One of my co-workers subscribes to the WSJ and he allows me to read it after he’s done with them. Saves me some money, although I doubt the WSJ business staff would approve of this example of fiscal responsibility.
There was an article on page A11 of the Thursday, July 22, 2004 edition of the paper. It was G. Thomas Sims, and it was entitled “Europe Sees Limits on Growth”. Nothing new here, just the same old same old that everyone’s been saying for the past few years. Everyone who’s not blinded by their own prejudices, that is.
Back in 2000 the European Union saw a growth rate of 3.5%, which means that it was possible that the EU was about to do as well as the US. Unfortunately, that seems to have been the high water mark. This year, even the European Central Bank is pegging growth at 2.0% to 2.5%, which is wildly optimistic. J.P. Morgan says it’s 1.5% to 2% at best, while Credit Suisse First Boston says that it’s gonna be 1.4%.
So how’s the US doing? Pretty good, I’d say. If I’m reading this chart right, we’re looking at about double the European rate. AND we’re doing it without fear of runaway inflation, which is what the Europeans might just have in store for them.
But it’s just not GDP growth and inflation. In the 1980’s, Europe’s annual productivity was growing at 1.9%. It’s since dropped to 0.9% in the period from 1996 to 2003. And how is the US doing? Although it can always be better, compared to the EU we’re kicking hinder and taking names.
Some of you are wondering why I’m comparing the EU and the US. Apples/oranges and all that. My reply is that the main motivating factor for forming the EU in the first place was to create an entity that could compete with the US. So far they aren’t doing all that great a job.
Mr. Sims states that there’s a variety of reasons why the EU is having trouble. Some, like low birth rates, just have to be lived with without any clear way to improve them. But there are also a slew of “structural problems” that are hampering the Europeans. Mr. Sims doesn’t go into too much detail here, but he mentions the amazingly short work week that European workers enjoy, as well as fat unemployment benefits that don’t do much to encourage people to find a job.
What’s my opinion? I’m just some guy who’s interested in history and certainly lacking in even the most basic skills to understand the economy, but even I can see that Europe has got to get it’s house in order. They rely on the US for their own defense, and they enjoy historically low military spending. Even so they’re having trouble? How come they’re not using the “Peace Dividend” provided by the US military to jump ahead?
Someone’s screwing up big time. But don’t ask me who, or what can be done to fix it.