Mind the gap

TomPaine.com provides an interesting analysis of why the European trade unions are apparently less hostile towards globalisation and free trade than their US counterparts. The argument is that European social safety nets mean the prospect of unemployment is less traumatic than in the US.

The article, however, operates from the premise that free trade does cost jobs, when all the evidence is that — on aggregate — it creates jobs. Part of what is stoking the rise of the far right in continental Europe is the economic stagnation and lack of jobs. The European system works well for those in work, but at the cost of unacceptably high unemployment. France has 9% unemployment, Germany 9.6%, Italy 9.1% and Spain 12.9%.

Unsurprisingly, those statistics don’t figure prominently in Will Hutton’s latest attempt to prove so-called Rhineland capitalism is far superior to Anglo-Saxon capitalism. There are many good points in the extracts from The World We’re In, but the demonisation of the American system is as nonsensical as his selective, rosy picture of the continental system. Doc Searls notes that American business (surprise) isn’t monolithic: “There is no reason that a highly competitive company can’t be an organization of human beings. Volkswagen and Nokia (the poster companies fo the author’s case) prove that. So do Johnson & Johnson and SAS Institute on this side of the Atlantic.”

Exercise great caution, as well, at Hutton’s assertions on European productivity. Martin Wolf argues the contrary. Some European countries (not the UK) have good productivity, but they work far fewer hours than the US (and the size of their workforces is generally declining while the US is growing because of radically different immigration policies). Europeans are choosing leisure over wealth (and high unemployment over low unemployment). It’s a legitimate choice (although Martin reckons it’s not sustainable), but it is a choice that will lead to a growing gap in economic outcomes.