NationStates Jolt Archive

Defense of the United States Mixed Economic System
Against European Welfare States

I’ve heard a lot of Europeans refer to the United States in negative ways. It seems many view it as some kind of boogeyman-- a country where fundamentalist theocracy rules, and the homeless and poor lay bleeding in the street without medical care. A place where people are virtual slaves to their corporate overlords, working 24 hours a day for sweat-shop wages with a government paralyzed by ideologues and out-dated policies.

Okay, maybe I’m exaggerating a tiny bit.

But the fact remains, the U.S.A. is not nearly as bad as some people believe. Take, for instance, our unemployment rates. According to the CIA World Fact-Book The United States has an unemployment rate of 5.1%. When compared to England, France, Germany and Spain- who are among the largest, richest countries of the EU- unemployment rates of 4.7%, 11.7%, 9.9%, and 9.2% respectively, it is shown that France, Germany, and Spain have significantly higher rates of unemployment than the U.S., while those of England and the United States are roughly the same. It is worth noting that the U.K. is significantly more liberal (Classically liberal, that is), than the other countries listed. Most telling of all, however, is the overall unemployment rate of the EU, which stands at 9.4%- a rate which would be looked upon with horror by most Americans. In addition, the national debts of those three countries are somewhat higher than the National Debt of the U.S. And perhaps we should also take a moment to note that Britain has yet to join EMU.*

Just as predicted by classical liberalism, government intervention fosters dependence on the state instead of the individual. People, especially the younger population (who make up a significant amount of the unemployed*) look towards the government to solve their problems, especially those economic in nature. Instead of entrepreneurship and “hard work”, welfare becomes the answer. These are situations which the government does not help by discouraging those same entrepreneurs through oppressive regulations.*

Higher unemployment rates are the fruits of welfare states.

Instead of helping the little guy, these same policies which are meant to “regulate Big Business” do the exact opposite- they harm the average citizen. And that’s the reason that the United States will continue to be the driving economic power in the Western World.

Despite this, many still perceive the U.S. as a country that is, for lack of a better word, barbaric, despite the other significant problems facing their countries.. For instance, a CIA study said that “The European Union will break-up within 15 years unless it radically reforms its ailing welfare systems.” The welfare states, at least in the mainland European communities, does not work very well. The same Social Security problems that face the United States, for instance, are not only present but magnified in the EU. A large, aging population who are enjoying longer life-spans are followed by a smaller population, many of whom do not, and do not show many signs of looking for, work, a problem which is even further compounded by the presence of Socialized Medicine, which is going to be under a similar strain to Social Security.*

Another point in favor of the free market is that the United States leads the worlds
in research & development. Despite Europe’s attempts to put a greater emphasis on technological progress, the United State’s industry, fostered by free-market policies, continues to lead the world on R&D, investing over two billion dollars more than our closest rivals, none of who are located in Europe. Progress is defined as “movement as toward a goal; advancement“. Which is exactly the Realm of R&D.*


The protectionist policies of the EU don’t help much. Take, for instance, the absurd laws governing work from other nations, even within the EU. Most countries require outside workers to obtain a work permit, even if they are “only doing a single days work”*. They discourage foreign investment that is vital in today’s global market, as proved by the Republic of Ireland. The ROI is one of the smaller nations in the EU, but remains an economic engine due to it’s relief of economic burdens imposed by government spending a large tax burdens, and other general implementations of free-market policies*. In this regard it joins Luxembourg, another nation who’s relatively liberal (once again, classically liberal) economy encourages foreign investment helps offsets it’s small size.

It is interesting to note that welfare states tend to work better in Scandinavian countries. This, I believe, is an issue central to the debate which is often ignored; that certain people are better suited to systems than to others. I don’t believe that the United States is suited to a Welfare State. Out cultural heritage of individualism and ambition do not mix well with a government that works largely on the honor-system. In other places, things may be different; however, it seems that in the central European countries it functions poorly.

