Comments on: Dynamic Europe

By: Lawrence Krubner

Lawrence Krubner — Wed, 01 Oct 2003 22:54:06 +0000

“ps If the original author believes the Asian central banks are buying US securities because it’s a nice thing to do” The central banks want to prop up the American dollar so their nation’s companies can have an easier time competing against American companies. You can argue that in this they are offering a secret subsidy to the American lifestyle. But surely you can also see that this is quite different than if individual investors were still pouring money into America?

By: Lawrence Krubner

Lawrence Krubner — Wed, 01 Oct 2003 22:47:59 +0000

Some of the hype about a declining Europe has suggested that its lack of unfettered market competition has meant that its consumers have been underserved. This is surely false, as reports like this make clear. But some of the articles, certainly some of the articles that I’ve read in the Economist, have been more interested in who will run the world during the 21st Century. Who will have the number #1 economy, Europe or America? This is an issue that has everything to do with absolute growth, and nothing to do with per capita income. I remember some historian, summing up the rise and fall of Napolean, remarking “In the end, one can not eat national glory.” That is, national glory doesn’t put food on the table, it doesn’t increase the standard of living. But if it doesn’t, then why are there so many newspaper articles that take exactly that line, and examine the issue of who will be #1 50 years from now, articles without much consideration for per capita income? I’ve concluded that people do, in fact, eat national glory, that it gives them a psychological lift that should be considered part of the standard of living. Just two weeks ago this issue came up with my friend Andrew. He expressed the fear that America would decline and no longer be #1. I said, “So what? The Dutch hit their relative economic peak in 1650, yet now, 350 years later, they are among the wealthiest people on earth.” And yet, strangely, the prospect of going that path depressed him.

By: Doug

Doug — Mon, 29 Sep 2003 20:22:06 +0000

Re: the common dreams post, this line “And while in Germany, for example, 80 per cent of school-leavers go on to receive either vocational training or a degree” obscures the fact that Germany has the one of the lowest percentage of degree earners in the OECD. Also, as Time reported this summer, only 8 percent of German children whose parents do not have a university degree will go on to earn one themselves. Not all of these “Europe is better” statistics are created equal.

By: Richard Ridge

Richard Ridge — Mon, 29 Sep 2003 19:34:08 +0000

You might also be interested in this: http://www.commondreams.org/views02/0428-01.htm

By: Doug

Doug — Sun, 28 Sep 2003 23:04:33 +0000

I wrote: >>That means that international investors still >>see the US as the best place to put their money, >>to the tune of hundreds of billions a year. Or >>does Legrain somehow think global managers put >>their funds into the American economy out of the >>goodness of their hearts? And dsquared answered: >True up until 2002, but since then, private >investors have been net disinvestors in US >securities, the slack having been taken up by >Asian central banks (particularly China). Fair enough, but I am even less inclined to believe in the goodness of central bankers' hearts, at least when it comes to making investment decisions. They may be pursuing goals other than quarterly profits (keeping the local currency down springs to mind), but that doesn't change the larger point: international investors finance the various US deficits because that action fulfills their own goals. For that to stop, as implied in the original post and other arguments I've heard for more than a decade, either the goals have to change or conditions have to change such that buying US securities no longer serves those goals. Thus a vague assertion that "America is living beyond its means" doesn't tell us much of anything at all. ps If the original author believes the Asian central banks are buying US securities because it's a nice thing to do, the offer on the bridge still stands.

By: Ken

Ken — Sun, 28 Sep 2003 21:27:11 +0000

“Not only are US growth figures inflated because American statisticians have done more than their European counterparts to take into account improvements in the quality of goods and services, but the US population is also growing much faster than Europe’s. ” So are American statisticians inflating improvements in quality or are European ones understating theirs? Also, are you comparing the adult populations? Children don’t contribute to current output, and really shouldn’t be counted when you measure “per-capita output”.

