Thursday, June 16, 2005

Someone at the Washington Post Gets It

I don't know much about Robert Samuelson other than the fact that he's an economist that writes for the Washington Post and Newsweek. Based on his more recent work, I think I'm going to be reading his Op-Ed column more frequently. Samuelson's work relies on sound reasoning along with easy-to-understand (and easy-to-verify) data to back up his conclusions. He's been described by various pundits as both a liberal and a conservative columnist, so I'll take it that he's middle-of-the-road politically.

In his latest column, Samuelson grandly proclaims "The End of Europe". And he 's right, too. How's this for an opening paragraph:

Europe as we know it is slowly going out of business. Since French and Dutch voters rejected the proposed constitution of the European Union, we've heard countless theories as to why: the unreality of trying to forge 25 E.U. countries into a United States of Europe; fear of ceding excessive power to Brussels, the E.U. capital; and an irrational backlash against globalization. Whatever their truth, these theories miss a larger reality: Unless Europe reverses two trends -- low birthrates and meager economic growth -- it faces a bleak future of rising domestic discontent and falling global power. Actually, that future has already arrived.
Here is the supporting data, as gleaned from the Op-Ed:

It's hard to be a great power if your population is shriveling. Europe's birthrates have dropped well below the replacement rate of 2.1 children for each woman of childbearing age. For Western Europe as a whole, the rate is 1.5. It's 1.4 in Germany and 1.3 in Italy. In a century -- if these rates continue -- there won't be many Germans in Germany or Italians in Italy. Even assuming some increase in birthrates and continued immigration, Western Europe's population grows dramatically grayer, projects the U.S. Census Bureau. Now about one-sixth of the population is 65 and older. By 2030 that would be one-fourth, and by 2050 almost one-third.

No one knows how well modern economies will perform with so many elderly people, heavily dependent on government benefits (read: higher taxes). But Europe's economy is already faltering. In the 1970s annual growth for the 12 countries now using the euro averaged almost 3 percent; from 2001 to 2004 the annual average was 1.2 percent. In 1974 those countries had unemployment of 2.4 percent; in 2004 the rate was 8.9 percent.
And of course, the inevitable comparisons with the US:

Consider some contrasts with the United States, as reported by the Organization for Economic Cooperation and Development. With high unemployment benefits, almost half of Western Europe's jobless have been out of work a year or more; the U.S. figure is about 12 percent. Or take early retirement. In 2003 about 60 percent of Americans ages 55 to 64 had jobs. The comparable figures for France, Italy and Germany were 37 percent, 30 percent and 39 percent. The truth is that Europeans like early retirement, high jobless benefits and long vacations.
No Krugman-like data manipulation or parsing, just cold, hard facts. And I'm afraid so say that I happen to agree with his conclusion:

All this is bad for Europe -- and the United States. A weak European economy is one reason that the world economy is shaky and so dependent on American growth. Preoccupied with divisions at home, Europe is history's has-been. It isn't a strong American ally, not simply because it disagrees with some U.S. policies but also because it doesn't want to make the commitments required of a strong ally. Unwilling to address their genuine problems, Europeans become more reflexively critical of America. This gives the impression that they're active on the world stage, even as they're quietly acquiescing in their own decline.
Once again, it is up to the Anglo-American alliance--which still includes Australia but not Canada--to save the world.


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