More Reactions to Keeping America’s Edge
Ross Douthat very generously devoted the bulk of his New York Times column to the article and its key themes. He adds two items to the agenda that I proposed: entitlement reform and tax reform. I agree with both of these concepts, and expect to go into much more detail on both in the book, likely with some preliminary ideas hashed out here on these blogs. Michael Barone was also very generous, and also proposed adding pro-family tax reform to the agenda.
Chrystia Freeland devoted her New Year’s Day column in the Financial Times to some of they key themes in the article, and emphasized some of its sociological aspects. In the article I said of the old Wasp ascendancy that they “developed a social matrix that offered broadly shared prosperity to generations of Americans.” Ms Freeland’s wording of this idea makes me wish she were there for the rewrites:
The genius of that elite was its ability to bring the American dream within reach of nearly everyone. If it hopes to emulate the longevity of America’s Wasps, and, more importantly, the political system they created, today’s global plutocracy must figure out how to do the same.
Jonathan Chait at TNR wrote that the piece does “have some interesting observations and decent proposals”, which is gratifying, as I saw a lot of the agenda I was proposing as being capable of gathering broad support. He also criticized the presentation of some of the data. Here are the relevant sentences from my article:
From 1980 through today, America’s share of global output has been constant at about 21%. Europe’s share, meanwhile, has been collapsing in the face of global competition — going from a little less than 40% of global production in the 1970s to about 25% today. Opting for social democracy instead of innovative capitalism, Europe has ceded this share to China (predominantly), India, and the rest of the developing world.
Mr. Chait has two basic criticisms of these sentences, as I see it. He asserts that:
1. While technically accurate, the statements present the data in a misleading way because (i) I am comparing a period starting in the 1970s with one starting in 1980, and (ii) I quote a GDP figure for all of Europe, and then proceed to describe Europe “opting for social democracy”, which implies that this should have referred only to Western Europe.
2. I discuss total GDP, rather than GDP per capita, which is a better measure of prosperity.
Let me take these one at a time.
1. I used the word Europe as per its dictionary definition. I apologize for any confusion the wording might have created; as always, such confusion is the fault of the author, not the reader. I don’t think, however, the statement is misleading. The basic conclusion that Europe has ceded enormous global GDP share, while the U.S. has retained close to constant GDP share, holds for any reasonable geographic definition of Europe, for any time periods beginning in the 1970s or 1980, and when using any data source that I investigated for comparing currencies.
I’ll start with the change in U.S and European shares of global GDP, using Mr. Chait’s preferred (and entirely reasonable) definitions: a common start date of 1980, and the EU15 as a proxy for Western Europe. According to the US Economic Research Service Macroeconomic Dataset; GDP Shares by Country and Region Data Table; 11/4/09 update, the U.S. share of global GDP was 26.2% in 1980, and grew very slightly to 26.7% in 2009. This is a net share change of +2% (1 – 26.7/26.2) for the U.S. over this period. Germany, as another example, had a global share of 8.2% in 1980, which declined to 5.85% in 2009. This is a net share change of -29% for Germany over this period.
According to this data source, the net share changes from 1980 to 2009 are:
U.S. +2%
EU15 -22%
Of which,
Germany -29%
France -20%
Italy -32%
Now I’ll show almost the same analysis with a different data source – the OECD Publication The World Economy: Historical Statistics – that only has data through 2006. (In general, these calculations show slightly worse performance for both the U.S. and Europe as compared to the rest of the world, but almost identical U.S. vs. Europe performance). This table will show the change in share of global GDP between 1980 and 2006 for a core group of 12 European economies identified by the publication, plus each of the “big three” continental social democracies individually, plus the U.S.
Net share changes from 1980 to 2006 are:
U.S. -7%
Euro 12 -29%
Of which,
Germany -37%
France -28%
Italy -34%
However you slice it, the same observation holds true: European countries as a whole, and especially the major “social market” economies of Germany, France and Italy, have lost 20% – 30% of their share of global GDP versus the U.S.
