I’ve been reading a lot lately about the European economy hitting the wall and my question is, why? What’s going on in Europe that’s causing such problems?
My ‘agenda’ here is to ask this WRT the board liberals, and WRT how higher taxes and more social spending is supposed to spark or spur economic growth. Why isn’t that happening in Europe? Is it because America doesn’t do those things, or some other thing related to America, or is there something else at work here (perhaps the taxes aren’t high enough? I’m not asking this snarky or tongue in cheek, it’s a serious question)? I know that a few really serious economic emergencies in a few countries like Spain, Greece, Ireland, etc are having an impact on them all, but it doesn’t seem like Germany, France or England (who I would guess are powerhouses in the Eurozone) aren’t doing very well either, at least from what I’ve been reading.
So, what’s the deal? Why is Europe doing so bad, despite seemingly having everything we poor Americans don’t wrt taxing the rich, lots of regulation, green energy initiatives and even lower mandated emissions, and lots and lots of social programs…arguably the best and most comprehensive in the world…plus, a fairly small/modest defense bill. So, what’s up?
Because the entire world in in the grip of economic disaster?
Higher taxes and social spending in America. Where the problem is the wealthy hogging the wealth of the country and self destructively low taxes for the rich. Higher taxes aren’t always the answer any more than lowering taxes is always the answer; it’s just that higher taxes are the answer here. Increasing the taxes on wealthy Europeans isn’t going to be as useful because they haven’t been allowed to suck society dry to the same extent.
:dubious: Most of that is desirable for reasons having nothing to do with the economy, you know. I really don’t care if strong environmental regulation helps the economy or hurts it; I just don’t want to live in a poisoned desert.
It seems like some countries in the Euro zone are doing poorly and others have had to keep them afloat, making the entire zone suffer. Its not liberal policies that have sunk them, its just plain bad policies, like Greece’s tax issue. Sorta like the phenomenon here in the US where some red states are not as indebted as blue states, but they get disproportionately more federal aid
Forget “Europe”. You need to look at individual countries. Is Germany doing worse than the US?
I just got finished listening to a blurb on NPR about how the Europeans (Germans and French) are telling us we shouldn’t be extending Unemployment Insurance because it causes people to delay taking jobs. That was interesting!
My understanding is that Brazil is doing quite well, although when you’re down on the economic ladder, it’s a lot easier to move up.
Well in this country, Ireland, we’re suffering the aftereffects of a ridiculously overheated property market and government idiocy with regard to privately held debt. Our European overlords have had to bail us out, so they suffer too, in the short term.
It’s also pretty well known here. We know unemployment insurances causes people to delay taking jobs. But it won’t cause them to indefinitely put off taking jobs. Also, that advice is rather suspect when we have 5 times as many unemployed as job openings.
Do we want to cut it off to all those people, with the effects we know will come from that?
It’s a balancing act, and we’ve been coming down on the side of extending benefits.
Do we really want to take queues from Europe? Europe seems to work by the ECB implementing whatever policies most benefit Germany and telling everybody else to deal with it.
I agree, it’s a tough decision. For me, I’d like to see that benefit devolve to the states. We’re a big, diverse country and one size does not fit all.
The trouble is that their economies ARE rather tied together (well, not England so much I guess). I don’t believe Germany is doing substantially worse than the US…it’s not doing substantially better either, afaik.
Yeah, the irony factor there is fairly high.
So, what you are saying is that the Europe would be doing great if the whole world wasn’t experiencing an ‘economic disaster’? Ok, fair enough, if you have some evidence that this is so. But shouldn’t they be doing better than us, since they have all those things I mentioned in the OP? Aren’t those things supposed to spur their economy?
Ok, so European tax rates are high enough. But why isn’t their current levels spurring their economy? I understand that you believe that ours are too low, but why aren’t all those things making Europe an economic powerhouse? Why are they doing poorly?
