T Nation

Future of Euro Social Democracy?

A couple interesting posts speculating on the future of European Social Democracy – I’m particularly interested in what the Europeans think of this pessimistic outlook?

From Crooked Timber, Tyler Cowen notes:

[i]Is Social Democracy a viable model for the European future?
Posted by Tyler Cowen

“Political history in the advanced industrial world has indeed ended, argues this pioneering study, but the winner has been social democracy?”

So runs the opening blurb on Sheri Berman’s The Primary of Politics: Social Democracy and the Making of Europe’s Twentieth Century. Most of the book is a well-researched account of the history and subtlety of social democratic thought, but I wish to consider the broader framing of the argument. In the last chapter the author returns to her apparent view that social democracy is fundamentally a solution to the problem of politics and it will remain relevant, indeed dominant, throughout the twenty-first century.

Much as I have enjoyed living in, working in, and visiting Western Europe, I have my doubts.

The Western European economies, which I take as the living embodiments of social democracy, face a dual crunch: low rates of economic growth and unfavorable demographics.

The importance of economic growth is obvious, but rarely are the long-range implications of lower growth taken seriously.

If a country grows at two percent per annum, rather than one percent, the difference in wealth or welfare in a single year is relatively small. Over time the difference becomes very large. For instance, had America grown one percentage point less per year, between 1870 and 1990, the America of 1990 would be no richer than the Mexico of 1990.

Growth laggards fall behind. If we compare a one percentage point differential in the growth rate, and start at real income parity, we need a time horizon of 110.4 years to establish a 3:1 ratio of superiority of per capita income. If we are comparing a two percentage point boost in the growth rate we need a time horizon of only 55.5 years to establish a 3:1 superiority in per capita national income.

Nobel Laureate economist Robert E. Lucas put it succinctly: “?the consequences for human welfare involved in questions like these are staggering: once one starts to think about [exponential growth], it is hard to think about anything else.”

For all its virtues, social democracy stands in danger unless Europe can boost its rates of economic growth. Even if some of the more radical social democrats may feel that “people already have enough,” it is hard to imagine Europe persisting and flourishing if it ends up as the “poor man out” and in a state of relative impoverishment. If nothing else, the most talented Europeans would migrate elsewhere. There are already 400,000 EU researchers working in the United States, and it is not clear when they plan on returning.

Most of Western Europe experienced a long postwar boom, lasting at least through the late 1970s (the timing is later for Spain). This was sustained by rebuilding, an enormous growth in world trade, and by lower levels of government intervention than we see today. But welfare payments rose, taxes rose, labor markets became less flexible, interventions favored insiders to a greater degree, regulations were cartelized, and the entrepreneurial spirit ebbed.

Western European per capita income is now about 30 percent below that of the United States and I see the gap widening rather than closing. It is common for the United States rate of productivity growth to be twice as high as that of the core European nations (NB: don’t be fooled by statistics of high average labor productivity levels in some countries, such as France. In part they result from limits on the creation of low-wage jobs and they do not predict good future performance.) The relatively free Ireland continues to boom, but France, Germany, Italy and others have performed poorly. Even the Dutch economic miracle appears to have ended.

Germany may experience a current blip in growth rates, coming close to three percent over the next year. But this will not sidestep the broader and persistent problem of shrinking populations. Most European birthrates are under the 1.5 mark and it is quite possible that many national populations will be cut in half by 2050. Along the way there will be too many retirees per worker and current European tax rates ? already among the highest in the world ? will have to rise. Since older populations also tend to be less productive, it is hard to see how Western Europe might reassume world economic leadership or even hold its current relative ground. Nor has the EU, for all its benefits, proven itself a good mechanism for making economic policy; farm subsidies are over 45 percent of the EU budget.

Part of the demographic problem, of course, is that the real standard of living in Western Europe is remarkably high. Western European women have learned how much fun they can have, living in Europe and traveling abroad, when they are not tied down with four children. The extreme secularism of Western Europe ? a philosophy which I share and indeed cherish ? also promotes small families. Religious exhortations to have more children, combined with a child-friendly church culture, do in fact raise birth rates. In both economic and cultural terms, Western Europe is not investing enough in its future.

