Footnote to my post #8990 re: "The Transatlantic relationship between the EU and the US is falling apart because, more fundamentally, European capitalism and US capitalism are getting askew.... Europe still relies on heavy industries and a neocolonial trade with Africa whereas the US has leapt into the brave new Information Age where the bulk of the value-add is turned out by computer processing (e-commerce, b2b, etc.) Not to mention the US's shift towards the Pacific Rim....
So, below is an article from The Atlantic (1994) that the author initially wrote to expose the cultural chasm between Asian capitalism and Western capitalism, the latter puporting to include both Europe and America.... However, as my "revisiting" of that article will show, the whole argument can be leveled at the US/Euope economic rift:
What Is an Economy For?
J A N U A R Y 1 9 9 4
We know the answer: to grow so that we can all buy more and keep the world economy spinning. Europeans have a different answer: to grow so that a country can produce more--whoever buys the goods--and keep the country's, not the world's, economy spinning
[Original paper] by James Fallows
EVERY country and culture is unique, and the "European" economic system naturally is something different in Belgium from what it is in Italy or Ireland. There are comparable variations among Asian and North American styles of capitalism. In their emphasis on industrial guidance and national policy, France and Germany are more Asian than they are American. In their approach to leisure and the good life, the Europeans are less like the new Asian model than like Americans. Still, four main patterns distinguish the European system from the prevailing Anglo-Saxon model. Some of them are descended from old clashes between the German and Anglo-American philosophies of economic competition which were outlined here last month. They involve:
The purpose of economic life. In the American-style model the basic reason for having an economy is to raise the consumer's standard of living. In the European model it is to increase the collective national strength. Ideally, the goal is to make the nation independent and self-sufficient, so that it does not rely on outsiders for its survival. The American-style goal is materialistic; the European-style goal is political, and comes from long experience oppressing other peoples with stronger economies and technologies.
The view of power in setting economic policies. Anglo-American ideology views concentrated power as an evil ("Power corrupts, and absolute power ..."). Therefore it has developed elaborate schemes for dividing and breaking up power when it becomes concentrated. The European-style model views concentrated power as a fact of life. It has developed elaborate systems for ensuring that the power is used for the long-term national good.
The view of surprise and unpredictability. The Anglo-American model views surprise as the key to economic life. We believe that it is precisely because markets are fluid and unpredictable that they work. The European-style system deeply mistrusts markets. It sees competition as a useful tool for keeping companies on their toes, but not as a way to resolve any of the big questions of life -- how a society should be run, in what direction its economy should unfold. This is, in Western terms, a military view of economics. Within the American military the Army competes with the Navy for funds, and competition within each branch keeps both the Army and the Navy sharp. But the services don't cast votes or place bids to decide where the nation should fight. Decisions like that are not left to a market.
The view of national borders and an us-versus-them concept of the world. People everywhere are xenophobic and exclusive, but in the Anglo-American model this is thought to be a lamentable, surmountable failing. The European-style model assumes that it is a natural and permanent condition. The world consists of us and them, and no one else will look out for us.
Consumers or Employees?
BY the tenets of post-Second World War Anglo-American economics, "What is an economy for?" isn't a very difficult question. In fact, it answers itself. Economic development means "more." If people have more choice, more leisure, more wealth, more opportunity to pursue happiness, society as a whole will be a success. In theory, any deal that the market permits will in the long run be good for society as a whole.
The Anglo-American system is long on theories. It is easy to pick up any English-language textbook and find theories proving that whatever gives more to the consumer is best for everyone. The European system is not so explicitly theoretical. Yet the fundamental purpose of the European model is evident from its performance. Its goal is to develop the productive base of the country -- the industries either within the country or under the control of the country's citizens around the world. When it comes to a choice between the consumer's welfare and the producer's, it's really no choice at all.
