ISN'T IT RICH?:

The Other American Exceptionalism (Gerard Alexander, Fall 2005, Claremont Review of Books)

American conservatives believe that a healthy modern economy is so complex and innovative that most economic decisions have to take place in the private sector, where scattered information is located, and risk may be rewarded or punished. Government is best at enforcing rules of the game and engaging in limited redistribution. When it does much more than that, it creates inefficient regulations and bureaucracies prone to expanding rather than learning.

This basic assumption runs deep in American life, not merely because we've spent too much time in post office lines—everyone on earth has done that—but because we're in a position to compare the post office to responsive, dynamic private businesses of all kinds. Many Europeans think similarly, especially business leaders, free-market activists, policy wonks, center-right politicians (including, apparently, the German Christian Democrats' Angela Merkel), and the occasional center-left leader such as Tony Blair or Gerhard Schroeder.

But most Western Europeans fear that markets will fail to meet their needs and satisfy their interests. They maintain a faute de mieux faith that government is the indispensable actor in economic life. Even when compelled by economic crisis to trim taxes, privatize, and curb spending—that is, even while recognizing implicitly that these measures attract investment and encourage growth—European leaders rarely offer principled criticism of government intervention, much less positive rhetoric about the marketplace. (Jacques Chirac's center-right cabinet is now privatizing state entities, not because private ownership is more efficient but primarily to cut the deficit and pay down the debt.) The European Union's proclaimed drive to become internationally competitive is top-down and government-centered. Not surprisingly, "Thatcherite" and "neo-liberal" continue to be labels insultingly applied and hotly denied. All this is true even for several right-wing "populist" parties, such as France's National Front, which calls occasionally for tax limitation but more often emphasizes protectionism and a welfare state generous to native-born Frenchmen.

These views have not been dislodged, even by serious economic problems. And Europe's economic problems are serious. The unemployment rate is stuck at around 10% in Germany and France, and if anything this underestimates the true figure--even more unemployment is concealed through extensive job-training and early-retirement schemes. The fact that many continental European economies have such mechanisms for sidelining less-skilled workers makes it all the more striking that labor productivity still generally grows faster in the United States. For decades, France and Germany had narrowed the gap in labor productivity with the U.S., but in the past 15 years their progress slowed and then reversed.

The result is that average U.S. per capita income is now about 55% higher than the average of the European Union's core 15 countries (it expanded to 25 in 2004). In fact, the biggest E.U. countries have per capita incomes comparable to America's poorest states. A recent study by two Swedish economists found that if the United Kingdom, France, or Italy suddenly were admitted to the American union, any one of them would rank as the 5th poorest of the 50 states, ahead only of West Virginia, Arkansas, Mississippi, and Montana. Ireland, the second richest E.U. country, would be the 13th poorest state; Sweden the 6th poorest. The study found that 40% of all Swedish households would classify as low-income by American standards.

A comparable divide in operating assumptions exists on foreign policy. By and large, American conservatives believe that although international conflicts may arise from uncertainty, misunderstanding, and mutual threats, they usually result from simple predation, power-hunger, and hatred. Global cooperation is possible when would-be predators are deterred, which requires muscular firmness. Democracies are uniquely suited to be enforcers of international order because they are least likely to be its transgressors—which is the reason Americans have traditionally championed an integrated and assertive Europe, instead of seeing it as a threat.

Some Europeans share this view, including most British and many Dutch and Danish conservatives, as well as Blair and other Laborites. Once upon a time, the Gaullists thought like this, and José María Aznar and other Spanish conservatives do so still. But most European governments now practice what Americans would recognize as a liberal foreign policy. This is not so much because Europeans inhabit what Robert Kagan calls a "post-historical paradise of peace and relative prosperity." Instead they insist on seeing misperception, insecurity, and pride as the root of most international conflicts, which accordingly are best defused by reassurance and the careful avoidance of confrontation, ultimatums, and threats.