It seems that for Western Europe to regain its dynamism, it has to move to a freer market economy, higher rates of childbirth, higher immigration, and greater religiosity. It has to stop being the Europe which we (or at least I) love, and become more like the United States.

The defender of the European way can attempt four arguments:

  1. The proper rate of social time discount is high. Yes, America will be much wealthier in the future but that simply doesn’t matter much.

  2. America’s growth advantage is illusory. Cowboy capitalism is self-destructive, and in the long run the European economies are better bets.

  3. Europe will return to traditional morality and high rates of child-bearing, but in the meantime we should keep this wonderful experiment going for as long as possible.

  4. Islamic immigrants, plus Chinese and Indian tourists, will save the European way of life.

I hear #2 from many Europeans, and from some American leftists, but it is mostly fantasy. If American does self-destruct it will more likely be from foreign policy than anything else. A look at the comparative microeconomics of information technology, research and development, or American universities, confirms that America’s growth edge is rooted in fundamentals.

I will not, in this forum, debate the ethics behind #1, which I have argued against elsewhere ( http://www.gmu.edu/jbc/Tyler/social-discount.PDF ). Furthermore #1 is not an easy fit with the pro-education, pro-future, anti-global warming sentiments found on the Left.

#3 and #4 are plausible. We do not know for sure they are true, but they violate neither the available data nor a first-cut application of economic reasoning.

These hypotheses, however, are damaging to European pride and damaging to the idea of social democracy as a universal model. #3 implies that the current arrangements, however noble, are doomed. #4 implies that the model can be sustained only with the assistance of foreigners, and poorer foreigners at that. In that scenario Europe survives as an Asian and American theme park, with the manual labor done by Muslims. The French and German lifestyle will continue, but with smaller numbers and as a kind of museum piece.

The bottom line: European social democracy will go down in history as a glorious moment in the sun. But its deep structural problems, most of all for delivering ongoing economic growth, mean that 21st century Europe will have to take a very different course. For better or worse, history will continue. The one component missing from Social Democratic Theory ? and from this otherwise excellent book ? is realistic economics.[/i]


Then Ilya Somin piles on with some more pessimism here:

http://volokh.com/archives/archive_2006_10_29-2006_11_04.shtml#1162348462

[i]The Crisis of European Social Democracy:

Co-blogger Tyler Cowen has an excellent post on the looming crisis facing the Western European model of social democracy over at Crooked Timber.

I agree with most of Tyler’s points. Unfortunately, however, I think that the risks posed by social democratic policies are in some respects even greater than he argues. The combination of high unemployment, low growth, and severe tensions between Muslim immigrants and native-born citizens (partially a result of the first two factors) has the potential for bringing political extremists to power in one or more European countries. In the first round of the most recent French presidential election ( http://en.wikipedia.org/wiki/French_presidential_election,_2002 ), the far right (the racist National Front and similar groups) and far left (trotskyites, communists, and others) combined for some 40% of the vote. Extremist parties have also gained strength in recent years in Italy, Germany, several Scandinavian nations, and elsewhere in Western Europe.

If European governments fail to improve the anemic economic performance described by Tyler, and remain unable to assimilate Muslim immigrants effectively, there is a real chance that voter frustration will increase, and the far right or far left will successfully exploit it and eventually come to power in one or more major European nations - with potentially disastrous results. Many of those Europeans who vote for extremist parties are probably just “protest voting” and do not actually endorse their platforms in full. But the same was probably true of many of the Germans who “protest-voted” for the Nazis and Communists during the Weimar Republic (as Richard Evans suggests in this recent book: http://www.powells.com/review/2004_07_03.html ). The results this time around probably will not be as bad as what happened in the 1920s and '30s, but neither will it be pretty.