2. Exactly as Mr. Chait indicates, GDP per capita would be a far better measure of prosperity – which is why I used that metric when discussing relative prosperity earlier in the piece. I used total GDP in the paragraph in question for the reasons I stated in the article. This was a description of the loss of European economic power to Asia. Ultimately, absolute size of an economy matters, because economic clout represents the latent capacity for military and cultural power. Not all large, successful economies become military powers, but many do. And per capita wealth will not protect a society from a large, aggressive military power. As an extreme illustration, annual GDP per capita is more than $40,000 in Hong Kong and more than $30,000 in Taiwan, but this did not allow Hong Kong to remain independent of PRC China, which has annual GDP per capita of about $6,000, and would not allow Taiwan to do so without the presence of the U.S Navy.
This is why the sentence that immediately follows the ones quoted by Mr. Chait is this:
The economic rise of the Asian heartland is the central geopolitical fact of our era, and it is safe to assume that economic and strategic competition will only increase further over the next several decades.
And it is why this is almost immediately followed by the following paragraph:
Yet the strategy of giving up and opting out of this international economic competition in order to focus on quality of life is simply not feasible for the United States. Europeans can get away with it only because they benefit from the external military protection America provides; we, however, have no similar guardian to turn to. We do not live in a Kantian world of perpetual commercial peace. Were America to retreat from global competition, sooner or later those who oppose our values would become strong enough to take away our wealth and freedom.
If we do consider per capita GDP, as noted in the piece, “economic output per person is now 20 to 25% higher in the U.S. than in Japan and the major European economies”. As Reihan Salam notes in his blog post on this, as of 1980 the consensus was that the U.S. and Europe should be converging on a reasonably common level of economic output per person. The roughly comparable growth rates in output per person over the past quarter century represent the unexpected maintenance of a U.S. lead.
look….white christian conservatism is a fail paradigm…it brought us the Econopalypse and the Epic Fail of Iraq and our continuing tenure in the Graveyard of Empires.
No one is going to give you a hearing on your stinky old failmemes.
And you can’t take back power until you can become not all pure white christian old peoples.
Go away and work on that.
— matoko_chan · Jan 6, 06:29 PM · #
It is my understanding you included the Soviet Union and former Warsaw Pact countries in your definition of Europe. If this is, in fact, true, then your analysis is deeply misleading.
Can you kindly confirm or deny whether or not you included the Soviet Union and former Warsaw Pact countries in coming up with these figures?
— Ingvy · Jan 6, 06:44 PM · #
Ingvy:
This included Eastern Europe and those portions of the old Soviet Union that are west of the Urals. This is the standard definition of the term “Europe” in all major dictionaries, encyclopedias and history texts of whihc I am aware. As per this post, the conclusion is robust to any other definition fo Europe, Western Europe, EU or any similar geographic entitiy. I’ve linked to the raw data tables, and you are free to investigate for yourself.
— Jim Manzi · Jan 6, 06:51 PM · #
“From 1980 through today, America’s share of global output has been constant at about 21%. Europe’s share, meanwhile, has been collapsing in the face of global competition — going from a little less than 40% of global production in the 1970s to about 25% today. Opting for social democracy instead of innovative capitalism, Europe has ceded this share to China (predominantly), India, and the rest of the developing world.”
How do you know this drop in productivity was due to adopting the welfare state? That’s just a huge asumption. Why couldn’t it be the industrialiation of countries with pools of cheap labor.
And if you are comparing the US to Europe it seems to me that, even if the drop was tied to adding a welfare state, that Europe comes out ahead. THey equal our global productivity AND they have a welfare state. Or to look at it another way, e spend all this money to ensure global dominance, the main purpose of which is to promote our economic interests—but we can only equal Europe in output, who spend way less on global dominence.
And we can’t afford a welfare state. It seems to me we are underachiving considering how much we invest in global dominece. I mean, we control the sea lanes, our military protects countries all overthe world, we have the biggest and most influential economy, the world’s currency is based on the dollar, our culture is fast becoing the worlds cultre… All that and we can’t even equal europe.— cw · Jan 6, 06:54 PM · #
cw:
I agree with a lot of what you say here. Probably the central point of the article was that we face a tragic choice. Europe’s (of Western Europe, or the “social market” economies, or whatever deifnition we want) have employed a package of responses to deal with the fundamental problems created by a market. This has created many advantages for them. One of things they have not been able to do, however, has been to maintain their share of the world economy. Over the long-term a civilization needs aggregate pwoer to protect itslef in an inherently hostile world. In this respect (htough certainly not in all ways) Europe is free-riding on the US, and following a non-sustainable strategy in aowrld that (IMHO) will always turn violent.
