By Phyllis McIntosh
Special Correspondent
Washington — Both the United States and Western Europe operate under a capitalist system where most of the means of production remain in private ownership. It is the attitude toward the role of government in shaping the economy and providing social services to citizens that sets the United States apart from its friends across the Atlantic. “Western Europe and the U.S. are concerned with both growth and income redistribution, but there’s more emphasis on growth here [United States] and more emphasis on income redistribution there [Western Europe],” said Allan Meltzer, a political economist at Carnegie-Mellon University in Pittsburgh and a visiting scholar at the Washington-based, conservative-leaning research group the American Enterprise Institute. In Western Europe, income is “redistributed” via high tax rates to fund a larger social safety net than exists in the United States. Western Europeans have such benefits as nationalized health care, universal preschool and government-mandated pensions and paid vacations. Strict government control over business slows economic growth but protects against the boom-and-bust cycles seen in the United States. “Europeans believe it is better to have more consistent, sustained growth than to let the market go from one extreme to the other,” said Anne Vorce, an economist and fiscal policy specialist with the liberal-leaning New America Foundation in Washington. “In the U.S., the way we move ahead economically and encourage innovation is to relax government involvement, and in the long run we gain more from it.” Americans are inclined to distrust government intrusion into their lives and oppose a so-called “welfare state” — attitudes that stem from a tradition of individualism, fierce protection of individual liberties and a strong work ethic. The United States prides itself as a land of opportunity, where anyone, regardless of social class or ethnic origin, has the opportunity to prosper. Nevertheless, over the years Americans have accepted a considerable amount of government regulation to protect the financial system, the environment and workers’ rights. A government-run Social Security system to support retirees, unemployment compensation and government-backed insurance for individual bank accounts are some of the safeguards that grew out of the Great Depression of the 1930s and have become an accepted part of the U.S. economic system. Liberal and conservative economists agree that the main strengths of the U.S. system are its flexibility and ability to adapt to market demands. “Americans take more risks, and that philosophy is reflected in our laws and regulations across the board,” Vorce said. “A lot of small businesses could not have gotten started without the ability to finance themselves via credit cards and to declare bankruptcy and start over again. Here they were allowed to fail, and a number of companies learned from their failures and built themselves into successful companies. Financing in Europe is very closed off to startups, so innovators in the market are very strapped for capital.” Companies in Western Europe are subject to much more stringent regulation, which tends to stifle innovation. Meltzer points out that some countries, such as France, also have what they call national champions. “They concentrate on a single firm within an industry and give it considerable monopoly power to represent the country as a competitor in the world market,” he said. “We are more inclined to say, ‘Let them work that out for themselves by competing.’ We believe that strengthens our firms.” The weakness in the U.S. system, Vorce said, “is that we take on too much risk and are more prone to boom-and-bust cycles.” There also are wider gaps between rich and poor, as well as some gaping holes in the safety net, such as millions of people without health insurance. Western Europeans clearly value more security and stability and vote repeatedly to maintain the current system. Some studies suggest that people in countries with a strong social safety net live longer, happier lives. (See “For Many Americans, Hard Work Is Badge of Honor.”) Because of the safety net, Western Europe may be better positioned to weather ordinary economic downturns, without the political pressure for economic stimulus packages. On the other hand, economists say, generous, long-lasting jobless benefits could be a disincentive for people to look for jobs and thus help prolong an economic slump. Conservatives in the United States sometimes argue that the country is heading too much in the direction of Western Europe. But, as political journalist Jacob Weisberg, editor-in-chief of the Slate Group, states in a syndicated column, there are crucial distinctions. Weisberg points out that President Obama seeks to curb global warming via a market-based cap-and-trade system to limit emissions, not taxes or regulations. (“Cap” means a legal limit on the quantity of greenhouse gases that a company may emit; “trade” means companies may swap emission permits among themselves.) And while the president and the majority of Americans want government to guarantee health insurance, they believe it should be privately run. Likewise, college students should have easy access to loans, not free tuition as in Western Europe, Americans believe. Instead of the “cradle-to-grave security” common in Western Europe, Weisberg concludes, the Obama administration aims to provide Americans with “cradle-to-grave opportunity.” |
