[22 October 2010]
Imagine a country where workers at the lowest levels are active participants on their company’s board of directors, where floor managers and rank-and-file workers exercise genuine influence over the operations of the corporation they work for. Imagine too that unions represent something like 60 percent of all workers nationwide, and have real power in negotiating wages and benefits. Imagine a country with extraordinarily high rates of newspaper readers—because in order to exercise all this power, people need to have a clear sense of what’s going on, both economically and politically. According to Thomas Geoghegan, a self-decribed union lawyer, this country actually exists. It’s called Germany.
Geoghegan’s book Were You Born on the Wrong Continent? is a lengthy comparison of the type of capitalism practiced in the United States with the type practiced in Europe, more specifically Germany. Europe is of course the bogeyman for American conservatives, a sinful den of free-thinking, godlessness and socialism, not necessarily in that order. Conventional wisdom places Europe’s business acumen well below America’s, though well above such self-described socialist states such as Cuba and China. How ironic, then, that these European socialists are doing rather better economically than America—and have been for some time.
Geoghegan produces numerous statistics to prove his point, and also goes to some lengths to show that current US economic policy is in fact following China’s model, rather than Germany’s. In seeking to contain costs by driving down wages, the US is following the footsteps of low-wage, low-value producers in the developing world, rather than Germany’s high-end engineering skills. One result: Germany has the largest trade surplus in the world; America has its largest deficit.
Geoghegan’s thesis is that, while everyone knows Europe does socialism better than America, the fact is it does capitalism better, too. Its citizens work shorter hours, enjoy more benefits, and indulge in a standard of living that is higher than experienced by their American counterparts. (They live longer, too.) His second main thesis ties in with the first: not only does this model benefit the working class and the poor, but also the middle class and even the upper-middle class of executives and professionals. The only people who benefit more from the American model are the super-rich.
Even more ironically, socialism wouldn’t cost much more than what Americans experience already. As he says on the very first page: “We’re paying for European-type socialism, without getting the equivalent payback.” Some would argue that Europeans pay through the nose for their benefits with extortionate tax rates, but Geoghehan points out that Europe’s average rate of tax is 47 percent. America’s is 40 percent.
That seven-percent difference accounts for a lot: education, including college education, as well as health care, maternity leave, child care, old-age care, and six weeks paid vacation per year. At this point, for many of us in America working multiple jobs or simply longer hours at one job, with no discernible rise in benefits and huge bills to pay for education, health and child care, the European model is starting to look pretty good.
But what about GDP? This measure of per-capita wealth is often trotted out to compare how individuals in different countries are doing relative to each other. It’s true: America’s GDP is considerably higher than Europe’s, which indicates that we Americans are spending more money. So we must have more to spend. Ergo, we’re doing better, right?
Well, yes and no. Geoghegan makes the intriguing argument that spending more money is not always a sign that you are doing better; sometimes it’s a sign that you’re doing worse. Consider, for example, someone living relatively close to his/her job who can take public transport to work while the children go to public school (because the state maintains the public transport system adequately, and because it still puts money into the schools and into making the city center liveable). Now compare that person to someone living in a city like, say, Phoenix, where the city is falling to pieces and the schools are lousy and the parents want the kids to go someplace better. What to do?
In the US, the family moves, if it can possibly manage to do so. It buys a house, possibly overextending its finances; it needs a car or possibly two to commute to work, since the public transport is unreliable; and it avoids the urban center as much as possible, preferring to stay home at night. This family is contributing a great deal to GDP—it’s bought a house and furnishings, a car or two, gas for the commute, and plenty of entertainment gadgets to play with at home. But is it really better off? Or is it just more in debt, more stressed from all the commuting, more overworked, more tired, more likely to eat at McDonald’s because it saves a lot more time than shopping for and cooking dinner at home?
Geoghegan’s argument is that in places like Germany, the State assumes much of the financial burden that individuals and families take on in the US. As a result, Europeans spend less and save more. They live closer to their jobs, i.e., in the cities, because the cities are better taken care of. Ironically, these citizens are not contributing to GDP, which makes them appear poorer. But with fewer expenses to pay, Europeans are actually better off.
Not everyone is convinced. Although his views are clear from the get-go, Geoghegan makes it clear that there are things about the American system that he prefers, and he isn’t shy about quoting people—including Europeans—who prefer the American system. But as this thoughtful and engagingly written book makes clear, there are many advantages on the other side of the Atlantic worthy of serious consideration. Alas, the political leadership in America continues to lack the will—or the brains—to at least consider them.