4 have less vocational training, must save nearly twice as much out-of-pocket for retirement (beyond their meagre government pension) (Social Security Administration 2012; Beard 2009; Possible French pension 2010) and most have to self-finance their own parental leave after a birth, sick leave when they get sick and senior care when they are old.
The American ideologue’s response to Europe’s comprehensive supports has been ‘Yes, but … Europeans pay more taxes than tax-phobic Americans, so forget it.’ Yet it turns out that this is a bit of a myth. Europeans receive a long menu of supports and services for which Americans must pay extra, via out-of- pocket fees, premiums, deductibles, higher tuition and other charges, in addition to their taxes. When you sum up the total balance sheet—taxes paid as well as out-of-pocket expenses—it turns out that many Americans pay out as much as or more than Europeans, but they receive a lot less for their money. Services are of poorer quality yet more expensive in the US because the ad hoc systems lack planning and economies of scale.
That kind of inefficiency is undermining the US’s middle class and families. In this era of globalised capitalism, with developing countries like China, India and Brazil demanding their rightful seat at the table, all of the developed countries are going to need to learn how to do more with less and to increase productivity in all sectors. European states can offer services such as health care, childcare, education and more at a much lower cost than the US can because their pools of social insurance allow them to design more efficient and cost-effective systems. Moreover, social spending is not just a humane thing to do, it is also good for the broader macroeconomy. The automatic stabilisers inherent in these policies provide ongoing fiscal stimulus, and the social support system maintains a healthy, educated, well-trained and productive workforce. For all these reasons, Europe’s growth rates do not need to be as high as they are in the US’s ‘trickle down’ economy, which has a poor distribution system and fails to provide adequately for all Americans (even when the US economy periodically outperforms Europe’s).
Europe has fostered a greater degree of economic democracy by deploying practices like codetermination, works councils, cooperatives, robust labour unions and public–private partnerships. Codetermination, first pioneered by Germany, allows workers at major corporations to elect their own representatives that sit side by side with stockholder representatives on corporate boards of directors. This is like requiring Wal-Mart to allow its workers to elect up to 50 % of its board of directors, a concept unheard of in the US even though many European nations deploy some version of this as standard procedure.
Codetermination also includes employee works councils in most workplaces, which give employees a great deal of input and consultation at the shop-floor level. Europe in effect has reinvented the corporation to make these private entities more accountable to the public and democratic values, yet US political analysts and economists have barely noticed. The impact of codetermination has been immensely significant, and yet it has not hurt Europe’s competitiveness. Indeed various studies have shown that these practices have helped the macroeconomy by fostering a culture of consultation, information-sharing and consensus-building between business managers and workers (Pontusson 2005; Levinson 2006).
Environmental sustainability, preparing for global warming
Europe has taken the lead in preparing for global warming, with widespread deployment of conservation practices and ‘green design’ in everything from skyscrapers, homes and automobiles to low-wattage light bulbs, motion sensor lights and low-flush toilets. Europe has moved forward ambitiously with renewable energy technologies like solar, wind and sea power, as well as efficient mass transit, high-speed trains and more. In the process, Europe has created hundreds of thousands of new green jobs (Burgermeister 2008). As a result of this transformation, the average European emits half the carbon and uses half the electricity of the average American (Central Intelligence Agency 2012),5 and it takes 40 % more fuel to drive a kilometre in an American car compared to a European vehicle (Hill 2010). Europe has reduced its ‘ecological footprint’ (the per capita amount of the earth’s capacity consumed by a population) to half that of the US for the same standard of living (WWF 2008).6
After centuries of kings and dictators, European states have forged pluralistic political institutions and electoral methods such as proportional representation/multiparty democracy, public financing of campaigns, free media time for campaigns and universal/automatic voter registration that have produced the most representative democracies in the world at the national level (at the European Union level, however, which is relatively new and still in formation, the institutions have not yet achieved sufficient levels of democracy or accountability). A robust and well-funded public broadcasting sector acts as a crucial counter-balance to the corporate, for-profit media. These modern practices have fostered inclusiveness, participation, multiparty representation and policy based on broad public support and consensus-building. Europe’s robust political democracies and media institutions better ensure that politics rule over economics instead of the other way around, resulting in the benefits of its social capitalism being broadly shared.
