Thursday, January 17, 2008

The World According to Wall St - full text

Foreign Policy magazine in the US complains this month that "in France and Germany, students are being forced to undergo a dangerous indoctrination. Taught that economic principles such as capitalism, free markets and entrepreneurship are savage, unhealthy and immoral, these children are raised on a diet of prejudice and bias. Rooting it out may determine whether Europe's economies prosper or continue to be left behind."

The article, written by Newsweek's European economics chief Stefan Theil, is titled Europe's Philosophy of Failure. In fact, Europe is doing quite well by any objective measures, and it seems somewhat counterfactual to cluck on in this unbalanced way just as the US economy, buoyed only by a continuing flood of Chinese money, teeters
on the edge of a crash, as subprime mortgages and derivatives trading erode the financial foundations of Wall Street.

Undaunted by reality, Foreign Policy continues complaining about Germany and France:

Millions of children are being raised on prejudice and disinformation. Educated in schools that teach a skewed ideology, they are exposed to a dogma that runs counter to core beliefs shared by many other western countries. They study from textbooks filled with a doctrine of dissent ... . Extracting these children from the jaws of bias could mean the difference between world prosperity and menacing global rifts.

Shocked, shocked, as only the country that gave the world Enron, the savings and loan scandal and the almost obligatory half-billion-dollar CEO golden parachute can be, the magazine inveighs: "In both France and Germany, for instance, schools have helped ingrain a serious aversion to capitalism. In one 2005 poll, just 36% of French citizens
said they supported the free-enterprise system ... . In Germany, meanwhile, support for socialist ideals is running at all-time highs - 47% in 2007 versus 36% in 1991."

Portentously the article concludes: "A biased view of economics feeds into many of the world's most vexing problems, from the growth of populism to the global rise of anti-American, anti-capitalist attitudes."

This unsubstantiated prejudice masquerading as economic analysis is pervasive in the US business world. I once interviewed the CEO of an American company that had subsidiaries in Holland and Scotland. He complained that in Holland he had to provide six weeks holiday for the staff and six months of paid sick leave. And although it was not so bad in Scotland, it was far worse than in the US, where he only had to offer two weeks vacation and 10 days sick leave.

I asked him which were his most productive and profitable plants. Holland, Scotland and the US last, he replied. And he could not see the connection. This quasi-theological horror of creeping "socialism" permeates American business, whose leaders have a vision of a Europe mired in perpetual recession.

A country that had built its prosperity behind high tariff walls, with huge government subsidies and infrastructural investments, has spent decades preaching the opposite to a waiting world. George Bush senior had the integrity to call it voodoo economics. The Russians listened and were only rescued from their economic folly when Bush junior's wars quadrupled the price of oil.

The same week that Theil's diatribe was published, the Oxford Economics consultancy calculated that Britain - National Health Service and mandatory holidays notwithstanding - has outstripped the US in terms of GDP per capita. In fact the figures probably understate European living standards compared with the US. While actual workers' income in the US has been stagnant for 30 years and in fact has declined under President Bush, American politicians and business executives have conspired for decades to ensure that the proceeds of the growth in the US economy have flowed overwhelmingly to a tiny

In Germany and France, as well as Britain, there is near universal health coverage, and incomes and employment have been growing steadily. The "stagnant" German economy, in taking over East Germany, did the equivalent of the US incorporating Mexico and giving a dollar per peso, and it still grew.

So, serious magazines should really have articles about the amazing country that persuades its students and voters that it has the best health system in the world, when over 45 million of its citizens have no coverage, another 20 million have inadequate coverage and most working people's insurance is effectively revocable at the caprice of greedy executives. They should be pointing out that the US comes 29th in life expectancy, which may also have something to do with the complete absence of legal holidays, statutory paid maternity leave and one in four children in the world's biggest economy living in poverty.

The official excuse for those bloated CEO pay packages is that they make the US economy more productive - but the US comes below "socialistic" Finland, Sweden, Denmark and Switzerland in global competitiveness.

Journalists should really analyse a media and education system that persuades voters that its economy leads the world in growth, when all the proceeds are funnelled to the top 1% of the population; that thinks that tax cuts for that 1% help ordinary Americans prosper; or that it is a "death tax", killing enterprise, for Paris Hilton to pay a percentage of her multimillion-dollar legacy to the IRS.

There are indeed lessons that Europe can learn from the US, but, when the reflexive prejudices are discounted, the statistics suggest that there would be much for Americans to learn from Europe, above all that the road to economic success does not entail widening inequality and impoverishing the working population.

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