The European Dream (10 page)

Ironically, when Americans opt for more work than play, the increase in wages shows up in the GDP figure. But, when Europeans choose more leisure over more work, the GDP is adjusted down to reflect the lost wages and consumption. The way the GDP is set up does not allow it to account for quality-of-life considerations such as increasing leisure time, even though such choices are fundamental economic decisions, just like choosing to work longer hours. (We will delve into the issue of how GDP biases the notion of what constitutes the good economy in greater detail in chapter 3.)

There is, however, one place where traditional economic figures still count—that’s jobs. And while the American economy can be justifiably taken to task on a number of fronts, admit American economists, the question of jobs is basic to a healthy economy, regardless of the questions one might entertain about fairness or quality-of-life concerns. The American economy can’t be that far off the mark, since it has produced far more jobs and put far more people to work over the course of the past decade than almost every other developed country. We found jobs for millions of people after the recession in the late 1980s and early 1990s. We reduced unemployment from a 7.5 percent high in 1992 to 4 percent in 2000, an extraordinary feat by any reckoning. Although unemployment has climbed back up to 5.7 percent (December 2003) in the aftermath of the stock-market crash of 2000, it is undeniable, say the economists, that the American economy has been an engine of job creation and a model for Europe to emulate.
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In countless seminars and meetings over the past eight years with business leaders, economists, and politicians on both sides of the Atlantic, my American colleagues have been relentless in their praise of what they call “the American miracle,” and have taken advantage of any and every opportunity to lecture their European friends about the superiority of American business know-how that led to the creation of so many new jobs in the 1990s. A closer look suggests that many of the new jobs created had little to do with superior entrepreneurial talent or better managerial skills or the quicker adoption of new technologies, but with other factors that artificially boosted the employment figures for a brief moment only to disappear just as quickly once the stock-market bubble burst.

While U.S. official unemployment was 4 percent at the peak of the late 1990s economic surge, a recent national study found that real unemployment during that period was significantly higher, approaching the unemployment levels in the European Union. That is because more than two million discouraged workers simply gave up and dropped out of the workforce and therefore were no longer counted in the official statistics, and the prison population soared from 500,000 in 1980 to two million people today. Nearly 2 percent of the potential male adult workforce in the United States is now incarcerated.
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Moreover, many of the workers who did find employment in the boom period between 1995 and 2000 were temporary and part-time, without benefits, and for the most part underemployed. Many of them have now sunk back into the ranks of the unemployed. While the U.S. Labor Department put the official unemployment figure at 6.2 percent in the summer of 2003, real unemployment, when discouraged workers who have given up are counted, is 9 percent of the workforce.
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It turns out that the so-called American economic miracle of the late 1990s, which created a temporary bubble of new employment, was illusory. It wasn’t so much America’s business acumen that fed the commercial expansion but rather the runaway extension of consumer credit, which allowed Americans to go on a wild buying binge. The burst in consumer spending put people back to work for a few years to make all the goods and provide all the services being purchased on credit. The result was that America’s family savings rate, which was about 8 percent in the early 1990s, sank to around 2 percent by the year 2001.
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Many Americans were actually spending more than they earned. With their credit maxed out, millions of Americans took advantage of record low interest rates and re-financed the mortgages on their homes, giving them a quick cash infusion in order to continue buying. Now, in the aftermath of the stock-market bubble burst, Americans have slowed spending, and the temporary decline in unemployment has given way to a steady climb back to the unemployment levels experienced nearly a decade ago.

The U.S. economy is experiencing its worst hiring slump in more than twenty years. Even with a 2.7 percent growth in the economy in 2002, and a steep rise of 4.7 percent in labor productivity—the biggest increase since 1950—more than 1.5 million more workers left the job market altogether.
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They simply gave up looking for work and are, therefore, no longer counted as unemployed. The old logic that technology gains and advances in productivity destroy old jobs but create as many new ones is no longer true. According to a report prepared by
USA Today
on productivity in America’s largest companies, it now takes only nine workers to produce what ten workers did in March 2001. The bottom line, says Richard D. Rippe, chief economist of Prudential Securities, is that “we can produce more output without adding a lot of workers.”
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The European Union is in the throes of a great debate about the future of work. Saddled with high unemployment, high taxes, burdensome welfare systems, and convoluted regulatory regimes, which some say only perpetuate economic stagnation, critics in government, industry, and civil society are locked in a fierce ideological struggle about whether the rules governing employment, commerce, and trade need to be reformed and, if so, how. Politicians and business and labor leaders squabble over the issues of creating a flexible labor policy, lowering taxes, rewriting the rules governing welfare and pension allotments, and bringing their economic policies in line with the United States.

If the key to creating new jobs, however, was only a matter of making the above reforms, then the United States of America should be experiencing high levels of employment. We have made virtually all of the reforms that the European Union is now attempting to implement. Yet the U.S. workforce is experiencing hard times, and the American economy has still not fully recovered from the last recession. Inventories are not being emptied, most industries are running below capacity, consumer savings are low, personal bankruptcies are at a record high, exports are down, and the stock market has still not regained the ground lost when the bubble burst in 2000-01. Other economies around the world are experiencing similar woes.

All of this bad news begs the question, Does the European Union really believe that its economic future is likely to look up substantially if it merely follows the U.S. lead on labor, welfare, trade, and other reforms? No one would argue that such reforms are unnecessary, although the question of how best to streamline the entrepreneurial spirit without sacrificing the social well-being of the EU workforce is a critical concern.