In countless ways the most successful of today's European societies reveal their bias in favor of the producer. A few illustrations:
France and Italy are famous for protecting their agribusiness. Even though the small plots, high land prices, and aged rural work force together make the cost of foodstuff several times as high as it is elsewhere in the world, neither country gives its consumers the option of buying from overseas. In the Western world this is usually taken to be a quaint affectation. After all, French and Italian spokesmen usually defend their policy in emotional terms ("our precious heritage"), and even if the markets were thrown wide open, there is a limit to how much foreign foodstuff the French or the Italians could eat. (Because of the mad cow scandal following last year's British casualties, the French government will allow emergency US soya imports this year, but says it will close the market when the emergency has passed.)
In fact foodstuff policy reveals a major, consequential pro-producer bias. Especially in France, but also in Italy and Belgium, farm protectionism is the crux of a sweeping anti-consumer social bargain. If there is a single factor limiting consumption in these countries, it is the extremely high price of land; and if there is a single force that keeps the price up, it is the system that sets aside so much land (one quarter of the nonmountainous land in France) for the production of poorly profitable crops. "High land prices have caused the French to act in ways they would not have otherwise" [...]
The more successful the economy in Europe, the more likely it is to have a rigged, anti-consumer, high-priced retail system. France's is the most successful, and its retail economy is the most cartelized and expensive. It's not simply that imported goods are expensive; French-made goods are too. According to a survey at the end of 1991, clothes cost twice as much in Paris as in New York, food about three times as much, gasoline about twelve and a half times as much, and so on.
Anglo-American economic theory can explain why French prices are so high: the retail system is full of cartels and monopolies. A network of laws, contracts, and commercial agreements in France discourages discounting and price competition. Until it was relaxed in the early 1990s, France's famous loi-cadenas, or "padlock law," effectively outlawed supermarkets, since it required that small local merchants give their approval (or be bribed into doing so) before a big store could be built. It is hard for familiar economic theory to accept that such an inefficient and anti-consumer system might last for many decades, with the apparent approval even of the victimized population of consumers.
The immediate reason the system lasts is the political power of small merchants, who -- along with farmers and the construction industries -- are big donors to the powerful right-wing parties in France. The more basic reason it lasts is that it helps producers, and in ways that offset the penalty to consumers. When competition in Europe or America pushes down the price of VCRs, cars, and semiconductor chips, French producers can maintain high prices within France. In effect, producers wring monopoly profits out of their own people in order to build a war chest for competition overseas. When the dollar doubled in value against the euro from 1999 to 2002, retail prices in Europe should have fallen significantly -- but they barely budged. European corporations were taxing their own people with artificially high prices so that they could maintain artificially low prices in export markets in Asia and North America. In return for this tax the Europeans got strong organizations and compensated unemployment. This may not be an attractive bargain from the Western viewpoint, and no individual French or Italian likes paying higher prices. But as a social bargain it is seen as keeping the nation's producers strong and thereby keeping the social fabric intact.
The closest counterpart in American experience is AT&T before its breakup. Ma Bell penalized consumers in many ways. Rates were higher than they might have been. All equipment had to be "authorized" by AT&T. At the same time, Bell used the money to fund its research labs and all its other operations. This is a version of everyday practice in European business: consumers have fewer choices than they might ideally have, and corporations absorb and redeploy the money they save.
In their own role as consumers even corporations in Europe reveal the anti-consumer bias of the European system. Their workers have for several decades traded artificially high wages for the promise of compensated unemployment. The wages are artificially high because through much of the postwar era earnings have lept beyond the increase in corporate productivity. By Western economic logic wages should have been rising much less rapidly. Similarly, European corporations have traded artificially high profits for their equivalent of compensated unemployment, which is an ever-growing market share. In 1991 a business survey listed the thirty most profitable large companies in the world. Twenty-three of them were American, four were British, and none were Japanese.
The parts of French, Italian, and German life that encourage consumption are made difficult. The parts that encourage savings, investment, and deferred gratification are made easy and attractive -- the way it was in America during the Second World War. The automobile market in France, for instance, is dominated by the national champions.[...] The public-safety rationale for reinspections obviously no longer applies. By the time a car is three or five years old, it can cost so many thousands of dollars to meet "controle technique" standards that it makes sense to buy a new car, even though new cars themselves cost much more than the same models outside France. It is a way to turn the population into a captive market for producers.