Why the dubious smiley? I’m asking why, despite having all those things you say are ‘desirable’, is Europe doing poorly. That’s the question here.
So, it’s the aggregate that is pulling everyone down?
What do you mean they’re “hogging” the “country’s” wealth. Their money isn’t yours and it isn’t the country’s either, apart from whatever taxes the government requires them to pay. The money they have is theirs by virtue of their having earned it, which is by virtue of the fact that lots of people have willingly given them their own money in return for the goods and services they offer.
Furthermore, your earning capacity isn’t harmed in the least by the amount of money those people have. When you say the wealthy are “hogging” all the money, what you are really saying is that there is only so much money to go around and since they have so much of it there’s that much less for you. This is blatantly false. You are perfectly free and able to earn however much your talents or skills are worth in the marketplace. You will not earn one dollar less in your life because of the money the wealthy have, and you will not earn one dollar more if they lose it all. There’s no corelation between the two. None at all!
The only way - and I mean the only way - that a person could come up with even a halfway arguable position that the wealthy are “hogging” all the wealth is by having deluded themself that they are owed money by the wealthy for no other reason than the wealthy have money and they don’t. Which is as ridiculous a notion as if a homeless person were to come knocking at your door insisting that you give him a sizable chunk of your bank account and possessions simply because you have more than he does. I have no doubt you would be “disinclined”, to say the least, to allow him to do that, but that’s exactly what you want the government to do to them…and for the same reason! The biggest difference is that on the one hand you lose money and possessions that you’ve earned, and on the other you receive money and benefits from the money someone else earned. And yet I’d bet dollars to donuts that you regard the people who don’t want to give their money to you when you come knocking at their door as “selfish”. Can you explain to me why their reaction is any more “selfish” than yours would be with the homeless guy? 'Cause from where I’m sitting it’s the same thing.
No. Those are most or all either not about the economy or relate to America-specific problems.
Again, because the whole world is doing badly. They don’t exist in a vacuum. Under the present conditions, no one is going to be an “economic powerhouse”.
The :dubious: is because - as I said - most of those things aren’t about the economy. The economy isn’t the be-all and end-all of human existence.
They have that money because they’ve engineered our entire society to benefit them at the expense of the rest of us. Nor did they earn most of it; the vast amount of it was either the result of various scams or was earned for them by other people. And it’s “this country’s wealth” as in the collective wealth of everyone in the country. Which the wealthy have the majority of.
No, it’s the simple truth. They have most of the nation’s money, therefore there’s less for everyone else. Everyone else is expected to carry them on our backs so they don’t have to pay their fair share.
Of course; you are right wing so your philosophy is “worship the rich, crush the poor.” And the differences are that the wealthy have a grossly disproportionate amount of the nation’s wealth, the have benefited much more from society than either I or the homeless guy so owe more back. And since the wealthy have most of the nation’s money it’s the wealthy who have to be taxed more to keep the country from general collapse; their destructive greed is dragging the nation to disaster. The rest of us can’t carry their parasitic weight much longer.
I am liberal on most measures, which I guess gives me the opportunity to provide my perspective. The short answer: I think what is going on in Europe is not much different than in the US, but only the US has the flexibility to make this economic crisis less difficult than it is.
Several economic problems are interacting:
The economy the world over is slowing down. I have no idea, but I assume there is just nothing productive to spend money on. I don’t think the money disappeared, its just a waste of time to use it on anything from a business perspective.
#1 and #2 interact to cause a loss of revenue to the governments of these countries. I think this can best be approximated by looking at the unemployment rate. This assumes that greater unemployment reflects greater loss of economic activity. In the link, of Portugal, Spain, Italy, Greece and Ireland, Italy has the lowest unemployment rate at 8% while the other countries have truly abysmal unemployment rates, topped out by Spain at 20%!
#1-3 makes financial markets shaky and then you see the inability of companies to grow because they cannot get the cash to do it.
