"EURO CAPITALISM"?:

The American Way Wins: Why American capitalism trumps Euro capitalism. (Irwin M. Stelzer, 01/21/2003, Weekly Standard)

The governments of the European Union by and large claim about 50 percent of their nations' output for the governments' ministers to do with as they please; the U.S. federal government takes about 30 percent. The high taxes needed by E.U. governments to support their welfare states have contributed to persistent double-digit unemployment in Germany, and to very low growth rates throughout most of what is called "Euroland." Add to the tax burden three further economic impediments to growth--labor markets so rigidly regulated that employers dare not hire for fear of being unable to fire; a Growth and Stability Pact that prohibits countries from running significant deficits when faced with recession; and a one-size-fits-all interest rate that is applied both to recession-afflicted Germany and inflation-afflicted Portugal.

There is worse. In addition to national governments that are inclined to regulate everything from the amount of foam allowed on a mug of beer sold by publicans (the UK), to the hours stores can stay open (in Germany it's never on Sunday and only part of the time on Saturday), Brussels' eurocrats have rules that regulate everything from the size of condoms to the permitted curvature of bananas.

So it comes as no surprise to any economist not included in the swath of those who hate America--"capitalism red in tooth and claw" and "the law of the jungle" are two of the epithets sometimes hurled at me in international conferences--that the E.U. economies are in trouble.

There is no better proof than last week's moan from Romano Prodi, president of the European Commission. It seems the European Union is falling ever-further behind the United States in the competitiveness race. Per capita productivity of the E.U.'s employed workforce fell from 86 percent of the U.S. level in 1999 to 83 percent last year. If you count the zero productivity of the massive numbers of Europe's unemployed, things are even worse for the European Union.

And unlikely to get better, says the new study by the European Commission. Resistance to labor-market reform remains a potent force, Europe continues to devote fewer resources to research than does the United States, and E.U. taxes remain high (at a time when the debate in American is not over whether, but by how much, to reduce the tax burden on workers, entrepreneurs, and investors).

That's without taking the demographic problems into account. Posted by Orrin Judd at January 22, 2003 7:19 PM