I hope that Western European nations will head off this potential catastrophe (as well as the risks highlighted by Tyler) by adopting more market-oriented policies, as Ireland has recently done with great success. I fear, however, that many governments will prefer to try to muddle through with current policies rather than pay the short-term political costs of alienating labor unions, government employees and other powerful interest groups that support the status quo.

All of this is not to say that US policies don’t have their own flaws; indeed, they have many. But, for the reasons Tyler emphasizes, as well as others, the US economic system at this point in time is doing considerably better than Western Europe. In part because of greater economic opportunity, we are also more successful in assimilating immigrants, including Muslims ( http://www.csmonitor.com/2006/1023/p01s04-ussc.html ).[/i]

…i won’t claim to have understood everything you posted, but i for one am getting tired of this push for perpetual economic growth. I dread the moment that Europe adopts all economic values that the USA hold dear. I wouldn’t want to live in such a society, and i know many of my countrypersons feel the same way.

We have general elections coming up on the 22 of november, and the polls are predicting a shift away from the right and more towards are social government. I will vote for the socialist party…

I do not think that this is pessimistic, I think it is spot on.

You cannot argue with expontial growth, demographics or basic economics, so why bother?

In Austria foreigners allready do get blamed for our social systems coming apart at the seams, so I would not be surprised if this gets ugly.

The future of Europe lies with Europeans.

I’ve read most of the o.p.

The slow economic growth in Europe is not because a lack of dynamics. It’s because we don’t have a population growth.

Let’s compare 2 countries, one with zero population growth and 1% economic growth, and another with 1% population growth and 2% economic growth.
The wealth of the people is comparable after 100 years.

The 0% population growth shouldn’t be a problem. The world can’t continue to feed more and more people every year. So 0% population growth isn’t the problem, it’s the sollution.

[quote]ephrem wrote:
…i won’t claim to have understood everything you posted, but i for one am getting tired of this push for perpetual economic growth. I dread the moment that Europe adopts all economic values that the USA hold dear. I wouldn’t want to live in such a society, and i know many of my countrypersons feel the same way.

We have general elections coming up on the 22 of november, and the polls are predicting a shift away from the right and more towards are social government. I will vote for the socialist party…[/quote]

But if nobody’s working who will pay the taxes?

[quote]J.Boogie wrote:
ephrem wrote:
…i won’t claim to have understood everything you posted, but i for one am getting tired of this push for perpetual economic growth. I dread the moment that Europe adopts all economic values that the USA hold dear. I wouldn’t want to live in such a society, and i know many of my countrypersons feel the same way.

We have general elections coming up on the 22 of november, and the polls are predicting a shift away from the right and more towards are social government. I will vote for the socialist party…

But if nobody’s working who will pay the taxes?
[/quote]

[sigh]

[quote]J.Boogie wrote:
ephrem wrote:
…i won’t claim to have understood everything you posted, but i for one am getting tired of this push for perpetual economic growth. I dread the moment that Europe adopts all economic values that the USA hold dear. I wouldn’t want to live in such a society, and i know many of my countrypersons feel the same way.

We have general elections coming up on the 22 of november, and the polls are predicting a shift away from the right and more towards are social government. I will vote for the socialist party…

But if nobody’s working who will pay the taxes?
[/quote]

We’re counting on a new Marshal plan.

[quote]ephrem wrote:
…i won’t claim to have understood everything you posted, but i for one am getting tired of this push for perpetual economic growth. I dread the moment that Europe adopts all economic values that the USA hold dear. I wouldn’t want to live in such a society, and i know many of my countrypersons feel the same way.

We have general elections coming up on the 22 of november, and the polls are predicting a shift away from the right and more towards are social government. I will vote for the socialist party…[/quote]

…as in National Socialist?

[quote]Wreckless wrote:
J.Boogie wrote:
ephrem wrote:
…i won’t claim to have understood everything you posted, but i for one am getting tired of this push for perpetual economic growth. I dread the moment that Europe adopts all economic values that the USA hold dear. I wouldn’t want to live in such a society, and i know many of my countrypersons feel the same way.

