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Two American news stories on the European safety net

by Magnifico Mon Mar 30th, 2009 at 06:58:09 PM EST

Reporting on Europe in American newspapers usually seems pretty dodgy. Without living in continental Europe or being able to read local newspapers written in the vernacular language, a reader like me is left to the reporting of the English-language press and the insights of European friends and bloggers.

Last Thursday, the New York Times really reported that European social safety nets provide a built-in economic stimulus, however it came across as a screed on how European nations aren't doing their part to stimulate the economy. The story's headline actually read: "Aided by Safety Nets, Europe Resists Stimulus Push".

Here's an excerpt about Germany:

The Europeans say they have no need for further stimulus right now because their social safety nets, derided in good times by free market disciples as sclerotic impediments to growth, are automatically providing the spending programs that the United States Congress has to legislate.

Europe's extensive job protections and unemployment benefits are "bad in the upswing, because firms don't dare to hire people, because then they are glued to them," said Hans-Werner Sinn, president of the Ifo Institute for Economic Research in Munich. "In the downswing, it's good if the people are glued to the companies. They keep their jobs. They keep their income. They keep consuming." ...

Germany already has generous unemployment benefits compared with the United States. And many German companies give workers the flexibility to save overtime hours, carrying over the pay for a rainy day. In the United States, despite scattered reports of unpaid furloughs and wage cuts, companies still rely heavily on layoffs to control labor costs.

I've never looked for work in Europe, so I don't know if "firms don't dare to hire people, because then they are glued to them" is true or not; however I do know in the United States company loyalty to their workers is minimal to the point of being non-existant. I feel as a worker that I am viewed as an interchangeable and expendable unit of work, not as a person. While my 'utopian' belief is that purpose of corporations should be about providing employment, the reality is their purpose is maximize profits.

Now on Monday, the Los Angeles Times reported on "Europe or Bust: When a strong safety net begins to fray" that is about "a slow-motion crisis unfolds in famed welfare states as the middle class feels the pinch of a sagging economy." The news story paints a bleaker picture for France, Italy, and Spain than the NY Times story did for Germany.  It begins with gloom:

Italian supermarkets report an increase in shoplifting by first-time offenders, especially among the middle class and the elderly. The most popular target for rookie thieves: Parmesan cheese.

French shoppers, famously insistent about freshness, no longer snub foods that are close to the expiration date. Discovering an underground market for almost-expired products fished out of dumpsters, stores decide to keep the spoils on the shelves.

Spanish police detect a shift in car thefts, from luxury brands to the sensible, midrange models now in demand on the black market.

Okay, if that was a blog post I'd ask to see some links. Is there really a shoplifting crime wave in Italy where the elderly steal pasta and Parmesan? And isn't food that hasn't expired still, um, fresh enough to eat? And aren't car thefts common everywhere? The luxury automobile known as the Honda Civic is the number one stolen car in the United States, for example.

But still things must be really bad in Europe for this story to be in an American newspaper, right? Nope. The real reason for the story is because Europe is Doomed™.

The street-level repercussions of the economic meltdown have been less brutal than in the United States or Eastern Europe, because of the strong government-backed social welfare network in France and its prosperous neighbors. But experts warn that the safety net is starting to fray as the global crisis persists, unemployment rises and benefits run out.

Unemployment numbers are rising in France according to the article, and half of the respondents in a recent French poll "could imagine themselves ending up on the street." Now, as I see this, this could be fear of becoming homeless or solidarity with their fellow Frenchmen and women. Because, as the article continues:

If the American dream is opportunity, the European dream is equality. Europeans don't grow up believing that anyone can be elected president or build an empire out of a small business. But they trust the state to help make a middle-class lifestyle widely accessible with solid health and education infrastructures, ironclad labor protections and a generous system for the unemployed and the poor.

Opportunity is a myth in my opinion. I don't know if European equality is just as much of a myth or not. I don't know if Europeans children grow up believing they can be the leader of their respective nations or not, but I think it is true that many American kids do internalize this belief. However, by the time a person finishes high school that dream usually has been squashed for most people. However with my midlife values, the idea of equality sounds pretty darned good.

Looking at euro-dollar exchange rates over the past decade, it sure seems like Europe is a lot less doomed than the United States is.

So I wonder which Europe is it? Is it simply a difference between Germany compared to France, Italy, and Spain? Or, a typically slanted American newspaper account of the situation in Europe? Or, something else?

from a head-scratching American.
by Magnifico on Mon Mar 30th, 2009 at 06:59:42 PM EST
I thought "all" American kids these days wanted to be rock stars or roadies.  Seriously,

I heard someone say on one of the US news networks today that the Euro wouldn't last through this crisis. Reason: Germany doesn't want to abandon conservative EU fiscal policies that it helped shape, whereas other countries in Eastern Europe, Italy and some other Western European countries do.  

