If the US Europeanises, Europe is in trouble

July 31, 2012

Free Market Foundation

There’s been an ongoing debate about whether America should become more like Europe. The battle lines are split almost perfectly along left-right lines ideologically. Liberals like Europe’s welfare states, unionised workforces (in and out of government), generous benefits, long vacations, etc. Conservatives like America’s economic growth, its dynamism and innovation. Everyone agrees that you can’t have Europeanisation without European-size governments, says columnist Jonah Goldberg.

For example:

America’s government outlays (pre-Obama) have tended to hover around 20 per cent of gross domestic product (GDP) the average of the last 50 years while Europe’s are often more than twice that.

In France, government outlays are nearly 55 per cent of GDP.

In 2009, the bailout and the Obama budget sent America’s government outlays to 28 per cent of GDP, but that should decline a bit over the next decade, unless Democrats have something else in mind.

To be fair, liberals insist conservatives are wrong to think that Europeanising America will necessarily come at any significant cost:

New York Times columnist and Princeton economist Paul Krugman says that, in exchange for only a tiny bit less growth, Europeans buy a whole lot of security and comfort.

Economists such as Stanford’s Michael Boskin say Europeans have a standard of living about 30 per cent lower than ours and are stagnating.

Others note that the structural unemployment rate in Europe, particularly for young people (it’s over 20 per cent in many countries), is socially devastating.

This debate misses something. We can’t become Europe unless someone else is willing to become America. Europe is a free-rider. It can only afford to be Europe because we can afford to be America. The most obvious and most cited illustration of this fact is national defence, says Goldberg.

Europe’s defence budgets have been miniscule because Europeans can count on Uncle Sam to protect them.

Britain, which has the most credible military in NATO after ours, has funded its butter account with its gun account.

From 1951 to 1997 the share of British government expenditure devoted to defence fell from 24 per cent to 7 per cent, while the share spent on health and welfare increased from 22 per cent to 53 per cent.

Source: Jonah Goldberg, If We Europeanize, Europe Is in Trouble, National Review Online/American Enterprise Institute, April 9, 2010.

For text: http://www.aei.org/article/101899

For more on International Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=26

First published by the National Center for Policy Analysis, Dallas and Washington, USA

FMF Policy Bulletin/ 26 April 2010