First, we pause to deliver a shocking update.
People love myth, fraud and claptrap - especially when it
flatters them. Maybe their food, life expectancy, crime
rates, transportation, liquor, women, and architecture are
nothing to brag about, say Americans to each other, but
when they grub for money, they grub good. 'Old Europe,'
they say, making a comparison, "is too rigid, fossilized,
hidebound... a museum."
And yet, even this is a fraud. Despite Laffer's curve,
Greenspan's Bubbles, Friedman's monetarism and Reagan's
revolution, the U.S. economy has done no better than
Europe.
This week's Economist examines the evidence.
Of course, everybody knows that America grew a lot faster
than Europe over the last 10 years. But the figures, in
terms of GDP/person are very close - 2.1% per year for
America against 1.8% for Europe. Take out Germany - which
has struggled with absorbing its formerly communist cousins
from the East - and the two regions are exactly the same.
And productivity? "A study by Kevin Daly, an economist at
Goldman Sachs, finds that, after adjusting for differences
in their economic cycles, trend productivity growth in the
euro area has been slightly faster than that in America
over the past 10 years," says the Economist.
What about jobs? America is the greatest jobs machine on
the planet, right? Again, excluding Germany, "jobs in the
rest of the euro area grew at exactly the same pace as in
America," concludes the Economist. "And since 1997 more
jobs have been created in the euro area as a whole; total
employment has risen by 8%, compared with 6% in America."
And get this... "GDP per hour in Germany and France now
exceeds that in America."
It's true that Americans earn more and spend more than
Europeans... but they work a lot more hours.
"Compare France with America," the Economist invites.
"Between 1970 and 2000, America's GDP per hour worked rose
by 38% and average hours worked per person rose by 26%, so
GDP per person increased 64%. French GDP per hour rose by a
more impressive 83%, but hours worked per person fell 23%.
"Europeans simply enjoy leisure more," the Economist
concludes.
But what about the 'recovery?' Hasn't it been much more
vigorous in America than in Europe?
Well, only on the surface. Spiked up by the biggest dose of
fiscal and monetary juice in history, America's economy has
slightly outpaced Europe's. But the figures are hard to
compare. Europe calculates GDP growth more conservatively
than America... and understates the truth, rather than
overstates it, as they do at the Labor Department. More
importantly, America's jolt of growth has come at great
cost. While Europe got no net stimulus, America has gotten
enough to give it the shakes.
"Super-lax policies of the past few years have left behind
large economic and financial imbalances that cast doubt on
the sustainability of America's growth," says the
Economist. "From a position of surplus before 2000, the
structural budget deficit (including state and local
governments) now stands at almost 5% of GDP, three times as
big as that in the euro area. America has a current-account
deficit of 5% of GDP, while the euro area has a small
surplus. American households now save less than 2% of their
disposable income; the savings rate in the euro area stands
at a comfortable 12%. Total household debt in America
mounts to 84% of GDP, compared with only 50% in the euro
zone."
Barely has the 21st century begun and America finds itself
in a remarkable position. It has, what it believes is, the
world's most powerful economy... and the world's most
powerful military force. Like the defunct Soviet Union, it
has a sickle in one hand and a hammer in the other. The
sickle, alas, has an awkward bend in it.
"The U.S. suffers from... structural deficits that will
limit the effectiveness and duration of its crypto-imperial
role in the world," explains Niall Ferguson. "The first is
the nation's growing dependence on foreign capital to
finance excessive private and public consumption. It is
difficult to recall any empire that has long endured after
becoming so dependent on lending from abroad."
But it suffers no deficit of raw power. The hammer - U.S.
military might - is real. Americans are no better or worse
than any other race; is it any wonder they will want to
take a whack at someone?
Putting it another way: grubbing for money might be fine
for a modest nation working its way up in the world; is it
worthy of a great nation on a roll?
"The trouble with the emphasis in conservatism on the
market," William F. Buckley said to Corey Robin, "is that
it becomes rather boring. You hear it once, you master the
idea. The notion of devoting your life to it is horrifying
if only because it's so repetitious. It's like sex."
Another old 'conservative,' Irving Kristol said this to
Corey: "What's the point of being the greatest, most
powerful nation in the world and not having an imperial
role?"
"It's too bad," Kristol lamented about money-grubbing. "I
think it would be natural for the United States... to play a
far more dominant role in world affairs... to command and to
give orders as to what is to be done. People need that."
"When I think of all the crazy things that went on here in
France during the last century," continued our dinner
guest. "Or maybe I should say in Europe. You know, we
invented most of the awful ideas back then.
Deconstructionism, Freudianism, Nazism, Conceptualism,
Socialism, Syndicalism, Minimalism, Communism,
Functionalism... come to think of it almost all the worst
ideas came from Europe. And even in America, if I'm not
mistaken, almost all the new developments in philosophy,
art and architecture came from immigrants... or maybe
refugees... from Europe. Just about everything. Of course,
most of it was harmless. Funny even... like Dadaism. But
politics wasn't so harmless. And now you do what we did.
You come up with the new ideas... and you try to force other
people to accept them. You have that... what do they call
it... neo-conservatism."
To be continued...
Regards,
Bill Bonner
for The Daily Reckoning |
