ARTHUR BROOKS, the president of the conservative American Enterprise Institute, writes:
I'm often asked if I think America is trending toward becoming a European-style social democracy. My answer is: "No, because we already are a European-style social democracy." From the progressivity of our tax code, to the percentage of GDP devoted to government, to the extent of the regulatory burden on business, most of Europe's got nothing on us.
In particular, Mr Brooks thinks America looks a lot like Spain.
The political right can crow all it wants about how America is a "conservative country," unlike, say, Spain—a country governed by the Spanish Socialist Workers Party for most of the past 30 years. But at 36%, U.S. government spending relative to GDP is very close to Spain's. And our debt-to-GDP ratio is 103%; Spain's is 68%.
Colour me unimpressed. A few cherry-picked stats hardly establish that America and Spain have in common the same style of political economy. America's economy is hardly in rude health, but its prospects are far from catastrophic. Spain's prospects? Well, Tyler Cowen put it this way, and I wish I could say he's wrong: "Spain is in a self-cannibalizing downward spiral, as Greece was and is. It will not end until there is, at the bottom, an absolute and total crash." To my ear "self-cannibalizing downward spiral" sounds worse than "weak recovery". One might also wish to observe that America, unlike Spain, is not caught in the centre of a continent-wide crisis over mismatched fiscal federalism and monetary centralisation.
Straining to establish a resemblance, Mr Brooks goes on to say that "the American left is every bit as focused on growing government and equalizing incomes as the Spanish left". Perhaps. Yet the American left never governs and the Spanish left often has. Consequently, Spain's top marginal income-tax rate is 52%, which is higher than the remainder of Europe's, save Belgium and Sweden. And that's on top of a fairly heavy VAT. In contrast, America's top income-tax rate is a low 35%. This sort of contrast is well reflected in the two countries' levels of inequality, as well as in their rankings on the Heritage Foundation's economic freedom league tables. On the Heritage index, America ranks 10th overall (just ahead of the notoriously social-democratic Denmark!), while Spain comes in at 35th. Of the several dimensions of economic freedom, as the Heritage Foundation construes it, America scores highest in "labour freedom" with 95.6 of 100 points. This is, as far as I can tell, the highest score among the wealthy liberal-democracies. Spain, in contrast, scores a dismal 51.8 of 100. "Despite some progress", the index's authors write of Spain, "labor regulations remain restrictive". Which is to say, among other things, that labour unions in Spain still have the heft to oppose labour-market reforms with a general strike. This doesn't happen in America, does it?
Now look at this picture, please:
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What do you see? Spanish youth unemployment has passed 50%! America's younger workers sure aren't having an easy time, but unless I'm confused, 50 is more than three times 15. Spain's overall unemployment rate hovers around 25%; America's is a notch above 8%. I figure this rather significant disparity has something to do with fairly deep structural dissimilarities between the American and Spanish economic models. In fact, if I were a professional free-market ideologue like Mr Brooks, I might suggest that a comparison of American and Spanish unemployment rates illustrates why the right-wing construction of "labour freedom", as opposed to the left-wing, pro-union construction, is so profoundly important for the long-term welfare of workers. An apostle of free markets might argue that a full quarter of Spain's labour force languishes without work precisely because the Spanish are so hostile to the model of "free enterprise" Mr Brooks so tirelessly promotes. So keep up the good work, Americans!
Why doesn't Mr Brooks make this argument? Why is he instead so keen to cast America as a flailing social democracy? He shows his hand in the column's penultimate paragraph:
What is the answer? We caught a glimpse of it in 2010, when a movement of ethical populism—the tea party—mobilized millions of Americans to read the United States Constitution and demand politics that reflect the majority's values. And while woefully misguided in its diagnoses and policy solutions, the Occupy Wall Street movement was at least right to protest the malignant cronyism in our economy. That energy must re-emerge in 2012 and become a permanent part of our political landscape.
The answer is that Mr Brooks reckons his longed-for permanent movement of conservative "ethical populism" might be conjured and riled by the spurious idea that America requires rescue from its imagined descent into Euro-style social democracy. In contrast, the fact that America's relatively high level of economic freedom has helped it weather the global economic crisis relatively well, even in the era of that pinko Barack Obama, is less likely to stir up useful idiocy.
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Be that as it may, but both are broke & lurching headlong into penury.
The difference between the economic indicators that you mention of spain and the us has less to do with leftwing or rightwing governments, more to the economic structure of both countries. Spain´s resembles that of a third world country or a typical 20th century economy. While the US has some of the worlds most innovative corporations. In other words the high unemployment in Spain is due to the fact that there are no jobs created because there is are actually few sector in the Spanish economy, Its all based on construction, tourism, and agriculture and a bit of manufacturing. The construction industry is basically dead and there is where the bulk of unemployment comes from.