We have general elections coming up on the 22 of november, and the polls are predicting a shift away from the right and more towards are social government. I will vote for the socialist party…

But if nobody’s working who will pay the taxes?

We’re counting on a new Marshal plan.
[/quote]

We should have left you alone to make your own way, since you’re all so startlingly brilliant. After devestating your continent with Napolean on up, we should have given up on you guys as simply suicidal maniacs, much like we should give up on the Middle East.

Please, any Americans reading this, let these maniacs in Europe and the Middle East all kill themselves. Don’t drag our country down with this muck!!

[quote]Wreckless wrote:

The 0% population growth shouldn’t be a problem. The world can’t continue to feed more and more people every year. So 0% population growth isn’t the problem, it’s the sollution.[/quote]

For once, I can’t disagree. Voluntary 0% population growth in Europe represents a fantastic solution.

Are you truly that stupid or is it just an act?

[quote]lucasa wrote:
Wreckless wrote:

The 0% population growth shouldn’t be a problem. The world can’t continue to feed more and more people every year. So 0% population growth isn’t the problem, it’s the sollution.

For once, I can’t disagree. Voluntary 0% population growth in Europe represents a fantastic solution.[/quote]

…someone has to make the sacrifice. 300 million people in the US, and that was an accomplishment? Scientists predict empty oceans around 2050 due to overfishing, but by all means, continue to procreate, consume and pollute. Who cares, eh?

[quote]Ken Kaniff wrote:

…as in National Socialist?

Are you truly that stupid or is it just an act?

[/quote]

…it’s a stupid [and boring] act…

[quote]Headhunter wrote:
Wreckless wrote:
J.Boogie wrote:
ephrem wrote:
…i won’t claim to have understood everything you posted, but i for one am getting tired of this push for perpetual economic growth. I dread the moment that Europe adopts all economic values that the USA hold dear. I wouldn’t want to live in such a society, and i know many of my countrypersons feel the same way.

We have general elections coming up on the 22 of november, and the polls are predicting a shift away from the right and more towards are social government. I will vote for the socialist party…

But if nobody’s working who will pay the taxes?

We’re counting on a new Marshal plan.

We should have left you alone to make your own way, since you’re all so startlingly brilliant. After devestating your continent with Napolean on up, we should have given up on you guys as simply suicidal maniacs, much like we should give up on the Middle East.

Please, any Americans reading this, let these maniacs in Europe and the Middle East all kill themselves. Don’t drag our country down with this muck!!
[/quote]

Headhunter, you STILL amaze me.

Yesterday it was your idiotic “Chamberlain” wise ass remark, today it’s this crap. What kind of “history for rightwingoverse dummies 101” is gonna be on schedule tomorrow?
Napoleon? It’s nice to see you’ve heard about him. But I fail to see a connection to “Euro Social Democracy”.
I’ve heard that you’re a teacher. Pray tell that it’s not history.

J.Boogie, your conclusion that nobody’s working hit the nail right on.
I’ll be telling my fellow hobo friends to consider seeking out employment.

Guys, has anyone of you been been hangin out in Western Europe for some time? You’d be amazed that the standard of living is about the SAME as in “US and A”, while you’re working LESS. We might have not the same number of billionaires, but that’s about it.

Of course, things will change.
As Orion already said: it’s hard to argue with demographics and basic economy.
And that I won’t do. But there won’t be any big catastrophies or revolutions ahead. At least not because the “euro-socialist-experiment” is falling apart.

[quote]Ken Kaniff wrote:

…as in National Socialist?

Are you truly that stupid or is it just an act?

[/quote]

He said he was voting socialist and I just want some clarification. Is he voting for the National Socialists or something about the Union of Soviet SOCIALISTS (USSR).

I’m simply curious as to what kind of socialism he prefers.

[quote]Schwarzfahrer wrote:

Headhunter, you STILL amaze me.

