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The Myth Of The "Social Europe." Part I.

A pizza for $48.

Worn-out appliances and furniture.

Dilapidated vehicles.

$6 gasoline.

Having to drive to another country just to buy groceries.

$15 bar drinks

Modest sack lunches in the office (because going to a deli would be a bankrupting extravagance).

Does all of this sound like paradise? Does it even sound like the fruits of the most successful, fair, and wealthy society in the world?

More likely, it is the type of evidence that shatters the myth of Nordic socialism. The country described above, of course, is Norway, a country with a GDP per capita at least on par with, if not greater than, the United States.

Europhiles (and it can hard not to love something about Europe) tend to believe that if only America could be more like Europe, we would be a far better society. There is a rarely-challenged notion in some circles (media, academia, etc.) that socialism works in the Nordic countries, so why couldn't it work for us?

The concept of a "European Social Model" (or, a "Social Europe") calls for a strong welfare state, with high levels of government expenditures, to create an equitable society. It's a well-intentioned notion, but it requires substantially higher-than-optimal taxes and a distortion of vast portions of the economy best left to the free enterprise system.

A recent piece in The New York Times (of all places) argued against the myth of the "social Europe", and specifically against the illusion of glorious Nordic socialism:

THE received wisdom about economic life in the Nordic countries is easily summed up: people here are incomparably affluent, with all their needs met by an efficient welfare state. They believe it themselves. Yet the reality - as this Oslo-dwelling American can attest, and as some recent studies confirm - is not quite what it appears.

Let's expand on their point a bit, looking at one such study.

Click for original study, in .pdf format.

But, aren't the Europeans, with their strong common currency, making strides to catch up with the United States? Won't they eventually catch up? Isn't Europe "the way of the future"? And shouldn't we be more like them?

No, not really:

Contrasting "the American dream" with "the European daydream," Mr. Norberg described the difference: "Economic growth in the last 25 years has been 3 percent per annum in the U.S., compared to 2.2 percent in the E.U. That means that the American economy has almost doubled, whereas the E.U. economy has grown by slightly more than half. The purchasing power in the U.S. is $36,100 per capita, and in the E.U. $26,000 - and the gap is constantly widening."

But it's not just one study alone, or even a litany of anecdotal evidence, that underscores the Nordic reality-perception gap. Another, conducted by KPMG, the international accounting and consulting firm, noted that buying power is much lower in Scandinavian countries than elsewhere in Europe:

It indicated that when disposable income was adjusted for cost of living, Scandinavians were the poorest people in Western Europe. Danes had the lowest adjusted income, Norwegians the second lowest, Swedes the third. Spain and Portugal, with two of Europe's least regulated economies, led the list.

At the same time, America's cost of living is well below that of Europe's. Specifically, take a look at what Americans have, compared with what Europeans do (original .pdf here):

Click for larger version.

But, things don't matter, we're told. They aren't a measure of true wealth. What about the wonderful social services, such as health care and education, that Scandinavians have?

Don't buy it:

Even as the Scandinavian establishment peddles this dubious line, it serves up a picture of the United States as a nation divided, inequitably, among robber barons and wage slaves, not to mention armies of the homeless and unemployed. It does this to keep people believing that their social welfare system, financed by lofty income taxes, provides far more in the way of economic protections and amenities than the American system. Protections, yes -but some Norwegians might question the part about amenities.

In Oslo, library collections are woefully outdated, and public swimming pools are in desperate need of maintenance. News reports describe serious shortages of police officers and school supplies. When my mother-in-law went to an emergency room recently, the hospital was out of cough medicine. Drug addicts crowd downtown Oslo streets, as The Los Angeles Times recently reported, but applicants for methadone programs are put on a months-long waiting list.

But what about income inequality? Isn't it, as Christian Science Monitor writer David Francis argues, better to be poor in Norway than in the United States?

Consider two important facts, from George Mason University Economics Department Chairman Donald J. Boudreaux:

First, as Mr. Francis acknowledges, middle- and high-income Americans are much wealthier than their peers elsewhere. Second, no one is stuck in whatever income category he or she currently is in. Therefore, a low-income American today – say, a college student waiting tables – enjoys much brighter lifetime economic prospects than does a similarly situated low-income European, even if this European is wealthier today. The inequality of income that Mr. Francis laments, far from harming low-income Americans, raises their lifetime earning prospects above those of low-income peoples elsewhere.

And this difference in perspective reveals the exceptional nature of America, contrasted with Europe; in the United States, people believe they can go from nothing to everything with hard work and a little luck. In America, the rewards of success are open to anyone willing to compete for them. Upward mobility shouldn't be such a distinctly American value, but it is. In Europe, with its aristocratic history, there is an awkward class consciousness that affects the mainstream of economic and political thought.

Meanwhile, in survey after survey over the years, Americans have consistently expressed uniquely optimistic attitudes on these questions:

In 1952, Americans were asked how they felt about this statement posed by University of Michigan interviewers: "Some people say there’s not much opportunity in America today -- that the average man doesn’t have much chance to really get ahead. Others say there’s plenty of opportunity, and anyone who works hard can go as far as he wants." Eighty-seven percent said there was still plenty of opportunity in the United States, and just 8 percent said there wasn’t much opportunity in America for the average man. In 1997, 79 percent said the statement "People who work hard are likely to succeed" was true; 18 percent said it was false....

In 1947, 64 percent of fathers surveyed believe that their sons’ opportunities to succeed would be better than their own, and 13 percent said they would be worse. In 1997, when the question was repeated, 62 percent of fathers said their sons’ opportunities would be better than their own, and 21 percent thought they would be worse. When Gallup asked mothers about daughters in 1947, 61 percent expected them to have better opportunities than they had had, and 20 percent disagreed. But by 1997, when many doors had been opened for women, the percentage of mothers expecting their daughters to have greater opportunity was 85 percent.

That's one of the reasons millions of people from around the world each year struggle to make their way here. They want a part of the American dream.

Political Calculations blog has more info on the U.S. versus European economies.

There's simply too much information on this topic to confine it to one post, so stay tuned to WILLisms.com this Wednesday for Part II of "The Myth Of The 'Social Europe.'"

Posted by Will Franklin · 24 April 2005 07:49 PM


Socialism just doesn't work! It never has and never will! ... When people loose their incentive to work hard to become better off financially. When people become the same and government becomes the wealth!...It Just Doesn't Work! Freedom is so much more satisfying and makes for a better economy...

Posted by: Zsa Zsa at April 26, 2005 04:59 PM