But in the US’s Wall Street capitalism, powerful economic forces have captured the political system. The winner-take-all, privately financed, two-party system has resulted in polarised legislatures, extremely low voter turnout (single digits in some races), a disengaged electorate, safe-seat incumbents and national policy that often does not reflect the will of the majority. Public broadcasting in the US is woefully underfunded (approximately $3 per capita compared to $50 per capita for the BBC, ARD and other European public broadcasters) (McKinsey and Company 2004), and chronically threatened with defunding by a US Congress that is not committed to public broadcasting (in Europe, most public broadcasters are funded by mandatory monthly household subscriptions). This has made the US’s public broadcasting an ineffectual watchdog of government and a weak counterbalance to the corporate media.
Properly understood, Europe’s economy, political democracies, social support system, media/communication institutions and environmental policies are all components of an identifiable ‘European way’—a well-designed framework that has been quietly incubating and developing in the post–Second World War period. The European way has harnessed a capitalist economy to finance broadly shared prosperity as well as environmental sustainability. The economic engine finances a social system that better supports families and individuals in an age of globalised capitalism that threatens to turn most people into internationally disposable workers. Taken together these differences in what I call ‘fulcrum institutions’—the crucial institutions on which everything else pivots—are the keys to understanding the striking divergence between the European way and the American way.
What Europe can learn from the US
But can this inspiring European way be maintained in the face of serious economic and demographic challenges? I think it can, especially if it learns a few important lessons from the US. Two primary areas where Europe can learn from the US can be summed up in a single word—integration: both racial/ethnic integration as well as political and economic integration. As Europe continues its efforts to integrate its burgeoning ethnic minority and Muslim populations, it certainly can learn valuable lessons from the US, which has been struggling with integration for many more years. And Europe is in the middle of a fateful decision: how united does it want to be as a continent? Does it wish to become a United States of Europe? Do the many Member States—or some subset of them—want to share a currency, budget policies, debt-sharing/eurobonds, a transfer union and federal political institutions? This is an extremely difficult decision, and the process is going to take many years to figure out. But Europe can learn a lot from the most successful continental union ever—the United States of America.
Past centuries, including the twentieth century, were dominated by a handful of empires or major powers. That is seemingly how the human world has operated for as long as anyone can remember. Is the world fated to remain a contest of dominant powers? Or is it possible to construct a multipolar world where a college of nations, roughly equal in their relative strengths and weaknesses and facing the same global challenges of economic development and ecological threats, face them together in order to overcome them? That is the daunting question the world faces, and it will succeed only if each nation has both an open mind and an opportunity to learn from others and to adopt the best practices for fostering economic development in a way that is environmentally sustainable.
1. In 2009 per capita health care expenditure was $7,960 in the U.S. and $3,978, $4,218, and $3,487 in France, Germany, and the UK respectively.
2. European nations have 164 Fortune 500 companies, while the US has 133, Japan 68, China 61 and India 8.
3. Childcare in the US costs over $12,000 per year for a family with two children, $500 per month per child.
4. In most parts of Europe, university tuition remains free or nearly free. In Germany, some of the state universities have begun charging up to $630 per year in tuition. But in the US the average annual tuition for a 4-year university is $28,500 for private college and $8,244 for a public college. US college students graduate on average with $20,000 in debt, a figure that has more than doubled since 1995.
5. US per capita electricity consumption is 12,470 kWh, EU per capita consumption is 5,774 kWh.
6. Europe’s total ecological footprint was rated at 4.7 hectares per person while that of the US was rated at 9.4 hectares per person.
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