Yesterday it was your idiotic “Chamberlain” wise ass remark, today it’s this crap. What kind of “history for rightwingoverse dummies 101” is gonna be on schedule tomorrow?
Napoleon? It’s nice to see you’ve heard about him. But I fail to see a connection to “Euro Social Democracy”.
I’ve heard that you’re a teacher. Pray tell that it’s not history.

[/quote]

Didn’t you read up on Houston Stewart Chamberlain and his very influential work? I mean, your countrymen revered the guy and incorporated his ideas into governmental policies. Why is that a wise ass remark? Aren’t you interested in your own country’s history and weltanschaung (world view, sorry about the spelling)? Man, broaden your outlook a little…sheeessshhhh…

Martin Luther was another cool dude, what with wanting to kill all the Jews and everything. Is that why Germans, a lot of 'em anyway, are Lutherans? Remember how he sicced all the nobles and shit onto the common people, with the church’s blessing? What a player!! How dare those commoners want to vote!!!

Germans are just plain fascinating!!!

[quote]Schwarzfahrer wrote:

Napoleon? It’s nice to see you’ve heard about him. But I fail to see a connection to “Euro Social Democracy”.
[/quote]

Well, if you consider Rousseau’s influence on Napoleon–and the French Revolution as a whole–and the fact that Rousseau was one of the first to really question the idea of personal private property, I guess there is a vague connection of sorts; however, I’m sure that’s not what headhunter had in mind.

On a serious note, headhunter, you’ve got to be one of the most unflinchingly ethnocentric people I ever seen. Say whatever you might, he’s consistent…

[quote]Headhunter wrote:
Ken Kaniff wrote:

…as in National Socialist?

Are you truly that stupid or is it just an act?

He said he was voting socialist and I just want some clarification. Is he voting for the National Socialists or something about the Union of Soviet SOCIALISTS (USSR).

I’m simply curious as to what kind of socialism he prefers.

[/quote]

…okay. Normally politics is about a number of interest groups that strive for [financial/political] advantage. If the constituency is appeased and the votes secured, it doesn’t matter what happens with the others who voted differently, they simply lost out on the deal…

…i was never able to understand that. We’re all living in the same country, trying to make the best of a, sometimes, shitty situation. We don’t need selfish people to make it any more difficult, do we? Modern socialism is about creating a society that realistically aims to provide a quality of life to everyone that is of a certain level…

…yes, the rich and the priviledged contribute a bit more, and the less fortunate work a bit harder, but it is a scenario that benefits all…

[flame away]

[quote]Headhunter wrote:
Schwarzfahrer wrote:

Headhunter, you STILL amaze me.

Yesterday it was your idiotic “Chamberlain” wise ass remark, today it’s this crap. What kind of “history for rightwingoverse dummies 101” is gonna be on schedule tomorrow?
Napoleon? It’s nice to see you’ve heard about him. But I fail to see a connection to “Euro Social Democracy”.
I’ve heard that you’re a teacher. Pray tell that it’s not history.

Didn’t you read up on Houston Stewart Chamberlain and his very influential work? I mean, your countrymen revered the guy and incorporated his ideas into governmental policies. Why is that a wise ass remark? Aren’t you interested in your own country’s history and weltanschaung (world view, sorry about the spelling)? Man, broaden your outlook a little…sheeessshhhh…

Martin Luther was another cool dude, what with wanting to kill all the Jews and everything. Is that why Germans, a lot of 'em anyway, are Lutherans? Remember how he sicced all the nobles and shit onto the common people, with the church’s blessing? What a player!! How dare those commoners want to vote!!!
Germans are just plain fascinating!!!
[/quote]

Like I said in another thread, I think you really need to broaden your intellectual horizon.
As a German, I practically ATE history lessons about national socialism.
It’s a impudent as well as primitive to try to simplify the rather complex reasons behind the advent of the NSDAP and it’s ideology with Hegel and German philosophy.
It’s like I’d say: Well you Americans are known to be rassists, I mean we all know how it started with Ku Klux Clan and Buffalo Bill in the wild West.

Also, I’m not sure if you sometimes trying to be funny: