Tuesday, June 13, 2006

Visiting Martian economist on China, western Europe, & the US (John Thornhill via Brad DeLong)

Brad DeLong's Semi-Daily Journal (Fair, Balanced, and Reality-Based)
June 11, 2006
John Thornhill Channels Tony Judt

John Thornhill [in the Financial Times] gives us Tony Judt's view of western Europe:

FT.com / Comment & analysis / Comment - Economists are from Mars, Europeans from Venus: By John Thornhill Published: June 9 2006 20:44 | Last updated: June 9 2006 20:44

A Martian economist visits earth. Not only does its arrival prove -- as many suspected -- that some economists really do live on other planets, it also provides fresh perspectives on our world.

Earthling economists chatter excitedly to our visitor about the stunning growth rates in China. This miracle economy of the 21st century has overtaken France and the UK.... Our Martian friend scratches its heads.

When my economics professor last visited earth in 1945 he told me that the Europeans had just experienced a terrible civil war in which 36m people had been killed, including many of their most brilliant minds. Now you tell me that 60m French people produce almost as much economic output each year as 1.3bn Chinese, who have been the dominant economic power for most of your planet's history. What is more, the French can do this while working 35-hour weeks and producing 246 different types of cheese. How did this economic miracle come about?

The earthling economists stare at each other and then down at their feet. "We don't normally look at things that way. We tend to say that Europe is suffering from 'eurosclerosis', you know, low growth, high unemployment, bloated welfare states and a looming demographic crisis."

"Maybe I need to talk to historians rather than economists to see how all this came about," says our Martian friend, blinking his eyes and flitting back several months in time to hear a lecture in Washington on The Future of Decadent Europe.

Tony Judt, the British historian, is talking about the dangers of conflating economic "inevitability" and geo-strategic prediction.... Mr Judt stresses the primacy of politics in human affairs and explains how postwar Europe created something novel in human history by transforming a tax-raising, military-spending state into a social state devoting huge amounts of money to health, education, pensions, housing, welfare and public facilities. Europe built these liberal welfare states, Mr Judt reminds his audience, not as a vision of a utopian socialist future but as a means of securing political stability and preventing a recurrence of its terrible past....

Europe today is a compromise caught somewhere between the lessons of memory and the distractions of prosperity, between prophylactic social provisions and the attraction of maximising profit. Like all such compromises, it is deeply contradictory and flawed. But of all the models that are on offer in the world today, it is the one most likely to be well-equipped to face the coming century,"

Mr Judt concludes.

Our visiting economist beams back a telepathic memo to the Martian Council of Economic Advisers:

The US economy is impressive -- as previous reports have indicated -- but its model is unique, not universal.... [E]ven our voters would balk at corporate bosses paying themselves huge bonuses while reneging on promises to pay their employees' pensions. Nor would our Red House be best advised to emulate the White House in its management of public finances. Eating tomorrow's lunch today makes for economic indigestion.

China's economy is astonishing.... But... any figure divided by 1.3bn ends up being rather small.... The Chinese may become collectively rich, but many will remain individually poor. And, if politics really does take primacy over economics, we may well be in for some surprises.

In their funny way, it is the Europeans who are at least discussing the big questions we Martians are facing too: how to reinvent the state's functions and strengthen the realm of collective international (interplanetary) action. For sure, Europeans will have to swallow their medicine by cutting wasteful state spending, liberalising labour markets and revolutionising higher education. But, as the Nordic economies have shown, the state's provision of public goods serves an economic purpose. Social justice can help maximise an economy's potential and sharpen its competitiveness...

Posted by Brad DeLong on June 11, 2006 at 10:28 AM in Economic History, Economics, History, Moral Philosophy, Political Economy, Politics |

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