— Jim Manzi · Jan 6, 07:06 PM · #
Okay, but if the reason for the disparity between per capita GDP and share of global economic output is simply population growth, is your point that “opting for social democracy instead of innovative competition” impedes population growth? If not, then how does it lead to a declining share of global economic output, while maintaining a consistent level of per capita GDP growth?
— Shankar · Jan 6, 07:07 PM · #
cw makes the real point here. Your data, no matter how you tweak it, in no way leads to the conclusion that Europe’s relative decline in total world GDP results from Europe opting for social democracy. To me it looks like the most likely cause of this meaningless change is relative population.
Take France. (I wanted to look at Germany, but really, if you’re speaking of the period from 1980 to 2006 you really have to define “Germany”.) From 1980 to 2006, France’s population grew by nearly 14%. The population of the US grew by roughly 32%. The world population grew by roughly 47%. The share of France’s population relative to the world population dropped by 23% over that period. For the US, the figure is 11%. The figures roughly parallel the decline in share of world GDP you cite above.
— Rob Mac · Jan 6, 07:08 PM · #
Re: Freeland’s point on the rising plutocracy. Excerpt:
I’m not sure that income inequality is really a problem. Or rather, I think it’s a problem only because of the power inequality that comes with it: it’s not that the rich are richer, it’s that the rich and connected can get what they want politically simply because they’re rich and connected. It’s not the monetary gap between rich and poor; it’s not even the virtue gap. No — the precise problem with the rise of the plutocracy is the influence gap between the middle class mean and the 3σ margin. In other words, it’s a tuning problem.
I’m not 100% certain how to solve that, but I’m pretty sure it has something to do with rolling back the legitimacy of supervening authorities and returning realworld significance to politics at the local level. I.e., invert the gaze of citizens, get them to attend to their block, community, city, county and state, redefine D.C’s domestic role as the enabler of popular sovereignty via the no-string-attached redistribution of funds to state and local governments on a per capita — or some other kind of intuitively fair — basis. Or something.
— Kristoffer V. Sargent · Jan 6, 07:23 PM · #
“One of things they have not been able to do, however, has been to maintain their share of the world economy.”
I think it was artificially high (%40) due to centuries of European dominence, the colonial system etc… And again, just becasue it declined doesn’t mean it declined becasue of their welfare statism. And third, I see lots of evidence that the US’s global produciton is due to decline—isn’t that somethin conservatives are always railing about—and we don’t have a welfare state (or a big one). I guess you could say this is a bad time to adopt a welfare state, but am in no way convinced that welfare state= drop in global production. And as I said, europe could just as eaisly be an example of why adding a welfare state doesn’t mean a drop in global production. They invest very little in global dominece, the have a welfare state and they equal the US in global production.
— cw · Jan 6, 07:29 PM · #
I think it is wrong to look at the overall GDP because the GDP does not tell you how much people can keep or about the state of their well-being. I left Europe and moved to the US because the high taxes in Europe would not allow me to buy a house for my family. I was earning an engineering salary but most of it got taxed away. Social democracies tend to extend the definition of social justice and the common good. The GDP per capita can be high and state governments can still take this money to invest in common goods that are not really common goods such as sports arenas.
— Dan LA · Jan 6, 07:35 PM · #
cw:
So do I. So was that of the US in 1945. For several hundred years up to about 1800 the world economy was about 25% China, 25% India, 25%, 25% The West and 25% all other. I see no reason to believe that we’re not headed back to something like that. This places a hugee premium on our ability to maintain long-term competitiveness. The point of the article is that it means we need even faster economic growth, but accepts that the deregulatory strategy that we have used (successfuly) for the past 25 years will eventually decohere the society. Unfortunately, the European experience is that it is not consistent with a rapidly-growing economy. There is no obvious solution to this problem. This is what I mean by “between a rock and a hard place”, and why I am searching for solutions that permit both innovation-driven growth and greater social coherence.
— Jim Manzi · Jan 6, 07:40 PM · #
2008 GDP per hour worked, rom the OECD website —
75.2 Norway (!)
55.5 Netherlands
55.3 USA
54.7 Ireland
54.0 Belgium
53.2 France
50.5 Germany
45.9 Sweden
45.6 Austria
44.9 UK
44.7 Switzerland
44.2 Finland
43.6 Denmark
42.5 Spain
41.1 Italy
38.3 Japan
— alkali · Jan 6, 07:43 PM · #
alkali:
Thanks. Norway’s extreme result(beyond being a generally very productive, successful economy) is driven by oil.
— Jim Manzi · Jan 6, 07:47 PM · #
KVS:
Yes, as I said in the piece, it is more symptom than cause (until it reaches truly catastrophic levels).
I agree.
— Jim Manzi · Jan 6, 07:52 PM · #
Curious — is ‘virtue gap’ a good distillation of your ‘growing disparity in behavioral norms…between upper and lower income strata’, or is the latter simply description sans judgment?
— Kristoffer V. Sargent · Jan 6, 08:14 PM · #
I like how you engage your commenters, Mr. Manzi. You’re very classy.
— Noumenon · Jan 6, 08:25 PM · #
KVS –
Two questions: Any ideas on how to create policy that would accomplish such a goal? Also, how do you envision local governments having leverage against corporations that are trending into transnational mega institutions?
— 62across · Jan 6, 08:25 PM · #
Jim, you say: Were America to retreat from global competition, sooner or later those who oppose our values would become strong enough to take away our wealth and freedom.
It’s an interesting point and a reasonable problem to think about, but what if you apply to this the same analytical approach you have applied to the question of what to do about global warming? For global warming, you’ve concluded (I greatly simplify here) that the problem is real, but because it is going to unfold over a very long time, and with enormous uncertainty, we would be making a mistake to take dramatic action now to try to prevent it. I’ve found you quite persuasive on that topic.
As with global warming, the time frame in which China (say) will become strong enough to seriously threaten to take away our wealth and freedom is certainly at least several decades away. Surely you would agree that the evolution of Chinese society over the next 50 or 100 years is subject to at least as much uncertainty as is the global climate. Isn’t it a serious mistake to presume that a society like China’s will maintain its cohesion while ours fractures? The USSR didn’t hold together, why will China? Is it not also a mistake to assume that we will always and forever be on our own to defend democracy in the world? The last time western democracy faced an existential threat, Europe and the US formed NATO.
Furthermore it is not clear how or why, in an age of nuclear weapons, China would take aggressive action against us.
It seems to me there is an important amount of uncertainty about the extent to which we ought to let our current actions be driven by fear of what China (or global warming) might do to us at some indeterminate date in the distant future. As you have rightly pointed out, resources deployed to deal with one threat are not available to deal with other threats.
I do not mean to argue here in favor of or against becoming more like Europe. I only wish to question the extent to which that decision ought to be influenced by potentially overblown concerns about someday, maybe having our wealth and freedom taken away from us by someone else. (I’d guess based on current behavior that elements in our own society pose a greater threat than does China to our collective wealth and long-term freedom – but that’s a topic for another day).
— andrew · Jan 6, 08:27 PM · #
@Rob Mac
I can just as easily flip your argument around and say “Hey, if you want to have no growth or serious decline in share of world GDP, but not have this affect per capita living standards, have fewer people to take care of!” This is a poor argument. And we should not for one second think the U.S. will begin emualting Western Europes low fecundity rate.
— Matt C · Jan 6, 08:54 PM · #
<i>This included Eastern Europe and those portions of the old Soviet Union that are west of the Urals. This is the standard definition of the term “Europe” in all major dictionaries, encyclopedias and history texts of whihc I am aware.</i>
If you’re including the former Warsaw Pact countries and large parts of the Former Soviet Union, then your numbers are naturally going to be skewed. Of course Europe’s percentage of global GDP is going to plunge once Communism collapsed along with the markets for their useless products.
My point is not to advocate for or against European-style social democracy (which clearly has its limits), but I do think that the particular argument you’re making here is intellectually dishonest and designed to mislead. There’s a perfectly good case to make against a European style system and I am disappointed you instead chose to resort tricks to make it.
— Ingvy · Jan 6, 09:02 PM · #
“Europe is free-riding on the US, and following a non-sustainable strategy in aowrld that (IMHO) will always turn violent.”
If Europe was geographically close to China this would make sense. It does not make sense when the only which power Europe is close to, Russia, has a smaller GDP then it had a generation ago. Given Russia’s severe demographic and economic problems maintaining a large military in Western Europe seems like a waste of money to me. The EU is perfectly capable of defending itself against Russia. Why should the US have an army in Germany to fight against a Warsaw Pact that does not exist?
— Mercer · Jan 6, 09:10 PM · #
Shorter Manzi… white christian conservatism enforced the cohesion of the patriarchy which enabled America’s relative success. Therefore we should return to stealth white christian patriarchy as a model for social cohesion….just don’t tell the blacks, browns, and teh wimmens.
I think Chait and Sully are more accurate.
“Interestingly, Manzi concedes in his essay that social democracy provides superior social cohesion. His essay simply assumes that it inherently produces dramatically lower growth. But now that we can see his assumption doesn’t hold up, he’s actually making the case for social democracy. To be sure, I’m not a social democrat, but Manzi has inadvertently softened my skepticism. If instituting a social democracy in the United States would dampen growth only very slightly, and create greater social cohesion and economic equality (meaning, for people who aren’t very rich, higher living standards), why not give it a try?”
— matoko_chan · Jan 6, 09:12 PM · #
Mercer:
Yoiu’d be surprised how much of this I agree with in terms of immediate tactics. I do not see a short-term military threat to the US or Europe form China. My point is that, over time, threats will always emerge where capabilities permit it. Maybe it will be a autocratic, unstable Russia, maybe a Mideast alliance, maybe China in Asia, and so on – very likely unpredictably. Trade is a positive-sum game, but power is zero-sum. We will increasingly be at the mercy others if we cna not maintain global economic throw-weight in combination with other culturally and politcially sympathetic powers (e.g., Europe).
— Jim Manzi · Jan 6, 09:26 PM · #
Even curiouser:
Your National Affairs essay looks at the world through the frame of ‘our strategic situation’, that is, the essay’s worldview is the system’s: it looks at the world through the eyes a self-interested, rational America (America qua entity).
So: strategy implies preferences across outcomes, preference implies a perspective, and the perspective you are using in The System’s — the Ourworld rather than the Myworld perspective. But America’s preferences do not rationally reduce to a simple aggregate of the preferences of individual Americans (social choice theory).
Now, we can say America has her preferences — ordered chaos, relative power, security, etc. — because we’re able to define ‘primary goods’ and ‘rationality’ for the class of entities called nation-states. But that still leaves us with the question: where and how should we account for particular Americans, whose preferences do not rationally aggregate into a ‘general will’? Should we be ‘all system all the time’, or should we occasionally set aside the impersonal systems analysis and worry about how we keep the attachment of the people — which is itself a strategic priority for a system composed of human beings.
What I’m getting at here is an inherent tension between the existential perspective — i live and die once then nothing forever — and the State’s perspective. It is not obvious which perspective should be prior. And if they are equally legitimate, what would a stable and mutually advantageous compromise between them look like (I suppose we’ll have to idealize them a bit and put them in the original position)?
That is a hard question.
— Kristoffer V. Sargent · Jan 6, 09:26 PM · #
@62across,
Off the top of my head, I’d start by rolling back commerce clause jurisprudence. Perhaps an Amendment giving States reverse preemption in key areas: areas defined by the amendment as de facto intrastate activities; areas like education, drug policy, welfare, wages, etc. Then I would pass an amendment eliminating South Dakota v. Dole spending strings, and pass another amendment requiring some percentage of tax revenue to be redistributed to States and Municipalities — earmarked for specific issues (like education) without actually being conditioned on the enactment of specific policies — with the redistribution being based on something intuitively fair, like mean income (pro rata) or per capita.
I’m pretty sure this would empower local politics without too many adverse effects. I also have zero expectation of anything like this happening.
— Kristoffer V. Sargent · Jan 6, 09:28 PM · #
re: That is a hard question.
I meant to add: and I appreciate how intelligently you addressed it.
— Kristoffer V. Sargent · Jan 6, 09:32 PM · #
KVS:
…
…without an algorithmic answer. It’s one I’m working on right now.
— Jim Manzi · Jan 6, 09:37 PM · #
Yeah, me too. Maybe we’ll meet on the other side.
— Kristoffer V. Sargent · Jan 6, 09:54 PM · #
Looks like the main reason the EU15 are declining in world GDP is low population growth. That still leaves the question as to why their GDP per capita is not closing in on the US figure. I do not think that “social democracy” is the explanation. The gap existed before “social democracy” came along.
The American health care costs wipe out a lot of the advantage that the US has – so is there any reason to lose sleep over it, even if it is all very intriguing?
— wrs10 · Jan 6, 10:16 PM · #
Mr. Manzi
Correct if I’m wrong but you still have not answered the criticism that the relative decline in GDP of “Europe”, however defined, is due to a relative decline in population rather than the creation of social democracy as Rob Mac stated above or Chait implies.
More broadly, you don’t draw a convincing link between decline in relative GDP and social democracy.
While your article has some interesting observations it boils down to the classic libertarian dogma that “state intervention in the economy = decreased wealth”. All you seem to be doing is modifying that statement by conceding that without state intervention we are doomed to fall into social unrest.
— Mike in the Mountain West · Jan 6, 10:34 PM · #
And the dishonest use of numbers continues to expand…
The original article claims that Europe’s share of global GDP declined from roughly 40% to 25%. When called out on his dubious definition of the European economy, he discusses the decline in share for Germany, Italy, and France all ranging from 20% to 32%. So at first glance this seems to line up with his original claim.
But unlike the first set of numbers, this second set of numbers are presented as a percentage change from 1980 GDP, which (again) obscures the comparison.
A 25% share for Europe in 2009 actually represents a 37.5% decrease from a 40% share in 1973. This is considerably higher than the average decline for the EU15 or any of the major European countries from 1980 to 2009. So Manzi’s bad apples-to-oranges comparison significantly overstated the strength of the trend he’s attempting to demonstrate.
Additionally, Manzi cherry-picked Italy (32%) instead of the UK, whose share declined by only 12% despite their rampant health care socialism.
So his original article played fast and loose with comparisons to make his thesis look stronger, and his follow-up played fast and loose with comparisons in order to make the original article look less dishonest.
In the academic world, this would be flirting with academic fraud.
Not to mention the general weakness of the thesis. The 12 nation EEC has grown into the 27 nation EU, developed a common currency, and therefore SIGNIFICANTLY INCREASED the economic power of “Europe” by any reasonable measure. Which is probably why Manzi persists in using unreasonable measures and presenting the numbers in dubious ways.
— LaFollette Progressive · Jan 6, 10:59 PM · #
I’m also quite unconvinced. It looks like the relative change in GDP is due to (1) slower population growth in Europe and (2) decline in the hours worked per person in Europe. What about a comparison of the rate of change of GDP per hour worked?
— casual observer · Jan 6, 11:13 PM · #
Mr Manzi, interesting article. I don’t at all agree that being a social democracy would threaten America’s military or cultural dominance – I’d need to see more convincing evidence that what you have provided, but I’ll be reading the sight regularly seeing how you engage your readers and your acceptance of criticism. A rare thing indeed.
— James · Jan 6, 11:19 PM · #
Mr. Manzi,
Enjoyed your article and the follow-up, and broadly agree with the general thesis. But I was wondering if you think the idea that social cohesion is primarily based on economic equality needs refining. It certainly seems, from travels to Europe and from reading about the situation, that cohesion there is not significantly better than here, due to other fault lines that are opening up (young vs. old, immigrant vs. native, etc.) So my question is, do you think America might be able to endure greater (though not unlimited) economic inequality than other nations if it successfully manages other factors that contribute to social cohesion?
— NYDan · Jan 6, 11:21 PM · #
What you wrote then: “Opting for social democracy instead of innovative capitalism, Europe has ceded this share …”
What you say now: “I used the word Europe as per its dictionary definition.”