In light of this, I find it hard to believe that criticism of the American economy is so widely condemned Despite the criticism of our health care system, which leaves a significant portion of the population without coverage, I doubt that socialized medicine is the answer. Instead, I am of the opinion that the twenty-or-over requirement imposed on businesses should be extended to those who have dependants and those aged twenty-one and over. I would hope to see this combined with government programs to extend health insurance to the employees of small companies, such as the one that my father owns. In effect, health coverage for all working citizens. I do not imagine that welfare programs need to be increased, especially when a significant portion of the homeless and poor are alcoholics and drug addicts who have little interests in improving their lot in life. The United States should take great pains to preserve and improve it’s rate of upward mobility, and above all should not be pushed into rash reforms by what amounts to international peer pressure.



*All statistics taken from the CIA World Fact Book.
http://blog.eucap.com/entrepreneur/top_countries_to_do_business_i.html
http://news.scotsman.com/topics.cfm?tid=591&id=56762005
http://en.wikipedia.org/wiki/Research_and_development
http://www.iht.com/articles/2005/06/17/business/wbeast.php
http://en.wikipedia.org/wiki/Economy_of_the_Republic_of_Ireland

In regards to employment figures, that can be put down to Europe's modernity, a capitalist venture will always seek to cut costs, including labour, and so employment declines. Although America does lead the world in R&D as you say, there are wider extremes in America, and a good chunk of the American economy is made up of small out-dated labour-intensive professions. While Europe may have more unemployed people, those it does have are more able to access support and assistance from the state than their American counterparts, and in a world of increasing population and dwindling employment, that's what really needs to be taken into account.

I stopped reading when I hit unemployment figures because there it assumes every countries manner of deciding who is and isn't unemployed is the same.

I stopped reading when I hit unemployment figures because there it assumes every countries manner of deciding who is and isn't unemployed is the same.

Well, not necessarily. The US has multiple unemployment figures; generally speaking, the 4.5% rate is a good measure of the health of the labor market, and is good for comparison with European countries because the participation rates line up at that point.

Of course, the main point is that Europe needs to reform its welfare and social system to preserve it; their economies are simply not going to sustain them in their current form for much longer. Not that these systems are inherently flawed or a bad idea, but their current structure needs reform in order to provide the economic growth to support them.

In regards to employment figures, that can be put down to Europe's modernity, a capitalist venture will always seek to cut costs, including labour, and so employment declines. Although America does lead the world in R&D as you say, there are wider extremes in America, and a good chunk of the American economy is made up of small out-dated labour-intensive professions. While Europe may have more unemployed people, those it does have are more able to access support and assistance from the state than their American counterparts, and in a world of increasing population and dwindling employment, that's what really needs to be taken into account.
I'm not talking about how we treat unemployed people. I'm saying that because it's easier to access assistance from the state, they are more likely to remain unemployed, and younger generations are more likely to increase unemployment. And it's a fact that larger and larger proportions of several economies in the E.U.
And while there are is a good amount of jobs requiring Manuel labour, the fact remains that it still pays while not draining the economy.

In fact, your claim that " a capitalist venture will always seek to cut costs, including labour, and so employment declines" seems contradicted by the evidence.

I stopped reading when
I stopped reading there. Just kidding. While not all countries judge unemployment in the same way, I assume the CIA World Fact-book does. Since I got all of my statistics from the same source, differentiation in method shouldn't be an issue.

In regards to employment figures, that can be put down to Europe's modernity, a capitalist venture will always seek to cut costs, including labour, and so employment declines.

It's mainly due to labor market inflexibility and taxes. It is a lot harder to hire and fire workers, which means that a company is less likely to hire when business conditions are good due to the fact that they won't be able to cut those costs when the economy is in a downturn. It restricts investment in new workers due to the higher costs.

And taxes eat in to income, reducing the amount that is spent on growing the business. However, this has a caveat; an efficient tax system will actually reduce the burden even if the rates are higher. As a matter of fact, Sweden has a lower real corporate tax rate than the US due to a more efficient and responsive system.

Although America does lead the world in R&D as you say, there are wider extremes in America, and a good chunk of the American economy is made up of small out-dated labour-intensive professions.

