[p2p-research] Social Democracy and Global Competitiveness

[Ryan]

  Sent to you by Ryan via Google Reader: Social Democracy and Global
Competitiveness via Matthew Yglesias by myglesias on 1/6/10

When I read this portion of Ross Douthat’s column a few days ago, I
scratched my head:

Social democracy has its benefits, but global competitiveness isn’t one
of them. As Jim Manzi points out, in an essay on “Keeping America’s
Edge” in the latest issue of National Affairs, “from 1980 through
today, America’s share of global output has been constant at about 21
percent. Europe’s share, meanwhile, has been collapsing in the face of
global competition — going from a little less than 40 percent of global
production in the 1970s to about 25 percent today.”

Central Station, Stockholm, Sweden (photo by me, available under cc
license)

The implication here is of a huge shift in relative living standards
that never happened. The fact that this doesn’t take account of
population growth is suspicious.

Jon Chait, for his new blog, delves in deeper and discovers a few
salient points. One, Manzi is comparing US economic performance since
1980 to European performance since 1973—which is nuts. Two, Manzi is
defining “Europe since 1973″ to include the Soviet Union and sundry
Central European countries that spent half that period in the Communist
bloc:

So, let’s look at a straight-up measure. How did the United States
perform in comparison with European social democracies? Well, since
1980, the original 15 members of the European Union saw their real per
capita income grow by 58%. Real per capita GDP in the United States
grew by… 63%. And that measure actually overstates the difference. The
European Union does not include Switzerland, Norway or Iceland — three
countries that clearly qualify as European social democracies. Those
three countries had 71% growth in per capita GDP since 1980 — thanks to
Isha Vij of the Center for American Progress for pointing this out to
me — which, if added to the EU 15, would bring the growth record of the
United States and the social democracies even closer to parity.

There are three main differences in living standards between the United
States and Europe. One is that the US has long been somewhat wealthier
than the biggest European countries, dating back to the 19th century.
Two is that the US is much less egalitarian than Europe—a bigger share
of European output is in the hands of the poor and the middle class,
and a smaller share in the hands of the rich. The third is that
Americans work more than most western Europeans:



These last two show us what I think is the real meaning of social
democracy for a developed country—you get more equality and more
vacation, with no real impact on the rate of growth. There’s a case to
be made that less vacation and better televisions are a better deal
than more vacation and worse televisions (the two things I like to do
on vacation are go to Europe and watch TV, so I have mixed feelings
about this) and there’s a tradition of philosophical argument which
holds that the failure of modern mixed economies to be sufficiently
solicitous of the interests of the wealthy is a major source of
injustice. But though some level of income inequality would seem to be
necessary to achieve economic growth, within the range that actual
developed countries exist at there’s no evidence that inegalitarian
policies boost growth.

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