The worst hit countries cannot keep up their spending at the rates they may have become used to because their economies cannot supply the revenue to maintenance the debt caused by government spending.
I am not 100% certain but I think all these countries differ for the “why’s” of their government spending. I don’t think it is all social programs. Greece seemed to have a problem with having too many people making a living off of government. I doubt Ireland’s economic boom was fueled the same way. Germany is not suffering, but experiencing a slowdown, yet it is utilizing public spending on green energy at a high rate.
Taking all of this together. The USA and Europe are in roughly the same boat economically. I think most of the countries in the EU and the USA can ride through this without disaster, although it is tenuous.
The difference between the USA and the EU is how government is involved. Our government is not taking on debt as the economic wimps and powerhouses of the EU. We are avoiding debt and that may be a good thing in the long run. On the other hand, we have a lot of room before we become like any of these powerhouses and wimps in terms of debt. Some of these powerhouses are showing us that it is possible to spend a lot more and still be no worse than anyone else. Germany was supposedly cooking until last quarter.
When I think about the why’s of our debt I start to get a little enraged. Most of our debt is due to war and providing the lowest possible taxes for people who will never know the struggles I face in regards to money yet have the personal ear of any politician they care to consider. I think they are not paying their fair share in this crisis. The only responsible use of government money in the last decade has been bailing as all out of the mistakes made by irresponsible financiers and borrowers alike.
That said, we can tax them to reasonable levels, we can set up works projects and training programs that actually mean something and we can publicly finance the green revolution. I think the US is missing out on one of the greatest changes in energy production in human history (akin to finding uses for oil) while arguing over whether we should tax rich people, going back to unworkable health care, and continuing to spend unbelievable amounts of money on the military.
To summarize, we have the room to make the average person’s life a bit easier for the short term while improving our infrastructure and technology, but it is not being done in the name of preventing any sort of tax burden on those who can afford it most.
Depends on which metric we use I guess, John, if we are just talking about Germany (which I wasn’t…I just mentioned them in the OP, it wasn’t the main focus of what I wanted to discuss). Which metric did you want to use? I believe that unemployment is better…economic growth is about the same or worse.
Short answer: Europe, like the US, is suffering the aftermath of a major financial crisis. An economy doesn’t quickly bounce back from something like that for a variety of reasons. It doesn’t have much to do with higher taxes and welfare programs.
European is conducting austerity measures, just like the US. They should be conducting greater deficit spending. Two sources of aggregate demand during recession are 1) higher government spending and 2) depreciation of the currency and export boom. Unfortunately, #2 is limited since we’re in a world recession.
Spain, Greece, Portugal, Ireland and probably Italy need to depreciate their currencies. But they can’t – because they no longer have their own currency. If they could depreciate, that would effectively lower domestic wages relative to world ones.
Why doesn’t the US have this problem? In the US, if Texas and Oklahoma are hit by low oil prices (like during the mid 1980s), they tend to have net labor out-migration. They also tend to have lower taxes (they send less to Washington) and get higher government spending (in the form of unemployment insurance and welfare payments). In Europe, migration is limited by language barriers. And the policy makers screwed up royally by not establishing fiscal systems that automatically send funds to their states during downturns.
Their monetary policy is too tight: they need to cut interest rates.
If Greece tries to leave the Euro, they will spark an enormous banking crisis. So they won’t do that. Ever. Until at least that huge banking crisis happens anyway. Then they will leave the Euro if they are wise.
In short Europe is FUBAR, much like the US… and Japan!
Unemployment is 9.2% in the states vs. 6% for Germany.
I would be careful about directly comparing GDP growth. Population in the USA is rising, while IIRC it’s stagnating or shrinking in much of Europe.
I submit that this is a poorly constructed OP. I don’t have numbers off the hand, but my impression is that Europe has done substantially better in the recent economic troubles than the USA. Of course, Europe can’t really be treated as a whole. The PIGS are doing pretty bad, but Northern Europe seems to be much better off.