Not true. In fact, labor-intensive occupations have been declining since the 1960's, since it's a lot cheaper to move them to China/Mexico and keep the advanced things here. Now, it is correct to say that the majority of our jobs come from small businesses, but they are far from outdated. The US economy is one of the most technologically advanced and productive in the world, and has one of the highest growth rates in the developed world with corresponding benefits in terms of employment and income.

High income inequality is more a product of problems in the education system than anything else; the system is incapable of providing a good education to students in certain areas, producing extremes of income that are built in to the system. Obviously, this needs to change in order to address it; I don't think anyone sees this as a desirable state, especially considering that it can produce severe discontent (if Brazil is any indicator of that).

While Europe may have more unemployed people, those it does have are more able to access support and assistance from the state than their American counterparts, and in a world of increasing population and dwindling employment, that's what really needs to be taken into account.

Employment is not dwindling; it grows along with the economy and has continuously outpaced population growth. In fact, unemployment rates in the US are below their average, and participation is rising reflecting more people entering the job market.

The pattern is clear: the economy needs to grow to create jobs (and vice versa) and the economy needs to grow in order to pay for social programs. If you can't do this, you can't afford social programs.

And, of course, high unemployment brings its own problems like crime and unrest which further put strain on the economy and social net. Surely, the experiences many European nations have with accommodating immigrants is a clear sign that reform in the job market is needed.

I stopped reading there. Just kidding. While not all countries judge unemployment in the same way, I assume the CIA World Fact-book does. Since I got all of my statistics from the same source, differentiation in method shouldn't be an issue.

Highly doubtable unless stated straightforward. I doubt the CIA does their own personal unemployment studies as opposed to pulling the information released by the governments.

You lost me compleatly with your conclusion.

Highly doubtable unless stated straightforward. I doubt the CIA does their own personal unemployment studies as opposed to pulling the information released by the governments.
While they do use official releases, they also use a combination of other measures to insure accuracy.

From their websites:
"What is The World Factbook’s source for a specific subject field?
The Factbook staff uses many different sources to publish what we judge are the most reliable and consistent data for any particular category. Space considerations preclude a listing of these various sources."

I think it's reliable enough for our purposes.

You lost me compleatly with your conclusion.
Sorry, that was because I'm an idiot :p. My I put "acceptance" instead of "criticism", making my topic sentence completely contrary to what I was saying.

Highly doubtable unless stated straightforward. I doubt the CIA does their own personal unemployment studies as opposed to pulling the information released by the governments.

Not necessarily. The CIA does gather its own economic data for intelligence purposes; they have their own group dedicated to that kind of research.

Of course, most of that data is going to be on nations perceived as enemies or threats so chances are the data for Europe will be from European economic ministries.

You lost me compleatly with your conclusion.

Basically, his argument boils down to the fact that people tend to grumble about how the American economy does not match the sort of welfare capitalism practiced in most European countries and pointing out why it is idiotic to do so because no one system works for everyone. Case in point, as he said, the Scandinavian countries, which work extremely well under such welfare capitalism, whereas the economies of France and Germany, to name a couple, cannot maintain the same system with the current implimentation. He's not saying the system is bad, he's merely saying that it isn't right for the United States, and I agree with him.

For more in-depth commentary, read Vetalia's post. He's a freaking genius, I kid you not.

Case in point, as he said, the Scandinavian countries, which work extremely well under such welfare capitalism, whereas the economies of France and Germany, to name a couple, cannot maintain the same system with the current implimentation.
Note however:
http://www.ccges.yorku.ca/IMG/pdf/file_3_Richard_Deeg_Modell_Deutschland.pdf
http://www.spiegel.de/international/0,1518,457593,00.html

To be fair, Germany's had a lot to deal with since reunification (and probably still does).

OP, hear hear! You're dead-on. Nothing works for everyone, and to try to push the welfare state onto the American people would be an utter disaster. Americans are too independent for such a system. I have no clue why it works for the Scandinavians, but kudos to them for finding a system that does, even if I don't like it.

