RALEIGH – In moments of candor, those who advocate a larger government role in the provision of health care, child care, and other goods will say that they’d like to see North Carolina and the U.S. as a whole move closer to the European model of political economy. That is, they seek a social democracy.
The term is typically used to distinguish the model from true socialism, where the public sector owns and manages most if not all major industries, or what was once called syndicalism or fascism, where enterprises and property remain privately owned but are tightly constrained by regulation and government-controlled cartels and committees.
Social democracy combines the income-transfer apparatus of the modern welfare state, which was invented in Bismarck’s Germany during the late 19th century, and the regulatory apparatus that arose in the next century, during the world wars and a period of rapid government growth in the 1960s and 1970s. It’s not true, of course, that America has been immune to the same tendencies and political pressures. We have a large welfare state and a costly, intrusive regulatory state. But in neither category do we match most of our counterparts in Europe in the damage done to liberty and living standards.
Much of the work of free-market policy institutes such as the John Locke Foundation involves questioning the morality and practicality of these programs. At our main JohnLocke.org site, you can read our work on health care, unemployment insurance, taxes, regulations, and other related matters. There are other ways to assess the alleged superiority of the European social-democracy model over what remains of the American market-democracy model, however.
One is immigration patterns. If, on balance, America’s greater reliance on private initiative and individual freedom made people worse off and unhappy than Europe’s greater reliance on central planning and redistribution, the likely result would greater demand to emigrate from the U.S. to Europe than to emigrate in the other direction. That’s not the reality. There are still vastly more people seeking to cross the Atlantic in our direction.
Second, there’s economic performance. On balance, Europe has lagged the U.S. for decades. Most of the countries with strong growth trends in recent years have been those, such as Ireland, that have reduced marginal tax rates, deregulated markets, and embraced competition and innovation. Many other European Union economies remain relatively unimpressive. Twenty-two of the 27 member states have higher unemployment rates than America does, and indeed that understates the problem – when you look at employment rates, as a percentage of the working-age population, the EU average is 63 percent, nine points lower than the U.S. rate.
One of the best ways to assess relative economic performance is to look at gross domestic product per person, adjusted for purchasing price parities. The latter is necessary to generate a useful comparison of living standards within each country, rather than just using nominal figures. According to data from the International Monetary Fund, real GDP per person in the U.S. was about $43,000 in 2006, which was 22 percent higher than Great Britain’s, 24 percent higher than Sweden’s, 36 percent higher than France’s, 38 percent higher than Germany’s, 39 percent higher than Italy’s, and 55 percent higher than Spain’s. The average American is wealthier, owns a more spacious and comfortable home, enjoys greater automobility, and has a broader array of economic opportunities and choices than does the average European.
She’s also happier and more satisfied with her life, as I’ve written about before. That’s not to say that greater wealth and economic freedom necessarily makes one happy, but it sure doesn’t hurt. There are factors other than economic policies involved, to be sure, not the least of which is a greater degree of religious faith in the U.S., which tends to make human beings happier (sorry, Chris). There is also the confidence that comes from having the capacity to act resolutely against one’s enemies, something that all too few European countries are able and willing to do.
Can policymakers in Raleigh and Washington learn important lessons from Europe? Absolutely. Many of the EU countries have recently reformed their tax codes in ways we should emulate. Many of them extend parents a greater degree of school choice than we do, though I don’t always agree with the policy instruments they use. But on the whole, Europe would be better off if it moved closer to the American model.
Actually, America would be better off if it moved back towards the American model of free markets and limited government.
Hood is president of the John Locke Foundation.