So, the decades-long economic crisis in the Eastern Bloc that resulted in the collapse of communism was a result of the Soviet system of “social democracy”?
No, that’s not what you meant? Then what DID you mean when you wrote that “Europe” in its “dictionary definition” had opted for “social democracy”?
You were playing a shell game then and you’re playing one now. But there’s no way to win with a fellow who’s willing to palm the pea, so I for one am not interested in playing anymore.
— Bloix · Jan 7, 12:31 AM · #
i have a whole book making your argument (better data, since i had more time and 250 pages to lay out the arguments).
Subprime Nation: American Power, Global Finance and the Housing Bubble,
Cornell University Press, 2009
http://www.cornellpress.cornell.edu/cup_detail.taf?ti_id=5452
http://www.amazon.com/Subprime-Nation-American-Capital-Housing/dp/0801475678
the books focus is contained in the subtitle.
enjoy
hs
— herman schwartz · Jan 7, 01:04 AM · #
Nail on the head, LaFollette Progressive. There is too much fallacious, FAR out-of-context logic here. You cannot “prove” social democracies inhibit growth by referencing a contrived Europe v. US contest in global share of GDP. It appears that Manzi truly believes that social democracy inhibits growth, but either cannot find a way to articulate his subjective instinct on this matter, or thinks that his articulation would be ineffective in proving the point that is the premise of his entire analysis.
We understand why you believe unfettered capitalism drives superior growth Mr. Manzi, there’s no need for intellectual dishonesty. Allow me to engage in some conjecture: The mechanisms that allowed you to venture into new technologies were enabled through what you see as a dynamic, conservative economy. This bolstered your own instincts, and rather than weakly basing your premise on anecdotes, you found numbers you knew would appeal on a cursory glance.
I recommend Dan Pink’s Tedtalk, which I’m sure many of you have already seen, for its short examination of what drives innovation. Innovation != unregulated capitalism, and no statistics will simplify it as such.
— Dwight · Jan 7, 01:14 AM · #
America has just had eight years of innovative capitalism, pro-growth policies, a business-friendly administration scrapping red tape and regulation to allow US business to boom. The result? A whopping 1.9% average annual GDP growth during the Bush administration and an almost catastrophic financial meltdown. Oh, and gigantic deficits caused by the tax cuts (go look at actual US annual tax revenues 1990-2008 and even further back.) There now exists the serious question as to just how many more pro-growth business-friendly innovatively capitalistic policies the US economy can withstand before complete economic collapse.
And now the ideological masterminds behind all this have the brass neck to continue to tell us that they know best how to run the economy, how their manifestly failed ideas are actually the best way forward! Before you do that, can I have an apology for the previous eight years please?
— hal · Jan 7, 04:23 AM · #
Mr. Manzi:
You have failed to address what I would suggest is a significant point.
As you have conceded, there were crucial flaws in your original analysis, in terms of using different time periods for Europe and the US and using a definition of Europe that does not match to social democracy (albeit you seem to resist the second one to a degree). However, you have failed to even attempt to explain how you made such egregious errors in the first place. The use of different time periods was particularly troubling. You are an intelligent man. Accordingly I refuse to believe that you would have made such an error inadvertently. In the absence of inadvertence, we are left with only gross intellectual dishonesty. This leads inevitably to a serious problem with your credibility on any further parsing of the data on your part.
— Gerald · Jan 7, 04:46 AM · #
From Chaits exposure and Manzi’s response the only conclusion to come to is that the original work was a piece of ideological bufoonery. Stripped of it’s coveniently arranged statistics and support free to false economic assertions the arguement comes down to: “Our system is better because it produces more babies and that is more important than a better quality of life for the majority, because, you know, the 3rd world. There are just so many of them!”
— tvd · Jan 7, 04:47 AM · #
One can’t help but wonder about the actual utility of the excess GDP per capita in the US relative to other nations. If we spend much of the extra national income on excessive health care without better outcomes, yachts for A-Rod and Tiger, weapons systems that the military doesn’t even want, errant wars, beachhouses for Goldman partners and failed CEOs and money managers who underperform the market, third vehicles for households with 2 drivers, bottled water that is no different than tap, fattening ourselves to the detriment of our long-term health, clothes that cost twice as much as they would if they had a different label on them…what is the point?