Europe has something the U.S. needs though. Well, Belgium has something the U.S. needs: a school voucher system. Public schools in the U.S. are a joke. I'm not sure how many European countries let the parents attach the money to their children, but I got the impression from a documentary that many European countries have a voucher system. They used Belgium as an example. Hopefully the U.S. will switch over by the time I have kids.

You forget that the unemployment rate is based on who files for unemployment. Because of the better government welfare people who are unemployed file for it more in Europe. Where as in the US some people think it's not even worth it or if they're illegals. So for all we know it could be even higher here.

Europe has something the U.S. needs though. Well, Belgium has something the U.S. needs: a school voucher system. Public schools in the U.S. are a joke. I'm not sure how many European countries let the parents attach the money to their children, but I got the impression from a documentary that many European countries have a voucher system. They used Belgium as an example. Hopefully the U.S. will switch over by the time I have kids.
If they took even a quarter of the military budget and used if for education, it would get a whole lot better.

The bad thing about private schools is that they can be biased.

If they took even a quarter of the military budget and used if for education, it would get a whole lot better.

An increase in the education budget would not necessarily result in an increase in the quality of education. Not that I'm for or against such an increase, but I was just pointing it out.

Europe has something the U.S. needs though. Well, Belgium has something the U.S. needs: a school voucher system. Public schools in the U.S. are a joke. I'm not sure how many European countries let the parents attach the money to their children, but I got the impression from a documentary that many European countries have a voucher system. They used Belgium as an example. Hopefully the U.S. will switch over by the time I have kids.Sort of. Belgium has a sort of market socialist system. Each school gets a certain amount of money per student, but the students can leave and enter schools at will. That wouldn't fly here. Different districts currently give each student different amounts of money, and I don't see that changing.

According to the CIA World Fact-Book The United States has an unemployment rate of 5.1%. When compared to England, France, Germany and Spain- who are among the largest, richest countries of the EU- unemployment rates of 4.7%, 11.7%, 9.9%, and 9.2% respectively, it is shown that France, Germany, and Spain have significantly higher rates of unemployment than the U.S., while those of England and the United States are roughly the same. It is worth noting that the U.K. is significantly more liberal (Classically liberal, that is), than the other countries listed.

One of the reasons why the UK economy does so well is that it is a net oil exporter. So is Norway (it has low rate of unemployment as well). Both these countries have a very skeptical attitude towards Europe. One won't join the Euro and other won't join the EU full stop. The UK exports 15.75 billion cu m of gas a year and 1.498 million bbl/day of oil. This is basically easy money that can fund the economy. The USA also produces significant amounts oil and gas.

Try taking a look at the UK before the North Sea oil basin was discovered. Not a pretty picture (the decade after wasn't a pretty picture either), but that can be put down to Britain remaining focused on secondary industry, and that the oil industry was in its infancy, but oil prices were spiking and causing recession and high inflation. The world then goes into an economic down turn in the 80s - Monetary policies lead to large unemployment figures (+10%). There's not much the UK can do except ride it out. Finally the UK emerges in the 1990s as an economically powerful country.

The UK's situtation is due to oil and a restructuring of the economy away from industry adn towards services.

OP, hear hear! You're dead-on. Nothing works for everyone, and to try to push the welfare state onto the American people would be an utter disaster. Americans are too independent for such a system. I have no clue why it works for the Scandinavians, but kudos to them for finding a system that does, even if I don't like it.

Does it work for the Scandinavians? I live in Sweden, and unemployment is very high here. I would say that it doesn't work if low unemployment is the measure we are using in this topic.

Despite this, many still perceive the U.S. as a country that is, for lack of a better word, barbaric, despite the other significant problems facing their countries.. For instance, a CIA study said that “The European Union will break-up within 15 years unless it radically reforms its ailing welfare systems.”

While european welfare states undeniably are facing some problems, I fail to see the link between that and the European Union collapsing, as social-economic policy is still mainly a national issue (hence the mainy national differences) and not a matter of the European Union.