I´m sure the US unemployment rate would me much higher if Obama didn´t do some pretty 'socialist stuff' as you yanks say, such as pomping money into the automobiles sector. If it wasn´t for that nowadays 100% of all american cars would be foreign made. Which of course would be great for Europe!
And obviously Americans have no idea what socialism is about. The democratic party would in Europe still be considered centred or maybe even centre right depending in which country you survey.
Of course youth unemployment in the US is lower, most of them are still in school.
The Big Difference, is
Americans have true entrepreneurship spirit
Spaniards are just rent seekers ( everyone in spain wanted to buy a house because it was a fashion to take advantage of the housing bubble)
On the other hand.. Spain has a huge deficit because it has given to its people, unsustainable social benefits.
The USA, has a huge deficit, because it has given the rich unsustainable tax cuts, plus it has an unsustainable huge army .
In India:
tax->relax by CBI_Judges_Military_Leaders_GovtEmployees -> Terrorism_Corruption
sell land_2G_3G_etc->relax by CBI_Judges_Military_Leaders_GovtEmployees -> Terrorism_Corruption
has this article been researched at all besides reading a few select sensationalist pieces?
Small difference between Spain and the US. USA is business friendly. Spain is not. Spain has a judicial system that is unworkable, average education is low, and a bureaucracy that actively hinders new and established businesses. Spanish economy has worked on the basis of a constantly devaluing Peseta. The situation we now have was camouflaged for years by EU structural subsidies and the largest property boom known to man.
I don´t think that the judicial system in Spain is worse than in the U.S. In fact, I think it is much more secure than the American system, and more respectful for individual rights. Just note that in the U.S. there are more than two million people in jail and hundreds waiting to be executed (death penalty).
And about average education, even if it is true that according to the PISA report, Spain fell after 2003 (before it was ahed of the U.S.), there is not much difference, and both in the 480-500 range. Average education in the U.S. is not very good. There are much of the best universities in the World (with many foreign students) but average education is similar to Spain.
It may be the case in the criminal justice system, but in Spain you can be held for up to 2 years without charges being filed. If you have a commercial dispute, even a simple one, you are talking years for any sort of resolution, and easily 10 years if your dispute is with a government agency.
This is funny. If I remember correctly ALL of the restrictive labor practices that the (evil) socialists supposedly introduced are actually Fascist-era / Franco-era (for those who insist Franco wasn't a "real" fascist) laws that were maintained after the breathtaking and bloodless transfer of power to a democratic system. That is also the case in Italy where fascist (the original fascists after all) labor laws still dog the economy.
America is screwed. Politicians are screwing the people, buying and manipulating the elections, running secret government with the biggest budget deficit in the world, far bigger than all of Europe combined, far bigger debt as well.
All tax income is spent on military builduo, wars and interest rates on debt, all the other spending is financed with new debt. in addition the middle class is geting poorer and poorer since 2007, and now unemployment is relatively high as well, despite having printeed trillions of dollars to keep the economy going. I dont even want to start thinking about states in the US and their debt, and counties, municipals and cities.
a massive trade deficit and private debt and no savings does not make things better. in addition what America is so dependent on, the financial industry, is collapsing all around us.
I pay over 55% income taxes in NY, that's on top of nearly 9% sales tax and high real estate taxes.
America's problems don't come from socialism. They come From special interest groups robing the country.
We wasted over $4 trillion in the war in Iraq, orchestrated by AIPAC based on lies. We have wasted trillions more to kerp a massive offensive force in and around the ME because of AIPAC.
We have accumulated unprecedented debt and printing unlimited amount of money to bring back profits to Wall Street, the main funding source of AIPAC. The FED under Greenspan and Bernanke are manipulating our currency and interest rates everyday and we are surprised to hear Wall Street was doing it too. Large corporations pay virtually no taxes while entrepreneurs are subject to rediculous taxes. We waste tremendous resources because of a large bureaucracy in Washington and on a state level. Our congress with an approval rating in single digits can't get simple deficit reduction goals in place because of hundreds of special interest groups.
The Economist should call out senseless talk by the likes of the AEI but it should also point out what is really destroying our country financially and morally.
55%?
Nobody in the UK (even including social security) pays a marginal rate even approaching anything like 55%.
There's too much temptation to cheat. How about a VAT?
That was a fantasy.
I am tired of reading about 35% top tax rate in US. If you do not live in Texas or Florida add 10 or more percent of state tax, then we getting closer to EU country levels. Well, EU might introduce something like federal tax to push it even higher, lets see....
Looking holistically at US government revenue, it's 32% of GDP - less than "socialist" countries like Spain, the UK & Germany (36%, 37% & 44%) or the tax cheating Greeks & Italians (42% & 48%).
That said, the US is running a deficit to the tune of double digits.
Still, the US isn't quite "socialist" on the expenditure side either. At 40% of the GDP, that's a decent margin below 42% in Spain, 42% in Canada, 45% in Germany or 36% in Australia (with universal free government healthcare).
That said, the US doesn't count compulsory employer payment for health insurance (or general health costs) as a tax, which it is in most other countries. After accounting for that, I guess American trend tax rates really are just as "socialist" as Europe - just that they're designed in a way to take more from the lower/ middle class, and prioritise the military over a basic safety net.
* evidence:
Tax:
http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/weorept.aspx?pr....
Expenditure:
http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/weorept.aspx?pr....
Oh yeah, trust our governments to make the right long term plans. Free world governments may not have any clear foresights, but they are still around. In my book, that beats any 5-year planning, BS talking governments and big brothers you clearly miss.
My system, and these so called idiots, are all a part of THE system that have shaped the world you and I live in and for the last hundred years or so. Anything else comes a very distant second and not much else is left.
Unlike you, I treat my b1tch with respect and love and mostly it works wonder for me.
************************************
Leon HAHA,
Does Al Sharpton respect the b1tch?
When a government is demonized, no way will it be able to make long term plans. Do you like to check some FACTS (to see who are responsible for that) ?
Freedom Tower (couldn't get it done within 10 years), O'Hara airport, Barclay center, interstate 710 (planned for 40 years, now a joke, like the infrastructure in India), 2 Trillion dollar hole needed for infrastructure (just for maintenance, not to mention building new).
When 100 people can block a plan that would benefit 100,000 people, don't blame the problem on government.
BTW, there are some mouth-bigger-than-butt @$$ holes who love to blame everything on government.
Though their words sound like music to your ears, they are bunch of morons who don't even have sense of basic logic. They always talk about "should" and "shouldn't", but never about "how".
For example, they blame government for the halt of space program, never talk about whose money government should cut so government has money for the program.
They object death penalty like only they care about the lives (of criminal). but how to stop the crime ? FOR DECADES, YOU CAN NOT SEE A CLUE FROM THE WORDS OUT OF THEIR BIG MOUTHS. I bet you have no clue how much your government each year on each criminal on death row.
Look at Spain and the U.S. in the CPI (Corruption Perception Index) of Transparency International:
YEARS 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
U.S. 7.1 7.1 7.5 7.3 7.2 7.3 7.6 7.5 7.7 7.6
SPAIN 6.2 6.1 6.1 6.5 6.7 6.8 7.0 6.9 7.1 7.0
The U.S. is closer to Spain than to the 8-9 level of the Northern European countries and former British Dominions.
That's because Europeans are too sheepish and trusting.
CPI is an index of perception; perception can be wrong.
Logically speaking, it simply doesn't make sense that the US would be more corrupt than any other western country. Its sheer size and economies of scale have allowed it to create an army of professional attorney generals who aggressively hunt down corruption. Unless European and Canadian societies (and their members) are made of different cloth than American ones, it is very likely that a lower perception of corruption in other western countries is just that; perception.
But the perception is from the people trying to do business in that country. So they have some experience on which to base the perception. There is no "army" of profesional attorney generals. There are 51. They are either elected politicians or appointed by politicians. They are "responsive" to the "needs" of the persons who helped elect them. Attorney Generals, also known as the future governors of America, can be "captured" by the people who funded their once and future elections. Count the number of attorneys involved in prosecuting corruption and compare against the number prosecuting plain old drug cases, the mismatch is stunning.
As this newspaper noted some time ago the northern Europeans are easy to identify. They are the ones who always stop for the pedestrian signals, even when there is no traffic. That's a little thing, perhaps, but as Gunny Sergeants have been beating into Marines for generations it's the little things that count. The northern europeans were once as corrupt as the southern. The upper class English used to pull knives on one another and slit throats to settle differences, now they only do in metaphor. Corruption is not in the genes as you suggest but in the social contract.
Spain is in this mess because regional politicians used the state banks as piggy banks, for simple stealing, for hiring family/friends/supporters, and for dumping money into the local real estate market. You've heard of that airport that closed without ever opening? That's the Spanish political class spending ten dollars for every one in their pocket. Now the people who put their savings in those banks will never see their money.
But you can add another chart about a much more impressive spending. While the Spanish health care system takes 6% of Spain´s GDP, and that with universal health care, and with some strong private hospitals (like Navarre) and health care companies (like Adeslas)...in the U.S. the health care system takes 16% of America´s GDP. I don´t care for the private sector health care economy because people spend their money as they want...but the public health care system in the U.S. (Medicaid and Medicare) already absorb 7% of America´s GDP and only cares about 25% of the U.S. population. And, with all that spending, American indicators are worse than Spain´s. Spain´s life expectancy is higher, for example.
