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Oct 11 / Jonathan

The New York Times Does Not Like the European Welfare State

Another Dean Baker classic.

The New York Times Does Not Like the European Welfare State

The New York Times is unhappy because it doesn’t seem likely that Europe’s governments will dismantle their welfare state. The problem is that people in Europe like the welfare state and democratically elected governments seem intent on putting the wishes of their electorate over the desire of the New York Times and the experts it chose to consult for this article.

The article begins by telling readers that: “two years ago, Europe was growing more rapidly than the United States, and the Old Continent finally seemed prepared to tackle longstanding economic challenges like rigid labor markets, runaway government spending and a rapidly aging population.”

In fact, these “longstanding challenges” do not really exist. Europe did not suffer from “runaway government spending,” most countries had relatively modest budget deficits prior to the economic crisis. Over the long-term, the United States is projected to face far worse budget problems than Europe because of its out of control health care spending.

Its “rigid labor markets” did not prevent Europe from experiencing labor productivity growth that was comparable to that of the United States. It also managed to run current account surpluses, instead of unsustainable deficits, like the United States.

Europe’s population is aging more rapidly than the United States, in part because its people enjoy longer life expectancies. It is not clear why the NYT views this as a problem.

The article is full of complaints that Europe’s governments are not following the NYT’s agenda. For example , without any substantiation the NYT tells readers that: “just when it is needed most, the political will to address Europe’s bigger economic problems seems absent, according to many experts across the region and around the world.” It’s not clear what “just when it is needed most” could possibly mean in this context.

The article later complains that: “In Germany, Angela Merkel, who was elected last month to a second term as chancellor, has also avoided taking on the country’s powerful unions and its regional banks. She has embraced the “social market economy” and has insisted there is no alternative to relying on exports rather than consumers to drive growth.”

It’s not clear what the problem is. Economists view exports as a form of investment. Rich countries, like Germany, are supposed to run trade surpluses, lending money to poor countries to finance their development. The NYT apparently wants Germany to siphon money away from poor countries, as the United States does, leaving them with fewer resources to finance their development.

It would have been useful if the article had included the views of someone associated with Europe’s labor unions or an economist more familiar with recent research on European labor markets.

—Dean Baker

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