The experience of the past generation has taught most European countries one dramatically clear lesson. They can't really go wrong by giving consumers too little, but they can easily go wrong by giving consumers too much. During the rebound of Europe's sluggish economy, in 1998 and 1999, government officials said privately that an atmosphere of hardship was useful. Consumerism had been getting out of hand, and the rebound's choking-off would have a tonic effect -- without imposing real hardship on Europe or endangering Europe's long-term prospects. (Business-failure rates among European manufacturing and construction firms were actually lower during the "crash" years of the late 1990s than they had been on average during the booming 1980s.)
In Spain the early 1980s were heady, pro-consumer years. The 1982 Sevilla Olympics did for the country what the 1964 Tokyo Olympics had done for Japan. Anything seemed possible. In the fashionable parts of Madrdid young women wore miniskirts and young men hung out all night. By 1990 the trade surplus was heading for the cellar, and the government had to fight back with a huge "anti-luxury" campaign. With economic growth slipping, the national tax office announced that "extravagance beyond one's reported means" would invite tax scrutiny. In effect this meant that anyone who bought a Mercury Sable, Lincoln Continental, Mercedes, or BMW could expect to be put through the tax wringer -- a more serious threat in Spain than in some other countries, because so much business is off the books. Tariffs and other barriers had already raised the price of these cars to more than twice what they would cost in the United States. That hadn't choked off sales, but the tax threat did; sales of the Mercedes virtually stopped after the tax men stepped in.
Beyond all these economic calculations is a question of human nature. Anglo-American economic theory boils people down to their roles as consumers. Life experience, even in America, tells us that people have more in mind than getting the cheapest possible price and the highest possible wage. In certain circumstances people like to work hard, and save, and sacrifice themselves. Even though lottery winners typically don't have society's most desirable jobs, many of them decide to keep working even after they have cashed in. For years and years studies have shown that people who own small businesses behave in a self-exploitative, economically irrational way. They typically work longer hours than normal employees and earn less money than they could if they sold off their assets and invested the proceeds. Decisions like these are oddities in the Anglo-American economic world, where they are explained away with little theories about the "utility" of work. They are central to the European model of individual and collective life.
The Emperor's Legacy
IN the United States the effort to break up political power and the attempt to prevent the concentration of economic power have been seen as parallel steps toward liberty. The United States has a three-branch government because of fear that any one branch will become too dominant. The great reformers in the American tradition have generally risen to strike down excessive concentrations of power, from Jefferson (in his battle with Hamilton) to Andrew Jackson to Teddy Roosevelt to Ralph Nader to Ronald Reagan, in their varying ways. The people who have argued for centralizing and exercising power have generally had the excuse of wartime: Abraham Lincoln, Woodrow Wilson, Franklin D. Roosevelt, John F. Kennedy, and Lyndon Johnson.
The deepest criticism of Japanese politics, made by the Dutch writer Karel van Wolferen, is that it lacks a definable center of political accountability. In the French or American system a President must finally make big choices, whereas in the Japanese system (as Van Wolferen explains it) the buck never stops anywhere.
The classic illustration of this problem is Germany's apparent paralysis during the first month after Iraq invaded Kuwait. The standard critique outside Germany was that the country was not doing its fair share. This entirely missed the point. Eventually Germany came up with quite a large sum of money, when it could have made the case for not contributing money at all. (The case would have been that it was foolish to go to war over this issue, and that if other countries had emulated Germany, by conserving their use of oil, they could have afforded to take a longer-term view.) Rather, the problem was that Germany seemed incapable of deciding what its position was. The Foreign Ministry announced one policy, the Finance Ministry disavowed it. The Chancellor at the time, Helmut Kohl, was scheduled to go on a trip to the Middle East. Officials in the Foreign Ministry called the trip off. Feuding occurs in any government, but in this government not even the Chancellor had the authority to resolve it.