That´s true only that it is 17.5 % of GDP in the US;you must know better the figure for Spain but I remember it was more like 9%.
That´s one giant waste of resources in the US. Can you inform us of what areas of the Spanish economy are affected by large-scale waste?
Mr Brooks figures regarding Spanish debt are out-dated.
If we add up the recent EU bailout of the Spanish banking sector,
the public debt-to-GDP ratio in Spain is 118%.
To have the complete picture of Spanish debt, the private debt of 300% of GDP should be added.
It seems the Mr Brooks is right when he says that "Spain is in a self-cannibalizing downward spiral".
There are several cannibals in Spain, but the number one monster
is the absurd territorial administration system with 17 local
governments, 17 local parliaments, 17 different legal and fiscal systems, more than 120 "embassies" maintained by the local governments in all continents, 17 ombudsmen, plus central administration in Madrid with its central government and parliament.
No country in the world can survive such a madness of public spending.
And in the U.S. you can add the private debt too which is similar as in Spain. And the budget deficit in America is even higher than in Spain, and has been so during the last decade.
The excessive layers of the Spanish Administration, with Autonomous Communities, Diputaciones Provinciales and thousands of districts is a consequence of mixing at the same time the old French system of prefectures (provinces) with the American system of states (Autonomous Communities) as the democratic Government tried to imitate the U.S. in everything....and at the same time Scandinavian countries (ombudsman)
Of course, that is unsustainable, but at present the percentage of public servants in the labor market is similar in the U.S. and in Spain. In the U.S., at all levels (Federal, State, District, Defense, Police etc) there are as a percentage of the population a simlar figure as in Spain.
In my opinion, the number of civil servants in Spain is too high
and should be reduced, but you are right that the percentage
of civil servants in Spain doesn´t represent a major problem.
The real problem in Spain is the huge number of professional
politicians (double than Germany) in overwhelming majority corrupted to the bone, lazy and incompetent.
I agree it is too high with many unecessary institutions. There are thousands of bureaucrats and politicians who use the Administration in a similar way as the absolutist Kings or the mafia, that means as if the Budget was HIS/HER money and they can use it to give a job to people who are close to them.
But, at the same time, there is a part of the Administration (Justice, Defense, Health Care) which needs more public servants in several fields (doctors, nurses, judges)
I agree it is too high with many unecessary institutions. There are thousands of bureaucrats and politicians who use the Administration in a similar way as the absolutist Kings or the mafia, that means as if the Budget was HIS/HER money and they can use it to give a job to people who are close to them.
But, at the same time, there is a part of the Administration (Justice, Defense, Health Care) which needs more public servants in several fields (doctors, nurses, judges)
The guy runs the American Enterprise Institute. One what planet could anybody think he might come up with something rising above useful idiocy?
What will happen to http://en.wikipedia.org/wiki/American_middle_class if every country follows CHINDIA economic/export/currency tricks.
http://en.wikipedia.org/wiki/Renminbi#Value
It's nice to see that the Economist at least in this article clearly sees itself as a voice of sensible economics, and makes no effort to give comfort to the extreme Reich wing idiots that dominate our discourse in the USA.
Cherry picking is indeed the right word to describe what Brooks did.
For every figure he chose you could probably find a dozen that paint a starkly opposite picture of the USA, like the # of people without any sort of health coverage vs. a vs. any nation in Western Europe, and beyond that the miserable level of coverage most have. Only when you reach the upper middle income in the USA, do you see health care coverage and services in line with what Western Europeans think of as the norm, albeit at 3x the cost.
As the business wizard, George Soros said and wrote in his articles ,economic melt-down of2008 was triggered through poor regularly system of Financial institutions and all the poorer monitoring of the same , primarily by Bush administration. likewise OWS was a reflection of Arab Spring on account of Economic Vultures intensifying their strangle-hold through unregulated financial institutions as described by E Schultz in his book ," The killer Politics"
There is one thing shared by both countries (actually, shared by almost all the countries in free world):
Neither government can make long term plans.
Now start using your brain, not what you are told.
Oh yeah, trust our governments to make the right long term plans. Free world governments may not have any clear foresights, but they are still around. In my book, that beats any 5-year planning, BS talking governments and big brothers you clearly miss.
Leon,
Tell me what is so great about your system if it routinely put idiots or @$$ holes into offices.
and when you treat goverment like a b1tch, do you seriously expect a b1tch will work for you ?
My system, and these so called idiots, are all a part of THE system that have shaped the world you and I live in and for the last hundred years or so. Anything else comes a very distant second and not much else is left.
Unlike you, I treat my b1tch with respect and love and mostly it works wonder for me.