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Friday, August 23, 2013

Europe and the US

Three years ago, a Chicago labor lawyer named Thomas Geoghegan--a nearly exact contemporary of mine and a fellow Harvard graduate--published his sixth book, Were You
Born on the Wrong Continent? How the European Model Can Help You Get A Life.
It got very little attention and not a single public library in the state of Rhode Island, where I was still living, decided to acquire it.  I finally got my hands on it this month and I have just finished it.  In some respects I was disappointed.  Geoghegan makes clear that is was a miracle that this book (or his others, which deal with issues drawn from his own working life) was written at all.  Like most trial attorneys, he is ridiculously busy, but he arranged in the 1990s and 2000s to spend a good deal of time in Germany, which is the focus of the book.  It isn't particularly well organized and it could have used a lot more hard data to make its points.  But it still leaves a powerful impression.  By the middle of the twentieth century, the North Atlantic world had discovered the secret to modern society: combining an industrial plant, a well-organized working class, and a government that would provide public goods for all with the help of progressive taxation.  In the last 40 years the Europeans have focused on improving that model and, more recently, on keeping it alive.  The United States meanwhile has focused on destroying it.  The results are obvious.

To begin with, Europe in general and Germany in particular have not de-industrialized to anything like the same extent as the US and, for that matter, the UK.  While the US has used globalization to outsource jobs and become the world's financial center, the Germans decided to make the machinery that the newly developing countries would need, and they are running huge export surpluses, the goods produced by well paid unionized workers who, like all Germans, take six weeks of vacation every year.  But the book's best chapter isn't about the working class, it's about the well-to-do middle class--and it's here that Germany comes out the furthest ahead.  Because their health care and their children's higher education is provided by the government out of taxes, their middle class does not have to run up enormous debts.  Because they also provide excellent public transportation and much better schools, they don't have to live further and further out in the suburbs, either.  (Geoghegan lives in Chicago where this is evidently an enormous problem.  I must say that my own Boston metropolitan area, because of its compact size and, by US standards, excellent public transportation is more like a European city in that respect.)  Geoghegan thinks this has kept artistic and intellectual traditions more alive in Germany, and real bookstores do continue to thrive in Europe.  What impresses him the most is the role of the work force in German firms. Not only does the law guarantee them half the seats on the board of directors, but they also staff Works Councils in most firms, making all sorts of decisions on how the firm operates and how any profits and productivity gains are distributed.  Nationalization never went as far in postwar Germany as in Sweden, Britain or France, but this system has done the same job even better--giving average people a stake and a role in fundamental economic decisions.

The terrible problem we face in the US, as Geoghegan finally stresses in his last chapter, is that we allow public goods to become sources of profit, including education and, above all, health care.  The financial sector is also treated in effect as a public trust in Germany, where a parallel set of banks, Sparkasse, does the things the big US banks can't be bothered to do, like providing capital to small enterprises.  By the time he published this book it was clear that the Obama Administration was not going to try to change any of these essential aspects of American life, and indeed, Geoghegan frequently refers to Larry Summers as the no. 1 apostle of the new American model.  And there is no political movement of any significance whatever that will attack these problems on the US horizon now.

For most of the period in which Geoghegan was working on this book, Germany had considerably higher unemployment than the US.  That is no longer the case. Much of the rest of Europe has serious problems, and some of them are tied to the Euro and Germany's role in it.  Yet I think the Europeans will cope better with their problems than we will, because they have not forgotten the lessons of the first half of the twentieth century.  The reason, of course, is that they suffered so terribly from their failure to learn them.  My grandparents' and parents' generation of Americans were the big winners of that era.  Alas, my own generation decided to throw our inheritance away.


Bozon said...

Many thanks for a great exposition on the book.
Unfortunately, few Americans share these views.
My position is generationally explanatory, and I look farther back, to the times of the grandparents and parents of the boomers, but primarily to the structures they operated within for responsibility for how things have turned out in recent decades.
Prestowitz had some useful passages on trade with less developed countries. If Germany tries primarily to maintain prosperity by exporting technologically advanced products (they don't even have to offshore production anymore), they will quickly lose the advantage of that know how, just as others have done before them. This was one lesson, even, of electronics exported to Japan 45 years ago; Prestowitz has some useful passages on this, Trading Places. China has taken over from them after 1985 1990.

all the best

Unknown said...

how they got German costs down by destroying the middle class a la USA:


Shelterdog said...

As I see it, the problem is this: if you have an international agreement that prohibits X, but the international community either lacks the fortitude to enforce the agreement or is blocked from doing so because of a veto in the Security Counsel, should we simply walk away. We turned our back on Hitler's atrocities, on those in Rwanda and (for several years) in Bosnia. Isn't that the consequence of your analysis? Whether planned or fortuitous, Obama's credible threat of military force seems to have broken the logjam, and he deserves credit for doing so without launching an attack. I don't know how that plays out when someone refuses to go along, or if Russia refuses to step in. And the much bigger question is what we do if Iran doesn't make a deal about its nuclear program, after multiple US presidents of both parties have--rightly or wrongly--drawn a red line and Israel has, too. To admit we'll keep talking but won't take military action would send a signal that a) countries like Iran can do whatever they want and b) Security Council members like Russia can simply veto any remedial military action, no matter how outrageous the situation.