Europe Basks as U.S.-Style Capitalism Draws Fire
By JOELLEN PERRY
DAVOS, Switzerland -- A day after Chinese and Russian leaders blamed a free-wheeling U.S. financial system as the source of the global economic crisis, Europeans here are taking comfort in what they see as their kinder, gentler version of capitalism.
José Manuel Barroso, opening European markets remotely on Thursday from Davos, said the U.S. is looking to the European model of capitalism.
"In Europe, we have a social-market economy," European Commission President José Manuel Barroso said in an interview. "We have universal health care, a more generous system of social security, a general principle of almost free university education. And we want to keep that."
For years, Europe's more-regulated model of capitalism has been maligned by many economists as a study in second-rate market economics. Now, as world leaders seek a way out of the crisis -- and aim to avoid repeating it -- U.S.-style capitalism is under siege and the European model is getting another look.
America may be stealing a glance across the Atlantic. In Washington, the Senate is gearing up for a debate next week on its version of the $819 billion economic stimulus package the House passed Wednesday.
"President Obama," Mr. Barroso said, "is moving toward a European-style model." Mr. Barroso, who runs the executive arm of the 27-nation European Union, cited the new administration's aim to boost health-care coverage, access to student loans and public-infrastructure spending as examples of the U.S's emerging European tilt.
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After Wednesday's suggestions by Chinese and Russian leaders that the world might benefit from less reliance on the dollar, many here at the World Economic Forum said the crisis had dented the U.S.'s reputation. But few predicted the crisis would cost the greenback its status as the world's haven and reserve currency of choice -- largely because neither the euro nor the yen is seen as a viable alternative.
Others at the gathering spread the blame beyond U.S. borders. "Mistakes were made on both sides of the Atlantic. It's true, the crisis originated in the U.S. But it's also true that European financial markets had major exposure," Mr. Barroso said. "I don't want to get into a blame game."
Angel Gurría, secretary-general of the Organization for Economic Cooperation and Development, agreed. "There was massive regulatory failure, massive supervisory failure, and massive corporate governance failures," he said.
The World Economic Forum in Davos was full of verbal tongue-lashings for the U.S. from countries such as Russia and China. The world is calling for the U.S. to get its act together.
Some economists here say Europe's model means it will fare better than the U.S. amid the crisis. "I expect the U.S. slowdown to be longer and deeper," said Kenneth Rogoff, a Harvard University economics professor and former chief economist of the International Monetary Fund. "Europe's financial system is not as compromised and it already had heavy social insurance. So I think the U.S. has more and deeper structural adjustments to make."
Some contend the Continent's extra social padding hasn't necessarily been a drag on growth. From 1998 to 2008, gross domestic product growth in the euro currency zone averaged 2.2% -- less than the U.S.'s 2.6% and well above Japan's anemic 1.1% showing, according to a recent Goldman Sachs report. When measured on a per-capita basis, euro-zone growth outstripped the U.S. over that period, coming in at 1.8% compared with the U.S.'s 1.6%.
"The U.S. has higher highs, but it also has lower lows," said Erik Nielsen, Goldman Sachs' chief European economist in London, noting that the ups and downs of the U.S. housing market over the decade damped America's overall growth rate. "The euro zone still comes out ahead."
But Thursday's Davos discussions also brought reminders of the Continent's structural vulnerabilities. "I don't think everyone wants to take responsibility for everyone else's problems," Swedish Prime Minister Fredrik Reinfeldt said during a panel on European economic governance. "In that sense, we are still nation-states ... and I think that will not change in the short term." |
