Europe going its own way
If President Clinton glances over his shoulder, he'll see his key European partners marching in a different economic direction, writes JACOB HEILBRUNN.
AT A recent conference of world leaders on the "third way" at New York University, President Bill Clinton declared that a new economic era had begun. With a grinning British Prime Minister Tony Blair at his side, Clinton explained that where Democratic and socialist politicians used to preach the politics of redistribution, now they promoted economic growth for everyone.
All the hoopla was supposed to show that a Clinton legacy was in the making and that the United States' model of a third economic way - something between old-style liberalism and Reaganite capitalism - is being adopted in Europe.
But nothing could be farther from the truth. For all the American triumphalism, most Europeans shun the American system.
Britain may be closer to the US model, but the two most important countries on the continent - Germany and France - are headed in the opposite direction from the US, away from capitalism and back towards socialism.
By contrast to the 1980s, when conservatives were on top in Europe, socialists now head every government in Europe. The likely result? A clash between the US and Europe over globalisation.
Europe is doing everything it can to avoid following the US path of embracing globalisation. Instead of budget cuts, more social-welfare programs. Instead of reducing unemployment benefits, cut the number of working hours.
Indeed, with Europe slated to introduce a common currency, the euro, in January, the centralising, socialist tendencies of the continent are being greatly strengthened.
The European Union, a vast bureaucracy located in Brussels, will become far more intrusive and powerful than ever before. Its mandate will be to resist the pressures of globalisation - cutting social benefits and increasing the profits of big business - that the Clinton Administration has touted as a panacea for world economics.
Consider the French response to globalisation. The French Prime Minister, Lionel Jospin, is seen as a socialist soulmate of Blair, but he has been working to avoid the kinds of economic reforms seen in Britain and the US.
One of Jospin's main goals, for example, is to create a 35-hour working week. The socialists claim it would lead to more jobs, but the more likely outcome would be that business expenses would rise, with unemployment remaining in the double digits.
Then there's Germany. After the experience of Weimar-era inflation and the horrors of the Nazi regime, Germans put a premium on stability. But the flip side is a reluctance to reform the economy.
The election of the socialist Gerhard Schroeder - sworn in on Tuesday as Germany's seventh chancellor - is no sign of a third way. The fact is that the Germans like the way they have, with lavish social benefits, job protection and generous sick leave provisions.
Schroeder defeated the Christian Democrat Helmut Kohl by declaring it was time for a change. But like his coalition partner, the environmentally minded Greens, he opposes any harsh economic measures.
Germany, like France, is experiencing seemingly intractable, double-digit unemployment. Schroeder is retreating from measures to jump-start the economy, such as slashing taxes or cutting government services.
Why change a cozy way of life that keeps people on the dole fairly content and has ensured social stability? The last thing Germans want are homeless people and the destitute areas that dot inner cities in the US. So the Social Democrats are reverting to high taxes on industry and the wealthy.
The most powerful member of Schroeder's Government is the Finance Minister, Oskar Lafontaine, who wants to cut interest rates to stimulate the economy, rather than cut the Budget.
Top executives at the Deutsche Bank in Frankfurt see the introduction of a single currency as a brake on socialist aspirations across the continent to increase spending. According to the Maastricht agreement on a common currency, member countries are supposed to adhere to a budget deficit of no more than 3 per cent of gross domestic product.
To reach that limit for the coming year, several countries, including Italy, France and Germany, adopted unorthodox measures - selling state companies - or simply cooking the books. In the coming year, socialist governments will be even more tempted to increase spending, thereby increasing budget deficits as well.
What lesson does the talk about a third way in Europe have for the US? If Europeans tend to shrink from cutting their budgets, the US has clearly gone too far in the other direction. Clinton tried to stake out a New Democrat, third-way position that shed old dogmas and adopted tougher stances and proposals: cutting welfare, fixing social security, tackling Medicaid.
But a backlash is developing in the US to Clinton's endorsement of watered-down Republican proposals. Already the volatile stock market is a problem. The huge profits racked up by the wealthy have significantly increased income disparity in the US. It seems that rags to rags and riches to riches remain the US model.
If the economy slumps, look for a reaction against the globalisation forces that have prompted companies to slash workers to increase profits and stockholder benefits. The most likely outcome may be that Europe turns protectionist, shutting out US goods.
With a common currency, the European countries may settle for a lower standard of living, but continued job protections.
Europe isn't following an American-led third way. It's going its own way - and that may spell trouble for the US.
- Los Angeles Times
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