I can swear there ain't no heaven but I pray there ain't no hell. _ Blood Sweat & Tears

by Gringo (stargazing camel at aoldotcom) on Mon Mar 30th, 2009 at 11:36:18 PM EST
but something tells me that Obama may have changed that.

by Magnifico on Tue Mar 31st, 2009 at 11:13:08 PM EST
[ Parent ]
Well, they say a picture is worth a thousand words, so here are a few:

Obama still a rock star in Europe

'Rock star' Obama in the land of Lincoln

Today Show Groupies Swoon Over 'Rock Star' Obama

President Obama: Rock Star!

Barack Obama: Rock Star!

Then, maybe a video is worth a thousand pictures.  Who knows!

The Rock Obama

I can swear there ain't no heaven but I pray there ain't no hell. _ Blood Sweat & Tears

by Gringo (stargazing camel at aoldotcom) on Thu Apr 2nd, 2009 at 10:36:19 PM EST
[ Parent ]
Opportunity is a myth in my opinion. . . . the idea of equality sounds pretty darned good.

I think what we Americans have finally got to learn is that we are not going to get more opportunity for people in general without a great deal more equality. The two are complements, not substitutes.

by TGeraghty on Tue Mar 31st, 2009 at 08:04:44 PM EST
The US Electorate needs to figure out that they have been sold a bill of goods that has included an explanation of the workings of the economy that, by design, has enabled the ongoing looting of the society and that prevents the vast majority from understanding this seminal fact.  They need to understand that the current crisis is the consequence of the design of the existing system. The only opportunity available to US citizens at this moment that really matters is the opportunity to agitate and advocate for a breakup of the financial oligarchy that has insinuated itself into control of the US Government in the last 30-40 years.  

The more people who demand, in letters to the editor and in communications with their elected representatives, that the big banks that brought us this mess and their managements be brought to account. We should demand that the financial oligarchy and their representatives should suffer percentage losses of their net worth substantially larger than those suffered by the average citizen whom they have victimized, rather than expecting the average taxpayer to make them whole.  Not that we will ever accomplish those goals, but the prospect may make them content to be allowed to slink off with what they have left.  Then responsibility for the direction of the economy may be put into the hands of those whose primary concern is solving the problems that have gotten us here instead of avoiding them.

We should simultaneously advocate that our representatives vote for generous federal financing of all federal elections.  This, in conjunction with the current crisis, will give our representatives the political room to do what is needed.  They will not have to fear that taking effective action against the financial oligarchy will leave them penniless at their next election.  If we do not demand that our representatives work for us and not for the oligarchs we have no grounds for complaint if they continue to serve the interests of the oligarchs.

If we can accomplish this without bloodshed we will not only have saved ourselves, we will have saved what is salvageable of the wealth of the financial elites from the consequences of their own folly.  We are at a point where their own perception of their own interests are self destructive, much like an advanced addiction to heroin or meth.  In fact, the very same neural circuits are activated by greed for money as for an addict's desire for a fix.  Drug use on Wall Street is no coincidence.  

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Mar 31st, 2009 at 11:04:45 PM EST
Well yeah, but if you ask a blue-collar Republican about executive bonuses they say "outlaw them and throw the crooks in jail," but then if you tell them that they're sounding like a Democrat then they say "No, I'm just for the common man."

There is no hope.

by asdf on Tue Mar 31st, 2009 at 11:19:35 PM EST
[ Parent ]
but the part I haven't seen is discussed is the part flex-workers play (or have played), who don't have a long-term contract with a certain company (and hence don't have secure labour laws) but can be shed with greater ease. When a company fires flex-workers, this isn't expressed as a company firing workers, although flex-workers losing their job should be expressed in national unemployment numbers.

As to your last question, I would recall the same observation that has been made about Krugman's analyses on Europe: Europe (or the EU, or EU countries with the euro) is one big, general heap. I suspect it's easy, and misleading. The NYT article talks about Europe, then focusses entirely on the German case.

As a Dutchman, I can at least attest that here kids on the schoolyard don't really want to become leader of the country. In stereotypical Dutch sobriety, becoming the nation's top dog is also not particularly glorified (and with Balkenende, that shouldn't come as a big surprise).

by Nomad on Wed Apr 1st, 2009 at 07:47:24 AM EST
Europe (or the EU, or EU countries with the euro) is one big, general heap.

That point is also true about the US or any other big economy - or even small ones. We draw arbitrary lines, call the things inside them an economy and off we go.

by Colman (colman at eurotrib.com) on Wed Apr 1st, 2009 at 07:50:45 AM EST
[ Parent ]

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