By: dsquared

dsquared — Sun, 28 Sep 2003 20:51:11 +0000

Doug wrote: That means that international investors still see the US as the best place to put their money, to the tune of hundreds of billions a year. Or does Legrain somehow think global managers put their funds into the American economy out of the goodness of their hearts? True up until 2002, but since then, private investors have been net disinvestors in US securities, the slack having been taken up by Asian central banks (particularly China).

By: Andrew Boucher

Andrew Boucher — Sun, 28 Sep 2003 12:50:57 +0000

Should be of course (4) … europhobe …

By: Andrew Boucher

Andrew Boucher — Sun, 28 Sep 2003 11:38:22 +0000

Some random comments, from both sides of the fence: (1) Yes indeed most people forget to take into account the differing population dynamics when they compare E.U. and U.S. growth. (2) Living standards in Western Europe are, on the whole higher than in the U.S. (3) On the other hand, if one is interested in grossly speaking the “power” of a country or region (calling here the U.S. a country and the E.U. a region), it’s G.D.P. and not per capita G.D.P. which is important. That Chinese as well as American G.D.P. are growing much faster than European, is thus not a good sign for Europe, no matter which way the per capita G.D.P. is trending. (4) I won’t try to speak for or justify Johnston’s piece, but much of the Europhile philosophy is simply based on a look at the demographics and noting how old Europe will be in twenty or thirty years. Even though the U.S. has many many problems which in the short- and medium-term will hurt it vis-a-vis Europe (the enormous amount of debt, being one), in the long-term the U.S. will – if you put the two roughly level now – pull ahead. (5) Kleinman’s reaction to Johnson’s piece – I make the comment here since he doesn’t have comments on his blog – pooh-poohs the connection between 35-hours and the heat deaths in France. I guess you could say that hospitals aren’t important in public health, but evidently 35-hours has mechanically meant that French hospitals are even more understaffed than normal, especially in the summer months. Mind you, as Johnson correctly notes, 35-hours is great for those who are healthy and have a job (like me!).

By: Doug

Doug — Sat, 27 Sep 2003 19:36:27 +0000

Two things did leap out: “Ironically, the biggest threat to Europe’s resurgence is that America’s unbalanced economy will finally crash, dragging the rest of the world down with it.” This is a pretty clear admission that Europe (or even the EU bits of Europe, a conflation that captures the navel-gazing tendency of Western Europe very nicely) is not an independent source of growth in the global economy. One of the claims over the last half decade was that Europe was going to return to being able to provide dynamism to the world economy regardless of Stateside developments. Hasn’t happened yet. No one seems to know how to get there, either. “Americans still live beyond their means.” … thus allowing them to buy things from export-oriented European economies, thus driving European growth. Unless and until Europe can propel its own growth, European governments should thank their lucky stars that Americans are still buying up a storm. Another thing leapt out: “The [US] economy’s continued growth relies on foreigners lending Americans nearly $2bn extra every working day.” That means that international investors still see the US as the best place to put their money, to the tune of hundreds of billions a year. Or does Legrain somehow think global managers put their funds into the American economy out of the goodness of their hearts? (If he does, someone get me his phone number; I know where he can get a great price on a bridge.)

By: Maynard Handley

Maynard Handley — Sat, 27 Sep 2003 14:37:18 +0000

I have long wondered the extent to which the same sort of thing is true about Japan. For a society that, according to the mainstream business press has been suffering 14 yrs of unrelieved depression and misery (that, of course, can only be cured by “structural changes”) there seems to be a remarkable degree of lack of protest.

By: Scott Martens

Scott Martens — Sat, 27 Sep 2003 11:18:50 +0000

I noticed when I left Silicon Valley in 2001 that less than a year of recession had already taken a visible toll on people, while in Belgium the only sign of economic decline I’ve seen is that a few small shops have closed, something as much blamed on Carrefour as on the economy. People keep spending through recessions here, in large part because they keep getting money from their unemployment funds and pesion schemes when times are harsh. The service industries that do the most to improve the employment situation keep on going. In the States, a sharp decline in disposible income seems to have a disproportionate effect on business.