Facts don’t support the
idea that the EU is lagging behind the US
Netherlands Economics Minister
Laurens-Jan Brinkhorst is constantly harping on about Europe’s poor economic performance relative to the US.
This is a completely inaccurate picture designed to soften the
Dutch people up for savage attacks on their social security
and welfare system, argues Dutch Socialist Party leader Jan
Marijnissen.
In
the last ten years economic growth in the United States has
been persistently higher than it has been in the European Union.
The conclusion which is often drawn from this is that “we
don’t do things as well as they do in the States”.
In
reality, the US has experienced a more rapid population increase
than has the EU, and a just comparison can only be made by looking
at income per head. This gives a figure of 1.8% p.a. for the EU,
somewhat lower than the United States’ 2.1%. However, take
Germany away and the difference disappears. Without the Federal
Republic, the EU, as well as our own country, has done just
as well as has the US. Slow German growth is partly to be explained
by the fact that the Bundesrepublik has, during the last decade
or so, had to spend more than a thousand billion euros on reunification.
Labour
productivity in the Netherlands, contrary to the impression
which Brinkhorst is seeking to create, is around 10% higher
than it is in the States. Germany and France also have higher
productivity, while Belgium and Norway have the highest rates
of productivity in the world, with the Netherlands coming in
third in a table of GNP per work-hour.* All of these are European
countries. Taking the continent as a whole, average GNP does
indeed lag behind that of the US, but only because Europe includes
the less developed economies of the South and East.
A
new study from Goldman Sachs' economist Kevin Daly demonstrates
that productivity growth in Europe has been dampened during
the last ten years as a result of cuts in social security and
welfare. The consequent deterioration in provision has meant
that more poorly educated people have been forced into employment,
resulting in a lower growth of productivity per head. More or
less the same process occurred in the US during the 1980s.
Daly
identifies a number of other reasons why rates of economic-
and productivity growth in Europe seem lower than they really
are. In the US, for example, spending on computers is counted
as investment, giving the appearance of higher growth. A computer
which remains at a constant price whilst doubling in the speed
of its operations is, according to American statistical methods,
half as expensive as previously. In Europe, on the other hand,
the same computer would in most cases be counted as remaining
at the same price. Once again, this difference leads to an underestimation
of European growth.
Average
incomes in Europe are 30% lower than they are in the US. However,
this difference can be fully explained by the fact that Europeans
work shorter hours. Far more people work part-time in paid employment,
spending the rest of their time on a range of activities, including
voluntary work or trying to run a household. This is surely
something to be proud of, rather than seen as a way in which
we “lag” behind America.
Some
economists argue that Europe is in fact much better off than
the States. Europeans have lower heating- and air-conditioning
costs, because in general the climate is milder. This also contributes
to apparently lower growth, as does the fact that we spend less
on police officers and less on prisons. Lastly, Europe enjoys
a generally higher level of social provision, better public
services which are not reflected in the statistics. There are,
in conclusion, plenty of grounds upon which we can insist that
Europe has something of a lead over the US.
High
economic growth in the US is, moreover, extremely fragile. Enormous
military spending, boosted by Iraq, as well as tax cuts, have
allowed the Bush administration to stimulate the economy, whilst
the Federal Reserve has lowered interest rates far more than
has the European Central Bank. The result is that, from a surplus
of 1% left by the Clinton administration, the US has acquired
a 2004 budget shortfall which will reach almost 5%. Because
of low interest rates Americans save only a sixth of the average
for Europeans, and debt per head is far higher than it is over
here. US growth is in reality financed from the 2 billion dollars
poured into the country every day by foreign investors.
Not
long ago the Intelligence Unit of The
Economist gave the Netherlands a mark of
8.62/10 for its economy!
This puts us top of the class in Europe and second only
to Canada globally. There is therefore absolutely no justification
for pessimism. The right-wing cabinet of Premier Balkenende systematically exaggerates the problems
of the Netherlands’ economy
in order to create the conditions under which it can
carry out a programme of draconian cuts in social provision.
It is remarkable to witness with what ease the cabinet is able
to generate a sort of national inferiority complex. If anything
stops us from addressing the real economic problems which exist,
it will be a lack of hope and of confidence in ourselves.
Jan
Marijnissen is leader of the Socialist Party of the Netherlands
(SP). The SP is the fourth largest party in the national parliament,
with 8 MPs and 4 Senators. In the recent European Parliament
elections it acquired a second MEP. You can read more about
the SP, at http://www.sp.nl/en/
This
is a translation of an article which appeared in the leading
centre-left daily, De Volkskrant, on 5th July.
*Figures
from Kwartaalbericht 2003 van De Nederlandsche Bank, the national
bank’s quarterly report
