TREATING CANCER WITH A BAND-AID:

A Little Americanization Can Fix Europe's Economic Misery (John Micklethwait and Adrian Wooldridge, May 16, 2005, LA Times)

So what is the Continent's problem? Too many labor regulations and moribund capital markets. France and Germany have high minimum wages and rigid rules governing who you can hire and fire. (Blair was right to call the working-time directive "a hammer blow" to Britain's economy.) And the Continent's capital markets are sluggish, restricted by a "stakeholder" corporate culture — executives wedded to the status quo and not to competition. Germany had only three IPOs last year.

In a sense, the Continent is a quarter-century behind the U.S. In the mid-1970s, behemoths such as GM, GE and IBM created elaborate hierarchies of "company men" who spent their lives scheming to get bigger offices and accumulating growing commitments to their employees, in the form of pension and healthcare rights.

Two things changed this: The arrival of the Japanese, who woke up most of American manufacturing, and a new approach to using capital markets. Barbarian takeover artists such as Henry Kravis broke up giants that included RJR Nabisco. This created carnage but it also sponsored a surge in competitiveness. Smaller entrepreneurial firms were unleashed, and the big companies that survived — such as Jack Welch's General Electric — did so only by turning themselves into much more inventive organizations.

Rather, the problem is that it is far "ahead"--its post-Christianity makes its other problems unsolvable.

Posted by Orrin Judd at June 3, 2005 11:40 PM