Just as predicted by classical liberalism, government intervention fosters dependence on the state instead of the individual. People, especially the younger population (who make up a significant amount of the unemployed*) look towards the government to solve their problems, especially those economic in nature. Instead of entrepreneurship and “hard work”, welfare becomes the answer. These are situations which the government does not help by discouraging those same entrepreneurs through oppressive regulations.*

That's exactly the problem in the European welfare states: perverse incentive. Yet I doubt your idea that the truth comes from America is, if not flawed, at least not marketable to Europeans. Each European people has to find their own way out of the upcoming "pension bomb" crisis. Currently, I think that Socialists go "laalaalaa" with hands over their ears. Pushing the American way is only going to add to this mentality of denial.

The Socialist fears aren't even unwarranted. They perceive attempts to decrease welfare dependency as attempts to oppress and control the working population, not to genuinely improve the situation. Any attempt to decrease social spending is not Pareto optimal and is going to meet significant resistance. We're in a Pareto optimal, but not globally optimal trap.

To OP

Nice try, but no.

Real unemployment is at least twice as high as the 5% rate that is so highly lauded. The statistics simply don't add up. The number of new jobs created each year is significantly less than the number of people entering the workforce each year. Unemployment should be growing, but the the rates are not. Great statistical wizardry on the part of the Dept. of Labor (never trust 'em).

Real unemployment is at least twice as high as the 5% rate that is so highly lauded. The statistics simply don't add up. The number of new jobs created each year is significantly less than the number of people entering the workforce each year. Unemployment should be growing, but the the rates are not. Great statistical wizardry on the part of the Dept. of Labor (never trust 'em).

People can enter the workforce and they can also leave it. If ten people enter the workforce, nine leave, and one job is created, everything evens out. According to you, however, ten times more people would enter the workforce than the amount of jobs created, resulting in some kind of error.

People can enter the workforce and they can also leave it. If ten people enter the workforce, nine leave, and one job is created, everything evens out. According to you, however, ten times more people would enter the workforce than the amount of jobs created, resulting in some kind of error.

I'm talking about population growth. Pop growth is much higher then the number of new jobs created each year, but still the quoted rate of unemployment goes down. Like I said, stat wizardry.

unemployment figures are questionable unless you know how they are calculated as different countries have different methods.

the officially unemployed are those claiming benefits,

are those who have run out of benefits or have given up looking included? sometimes they are at other times they are not.

some statistics include the military as unemployed, some do not.

unemployment figures are questionable unless you know how they are calculated as different countries have different methods.

the officially unemployed are those claiming benefits,

are those who have run out of benefits or have given up looking included? sometimes they are at other times they are not.

some statistics include the military as unemployed, some do not.

Bottom line: Never trust figures from someone looking for reelection.

I'm talking about population growth. Pop growth is much higher then the number of new jobs created each year, but still the quoted rate of unemployment goes down. Like I said, stat wizardry.

If a baby is born, that will increase the population but not alter the unemployment figures in any way, nor will it create new jobs. Additionally, population growth is sometimes due to immigrants, some of whom may be retired. A boom in population is not necessarily equivalent to an increase in the amount of jobs offered.

Real unemployment is at least twice as high as the 5% rate that is so highly lauded. The statistics simply don't add up. The number of new jobs created each year is significantly less than the number of people entering the workforce each year. Unemployment should be growing, but the the rates are not. Great statistical wizardry on the part of the Dept. of Labor (never trust 'em).

Currently, that rate is 8.0%; in the past year or so, it has fallen faster because more and more long-term unemployed and discouraged workers are finding work, and fewer people are working part time for economic reasons. All of the indicators, from official DoL releases, to consumer confidence, to real wages and retail sales suggest that the labor market is strong and will continue to strengthen in to 2007.

The economy is going to do well this year.

Bottom line: Never trust figures from someone looking for reelection.

Most DoL people aren't; the staff remains pretty consistent from presidency to presidency, simply because nobody benefits from false economic data. The data is, for economic analysis purposes, more than accurate enough to make decisions off of.