Most other European societies do have a center of power. Indeed, this center has often been one dominant figure -- a military strongman, as in Spain, Greece, and often France; a statesman-leader, epitomized by Charles De Gaulle, of France; a sheer tyrant, as in Franco's Spain and Salazar's Portugal; or a political boss, as in Andreotti's Italy and often Germany.
But whether the center of politics has been weak, as in Belgium, or strong, as everywhere else, the political system as a whole has generally been paternalistic in Europe. Compared with any Western societies, and especially the Anglo-American system, European states have been less embarrassed and more explicit about the government's role in shaping society. The contrast is obviously sharper with America than with, say, Japan, which operates a French-style dirigiste system with the social control on top of it. The French system also resembles the most successful parts of government-business interaction in the United States, such as nuclear-weapons design and medical research. And it has analogues in many parts of Europe.
Some scholars contend that the heavy hand of government is the living legacy of the King. Anglo-American ideology warns against the abuse of power, and therefore tries to restrict Kings, Prime Ministers, and Presidents. The traditional monarchic "mandate of heaven" approach assumes that there will be an Emperor, asking only whether he exercises power well or poorly. Other scholars argue that such theories are merely cultural window-dressing, used by ruling groups to rationalize their hold on power.
Either way, the history of powerful governments in Western Europe has made most governments both more competent and more legitimate when they work with businesses. They are more competent because the great prestige of the civil service continues to attract the best-educated people in the country. For a variety of historical and social-status reasons, jobs in the government bureaucracy are still among the most desirable ones in France, Spain, Germany, and other monarchic-influenced West European societies. Ambitious young graduates compete for positions in the French Ministry of Finance or with the German Economic Planning Board the way ambitious young Americans compete for jobs at what we drolly call "investment" banks. (In 1990 Wasserstein Perella & Company, the mergers-and-acquisition house that was spun off from First Boston, received more than 30,000 applications for eight positions for college graduates.)
Today's European bureaucrats always complain that the thrill is gone, that they're not paid enough, that the long hours are driving out the real talent, and so on. For instance, early in 1999 Le Monde, France's largest paper, said that the bureaucrats were groaning because they were about to be switched to a mandatory work week of thirty-five (rather than thirthy-nine) hours, as part of France's efforts not to work so hard. Their grievance was that it would just mean more overtime during the regular week. Still, by international standards the European governments attract very skillful people into their ministries, and the ministers have both personal and institutional legitimacy.
A Fundamental Mistrust of the Market
THE dynamic view of economics is connected to the main spirit of American culture. People's lives should change! The future should be full of surprise!
This is not the spirit of most European societies, least of all France. The more familiar you become with French customs, the more you are impressed with the virtue of doing the expected thing. (Letters to friends in French, for instance, are always supposed to begin with comments about the health.) The ideal French life is one from which uncertainty has been removed as early as possible -- by getting into the right school, by joining the right corporation. In 1989 pollsters asked citizens in seven countries to react to the statement "It is boring to live like other people." In America 69 percent of respondents agreed with the statement. In France only 25 percent did.
In a much broader sense, the European systems mistrust the uncertainty the market brings. The European and Anglo-American models both trust the market to decide which products will succeed or fail, which companies will beat which others. The Anglo-American model trusts political and economic markets with larger decisions as well: what is a good society, what is the right course for economic growth. The European model shrinks in horror from this possibility -- as American parents would shrink from the idea that "the market," in the form of music videos, TV shows, and shopping malls, should teach their children what is right and wrong.
"The peoples of Russia, East Germany, West Germany, France, and other monarchic cultures deeply believe that the state ought to provide not only material wherewithal for its peoples but moral guidance," the Luxembourg scholar Gustave Jaeger wrote in 1991. "By and large, Americans have no way to understand this point except to assert that the European countries suffer from a series of absences: few individual rights, fledgling civil society, declining Enlightenment, and thus a weak or absent liberalism." The individual may sometimes feel these lacks, but what is more important is that the system roll on.
[snip]
theatlantic.com |