Myths die hard. Despite the fact that America’s job miracle turned out to be short-lived and less robust than the hype would warrant, many European policy leaders and public officials continue to look to the American model for their inspiration and guidance. Their enthusiasm is misdirected. Rather than asking what Americans have done right and what Europeans have done wrong—a favorite pastime of European leaders—Europeans should instead congratulate themselves on creating the most humane approach to capitalism ever attempted, and then ask what kinds of new ideas might be implemented to improve on their existing model. Maintaining the appropriate social benefits and pursuing a high quality of life for its citizens should be viewed by the EU as integral to the task of creating the first truly sustainable superpower economy in the world.

Were the European Union to abandon much of its social net in favor of a more libertarian market approach, its 455 million people might find themselves saddled with the kind of deep social ills that now plague the United States, from greater inequality to increased poverty, lawlessness, and incarceration. That’s a high price to pay when we consider the fact that the American model not only has failed to deliver real job growth but also has forced millions of Americans into long-term debt and bankruptcy.

The real challenge facing the EU in the coming years is how to take advantage of its vast natural and human resources and build a powerful continental economy without undermining its longstanding commitment to social and economic justice for all of its citizens. The outcome is anything but certain.

What is not in doubt, however, is that the American Dream and the European Dream differ substantially on the question of how best to ensure every person an opportunity to get ahead and make something of himself or herself in the world. The American Dream has, from the very beginning, put the onus of responsibility on the individual to make of his or her life what he or she can in the marketplace, with few social supports other than the guarantee of a free public education. Europeans, by contrast, believe that society has a responsibility to balance the sometimes ruthless Darwinism of the marketplace by providing social supports to the less fortunate, so that no one falls behind.

Both dreams have their strengths and weaknesses. Europeans are often faulted by Americans for not taking greater personal responsibility for their own destinies. Americans, on the other hand, are often criticized by Europeans for being heartless and not taking proper responsibility for their fellow human beings.

Curiously, Europeans are beginning to heed the American advice by instituting reforms that draw more of a balance between individual initiative and collective responsibility, but there is little evidence that America is altering its dream by incorporating into it a greater sense of shared responsibility for the collective well-being of society. If anything, the American Dream is going the other way, becoming almost a caricature of the rugged individualism so glorified in America’s frontier mythology. The result is that some Americans are getting richer while many other Americans are getting poorer. In both instances, the American Dream suffers. The sons and daughters of wealthier Americans grow up in the lap of luxury and come to feel empowered and entitled to happiness and less willing to work hard, sacrifice, and make something of themselves. For them, the American Dream becomes endless momentary pleasure-seeking, devoid of any grand purpose in life. For those Americans who still believe in the American promise, and who have made every effort “to pick themselves up by their bootstraps” and succeed, only to be pulled down over and over again by a market economy and society weighted against them, the American Dream has come to feel like a cruel hoax, a myth without any real substance. For those on the top and for those on the bottom, the American Dream is losing its cachet and, in the process, casting the American people adrift. With only our religious fervor to hold on to, we have become a “chosen people” without a narrative—making America potentially a more dangerous and lonely place to be.

As long as our religious fervor was wed to personal success, the idea of a chosen people helped foster upward mobility and the democratic spirit in America. Now that the American Dream of personal success is taken for granted, trivialized, or, worse yet, become the object of ennui among a growing number of younger well-to-do Americans and become something out of reach for most other poorer Americans, all that’s left is the idea of a chosen people. The question then becomes, Chosen for what? Religious fervor in search of a mission, especially when arched with the idea of enjoying a special status in the eyes of God, could metamorphose in threatening ways that we Americans are unaccustomed to thinking about. Already, we’ve seen in the post-September 11 era a hint of the possibilities, as a growing number of American Evangelical religious leaders, conservative politicians, and intellectuals talk of the coming global show-down between the civilized Christian West and the barbarian Muslim world. To be sure, most Americans of faith don’t hold such views, at least not yet. And many other more secular Americans are far removed from any such thoughts. Another 9/11 could change all of that in an instant.

Whether the emerging European Dream can offer an alternative vision more able to accommodate the tumultuous changes occurring in the world today, from globalization of the economy and rising unemployment to the spread of religious terrorism, remains to be seen. We will explore that dream from a number of vantage points and perspectives in the chapters that follow, with the hope of better understanding its potential to open up a new path for the human spirit to travel down.

W
E LIKE to vacation there. Around every corner, we experience some token of our past. Many of us still have deep roots in Europe. It’s like being in a giant outdoor museum—full of treasures and memories, some horrifying, others noble. It feels good visiting the “Old World.” The smells are more intimate; the details of life are more painstakingly cared for. The human nose hasn’t come fully alive until it has passed a cheese shop in France and taken in the rush of sumptuous smells emanating from a hundred different cheeses, each with its own particular history, and every one of them better than any cheese we might find in our own supermarkets back home. And then there are the display windows in the shops on Oxford Street in London’s fashionable shopping district, the side streets circling the Great Duomo in Milan, and along Paris’s Champs Elysees. Every window is its own work of art, suggesting to the Americans passing by that what is inside the store is more than products to sell, they are gifts to share.

For most Americans, Europe is a place to relax, awaken our senses, rejuvenate our spirits, and feed our souls. Nothing is more enjoyable than a stroll along the Rhine River in Basel in the early summer evening, while watching young men and women and whole families floating along the swift current of the water in their inner tubes. Or escaping from the winter frost into a warm and dimly lit sanctuary of a fourteenth-century church in a hill town in Provence. Great memories.