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As Smash-and-Grab Capitalism Collapses, the French Economy Shines
William Pfaff, truthdig
Many in Britain and the United States are in mourning for what’s taken as the suicide of the American (or Thatcherite, or Chicago-school) model of capitalism, accompanied by the non-interventionist state that hands the national economy over to business and financial leaders to run.
Not least among the mourners ought to be The Economist magazine in London, a major part of whose charm has always been the insolent certitude with which it expresses its views. It is not a publication used to lunching on its own words. But The Economist too has become a victim of the world crisis, and its current issue’s cover story pays a handsome tribute to the success of the formerly scorned, centralized, interventionist, Colbertist French economic model, and the state practices and values that support it.
“France’s economy,” it writes, “has been less hard hit than many. Its GDP is expected to shrink by 3 percent this year … against 4 percent in Britain, 4.4 percent in Italy, and 5.6 percent in Germany. It is less dependent on exports than Germany, and consumer spending in the first quarter of 2009 was up on the same period last year. The government … is set to have a deficit in 2009 (6.2 percent of GDP) well below those in America (13.6 percent) and Britain (9.8 percent).”
French household debt is half that in America, no bank has failed, none has been nationalized, executive pay is reasonable, and “the income gap between the top 10 percent and the bottom 10 percent is far smaller than in Britain or America.” The country is crisscrossed by 230-mph TGV trains, 80 percent of the power is nuclear (and more is exported), its auto producers are in reasonably good shape, Air France is the most profitable airline in the world, and French-dominated Airbus sells more planes than Boeing.
(16 May 2009)
The happiest taxes on earth
Thomas Kostigen, MarketWatch
Commentary: More people are satisfied in heavily tariffed nations
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Northern Europeans are the happiest people on the planet, according to a new survey.
The Organization for Economic Cooperation and Development says people in Denmark, Finland and the Netherlands are the most content with their lives. The three ranked first, second and third, respectively, in the OECD’s rankings of “life satisfaction,” or happiness.
There are myriad reasons, of course, for happiness: health, welfare, prosperity, leisure time, strong family, social connections and so on. But there is another common denominator among this group of happy people: taxes.
Northern Europeans pay some of the highest taxes in the world. Danes pay about two-thirds of their income in taxes. Why be so happy about that? It all comes down to what you get in return.
(15 May 2009)
Going Dutch
Russell Shorto, New York Times
… For 18 months now I’ve been playing the part of the American in Holland, alternately settling into or bristling against the European way of life. Many of the features of that life are enriching. History echoes from every edifice as you move through your day. The bicycle is not a means of recreation but a genuine form of transportation.
… For the first few months I was haunted by a number: 52. It reverberated in my head; I felt myself a prisoner trying to escape its bars. For it represents the rate at which the income I earn, as a writer and as the director of an institute, is to be taxed. To be plain: more than half of my modest haul, I learned on arrival, was to be swallowed by the Dutch welfare state. Nothing in my time here has made me feel so much like an American as my reaction to this number. I am politically left of center in most ways, but from the time 52 entered my brain, I felt a chorus of voices rise up within my soul, none of which I knew I had internalized, each a ghostly simulacrum of a right-wing, supply-side icon: Ronald Reagan, Jack Kemp, Rush Limbaugh.
… And yet as the months rolled along, I found the defiant anger softening by intervals, thanks to a succession of little events and awarenesses.
… In fact, as my time abroad has coincided with the crumpling of basic elements of the American economic and social systems, and as politicians, commentators and ordinary Americans have cast about for remedies or potential new models, I have found myself not only giving the Dutch system a personal test drive but also wondering whether some form of it could be adopted by my country. One subtext of the World Economic Forum at Davos in January was the question of whether, amid the derailing of American-style capitalism as we have known it, the European approach, which marries capitalism and social welfare, and which in times of economic crisis seems to offer more stability both to individuals and to society, could suit the United States. President Obama’s initial budget called for a $634 billion fund over the next 10 years for revamping the health care system: an attempt to make good on his campaign promise of moving toward universal coverage, which of course is a basic component of the European social system. Two years ago, the Bush administration sent an emissary to examine the Dutch health care system in particular, thanks to its novel blend of public and private elements.
(29 April 2009)
Capitalism’s Fault Lines
Jonathan Rauch, New York Times
… It comes as something of a surprise that [Richard A.] Posner, a doyen of the market-oriented law-and-economics movement, should deliver a roundhouse punch to the proposition that markets are self-correcting. It might also seem odd that a federal appellate judge (and University of Chicago law lecturer) would be among the first out of the gate with a comprehensive book on the financial crisis — if, that is, the judge were any other judge. But Posner is the late Daniel Patrick Moynihan’s successor as the country’s most omnivorous and independent-minded public intellectual.
… In “Catastrophe: Risk and Response” (2004), he took up the problem of low-probability, high-impact events. The financial meltdown certainly qualifies.
… Being Richard Posner, however, he is not content to be an amiable guide through the thicket. His real interest is in finding and detonating grenades in the underbrush.
One is right there on the title page, which flaunts the D-word. The current crisis, Posner maintains, is a depression. True, it is not (we hope) a great depression. But the typical postwar recession is a partly self-correcting disinflationary contraction that soon subsides, often leaving the economy healthier. The present downturn is a self-sustaining deflationary contraction whose costly aftereffects will linger for years. The Great Depression led to World War II. Today’s depression presumably won’t be that bad, but it may cause a huge loss of output, an immense increase in the national debt, a swing to excessive regulation, a nasty bout of inflation, a decline in America’s economic and geopolitical power, and increased political instability abroad.
… economists and policy makers got cocksure. They thought they had consigned depressions to history. As a result, they missed warning signs and failed to prepare for the worst. “We are learning,” Posner writes, “that we need a more active and intelligent government to keep our model of a capitalist economy from running off the rails.”
By doing what, exactly? Posner thinks laissez-faire economics has nothing relevant to say. The rest of the economics profession is all over the map. The system of financial regulation will need an overhaul, but Posner argues that the time for that is not now, in the heat of crisis.
(16 May 2009)
