Learning from Europe

By Steven Hill, Providence Journal, January 16, 2009

The inauguration of the 44th president of the United States looks like the most dramatic debut since the Beatles arrived in New York. But now that the buildup and the hype are over and it’s time for Team Obama to produce, President Obama would do well to look to Europe for guidance, particularly when it comes to three of the president-elect’s top priorities: energy and climate change, health care and jump-starting the economy.

Energy and the Environment

The European Union recently displayed global leadership by enacting its 20-20-20 Plan: agreeing to cut human-produced carbon emissions that contribute to global warming at least 20 percent by 2020. They will do this by ramping up renewable energy technologies to 20 percent of energy usage, as well as by implementing far-reaching conservation measures and enacting the world’s most ambitious carbon-trading program.

Displaying an important principle that will be crucial to any global climate agreement replacing the Kyoto Protocol, the richest European nations will contribute a greater share toward combating climate change.

Importantly, the EU has not allowed the recent economic crisis to thwart its drive. EU Commission President José Manuel Barroso told the BBC, “The financial crisis is not an excuse. On the contrary, we can make it a win-win situation. We can create more green jobs; we can promote more investment in the low-carbon economy of the future.”

Indeed, the European wind and solar industries are creating thousands of jobs, many of them in rural areas where job creation can be difficult. Germany’s economy has received a major boost from a massive investment in the renewable energy sector. Tens of thousands of Germans are employed in the wind-turbine industry. Germany’s entire renewable energy industry – including wind, solar and biomass power – included 249,300 jobs in 2007, a 50 percent jump from 2004. On a per capita basis, that is comparable with creating 1 million U.S. jobs.

A study by the German government predicts that by 2020 there will be 400,000 domestic jobs in the renewable energy sector. Other EU nations are enjoying similar economic surges; in Portugal, a massive solar plant is bringing jobs and development to the traditionally poor Alentejo region, 125 miles southeast of the capital Lisbon. The business of wind, solar and other renewables is growing deep roots in fertile European soil, and Europe is leading by example. In a friendly challenge to then President-elect Obama, Barroso said, “Our message to our global partners is: Yes, you can … especially to our American partners.”

Health Care

Similarly on health care, the Obama administration can learn from what works in Europe. The World Health Organization (WHO) rates European countries as having the best health care systems in the world, spending, on average, far less than the United States for universal coverage and quality results. France has the top-rated health care system, while the United States is ranked 37th – just ahead of Cuba and Slovenia. In the Czech Republic, a proposal to introduce a 30 K? co-payment per office visit nearly toppled the government, as health care is considered a basic right in the social contract.

The United States ranks 28th in the world in infant mortality, at seven deaths per 1,000 live births, tied with Poland and Slovakia, and substantially higher than Sweden (3.4 deaths), France (4.3 deaths) and Germany (4.5 deaths). In life expectancy, the United States ranks 29th, its 77 years lags behind Italy (81 years), France (80 years), Sweden (81 years) and Germany (79 years), and about the same level as South Korea (76 years) and Cuba (77 years). The United States has fewer per capita physicians, nurses and hospital beds, fewer MRI and CT scanners than the average for other advanced nations, and has the highest rate of medical errors (receiving the wrong medication, incorrect test results, a mistake in treatment or late notification about abnormal results). Due to excessively high out-of-pocket expenses, Americans are also much more likely than citizens of other nations to skip recommended follow-up care, fail to fill prescriptions and forgo doctors’ visits altogether, things which exacerbate health problems and lead to preventable suffering and more expensive treatments down the road.

In addition to providing better health coverage, somehow Europe also manages to spend less. According to the WHO, the United States spends the equivalent of 16.5 percent of its economy on health care, about $6,100 per person, compared to an average 8.6 percent in EU countries. France spends just $3,500 per person, or about 10.7 percent of its economy. As Dr. Christopher Murray, director of WHO’s Global Program on Evidence for Health Policy, says, “Basically, you die earlier and spend more time disabled if you’re an American rather than a member of most other advanced countries.”

How do EU countries manage to provide better health care than most Americans receive for about half the per-capita cost? While there are differences among EU member states, there also are some broad generalities to point to, namely a major difference in philosophy on each side of the Atlantic. These are differences between health care run mostly as a nonprofit venture with the goal of keeping people healthy and working, and running it as a for-profit commercial enterprise. UnitedHealth Group CEO William McGuire and his $124.8 million compensation package in 2005 is one obscene example of what can happen in a profit-based system.

A second major difference between American and European healthcare are the specific institutions and practices that flow from a “health comes first” philosophy. Contrary to the American stereotype, not every country in Europe employs government-run, “socialized medicine.” Unlike single-payer Britain and Sweden, France, Germany, the Czech Republic and other nations have forged a third-way hybrid involving private insurance companies, short waiting lists for treatment and individual choice of doctors. The model is based on the principle of “shared responsibility” between workers, employers and the government, all contributing their fair share to guarantee universal coverage – and may be the most relevant example at which President Obama can look.

A similar health-care plan is used in Massachusetts, and has been proposed by California Governor Arnold Schwarzenegger, but with two important differences. Plans in these states still involve for-profit insurance companies, but in France, Germany and the Czech Republic, private insurance is nonprofit. Doctors, nurses and health-care professionals are well-paid, but corporate health care CEOs do not make hundreds of millions of dollars. Broadly, the profit motive has been wrung out of the system.

The second key difference in the European model comes in cost controls. Service fees are negotiated between representatives of the health-care professions, the government, patient consumer representatives and private nonprofit insurance companies. Like in America’s publicly financed Medicare system (which provides health care to the retired and elderly), the negotiations establish a national agreement for treatment procedures, fee structures and rate ceilings that prevent health-care costs from spiraling out of control. In the end, this not only benefits personal health, but also business, as employers are not exposed to soaring health care costs.

Economic Stimulus

The Obama administration also could take notes from the European approach to stimulating economies in the face of the international economic downturn. The EU is often criticized for its lack of unity, but sometimes that multi-headed hydra affords advantages. Having so many nation-states allows each to act as a laboratory for the others, learning from one another’s successes and shortcomings.

For example, in the fall of 2008, as markets reeled and the United States announced a $700 billion bailout plan, Europe was harshly criticized for its initial failure to craft an EU-wide bailout. Euroskeptics saw it as another example of disunity and weakness.

But that was a rush to judgment. Each country initially tried its own bailout formula, and, less than two weeks later, British Prime Minister Gordon Brown’s strategy emerged as the most effective. Much of the rest of Europe followed, as did the United States in a change of tactics from Secretary of the Treasury Hank Paulson’s original plan.

Models used in Europe included tighter controls of the bailout money, equity in banks, reductions in dividends and concessions from bankers – all of which were lacking from the U.S. bailout. And Europe has already enacted a fiscal stimulus worth hundreds of billions of dollars at continental and national levels, while Americans still await Obama’s full plan. Europe is looking relatively light on its feet, while the United States appears flat-footed.

With half a billion people, the EU is the largest, wealthiest trading bloc in the world, producing nearly a third of the world’s economy – as large as the United States and China combined. While critics deride Europe as a land of “creeping socialism,” in fact, Europe has more Fortune 500 companies than the United States, China or Japan.

Like the United States, Europe is fighting to pacify the rising economic floodwaters. But something about Europe and its social capitalism seems particularly well-suited to these make-or-break challenges in the forms of a worldwide economic slump, global warming and new geopolitical tensions.

Team Obama would do well to look east for new ideas – especially ones that work.

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