— andrew · Jan 7, 07:06 PM · #
“Trade is a positive-sum game, but power is zero-sum.”
This quote ‘sums’ up the problem with free-trade theory. Power comes from trade. Put differently, the gains from trade are translated into power. As you said, power is zero-sum. It can’t become positive-sum just because the money used to produce that power came from a positive-sum trade. So the end result of trade policy is zero-sum, not positive-sum as one can be led to believe if one takes a narrow focus and looks only at the trade, and not the end result of a trade.
Whether unequal trade-gains are put into military power, or into investment which tranlates eventually into economic power, in either case the result is zero-sum.
— Boomer · Jan 7, 07:15 PM · #
cw gets frontpaged by Sully.
gratz, my Dark Master.
— matoko_chan · Jan 7, 07:20 PM · #
Citing reduction in the number of hours worked does not bolster the social democracy argument, it actually works against it. Reduction in hours worked is largely a symptom of less available work for the population, which is indicative of a weak (or weakening) job market.
One topic I do not see much attention devoted to is the benefit Europe at-large had and has with respect to providing for security. The cost of the security of Western Europe for the better part of the 20th century (at least up to the breakup of the Soviet Union, which did not result in any sort of swift exit on the part of the American military) was largely borne by the American people. Certainly America benefited from this buffer between itself and its superpower nemesis, but the people of Europe – whose military costs were subsidized by America – were the greatest beneficiaries.
For an economy to succeed, the people need to first and foremost be secured and protected.
— Ron · Jan 7, 08:31 PM · #
Here, as elsewhere for years, I read about America’s burden of military spending to protect the world. Why do we not hear from conservatives suggesting we let the rest of the world take care of itself, by instituting a gradual and planned decline of military spending, leaving it to developed countries around the world to take up the slack. Aircraft carriers and nuclear subs don’t seem to be the proper tools for fighting terrorism. Are we not being dragged to the same end that Reagan is said to have dragged the USSR; that is, bankrupted by our own military spending?
— Don Matheson · Jan 7, 09:46 PM · #
@Don: I was speaking more to the discussion happening here, not broadly, but your point is well taken. I’m of a conservative bent, though moderate in my views. I believe we need a strong military, but I also believe that our current military costs far exceed our military needs, and that a gradual and planned decline would indeed be prudent.
This has to be balanced against the diplomatic strength we gain from having military deployments around the world. The strong hand of the military gives us an advantage here which should not be overlooked. A decline does not necessarily need to mean a full withdrawal.
I do believe we’ve seen reductions in some military spending, at least in terms of new weapons development – for example the cancellation of production of the F-22 by Obama. This helps, though I don’t believe we’ve seen any meaningful decline in military spending.
My point in general is that the cost borne by the American economy to protect Western Europe (and East Asia) certainly is a factor when comparing services that are provided by the American government against those in a typical social democracy. America effectively frees up a significant percentage of tax revenue that can be allocated to social programs for EU.
— Ron · Jan 7, 09:58 PM · #
Ron · Jan 7, 03:31 PM · wrote:
> For an economy to succeed, the people need to first and foremost
> be secured and protected.
Jim Manzi and his defenders seem to apply there are huge differences between the US and Western Europe in this regard. Yet when comparing defense funding levels, the difference does not seem very significant to me. The U.S. and Russia spend about 4% of GDP on defense, vs.2-2.5% of GDP for the major Western European countries. Incidentally, Chinese and Indian defense spending is also about 2.5% of GDP.
Among the world’s top ten biggest military spenders, all but China and Russia are U.S. friends or allies! I think the risk of China invading Europe is close to zero. The Russian military is also weaker than the Soviet one, and any analysis which claims Western Europe faces a long-term demographic and economic crisis ought to be even more concerned about the fate of Russia! The Arab world? The Middle East is chock full of piss-poor nations with weak armies. I don’t see how this will change anytime soon.
Now, I agree that the Chinese and Indian share of global military spending probably will increase as their economies and populations keep growing. The Indian defense budget is currently smaller than that of Italy. But I fail to see why this inevitably will result in military conflict on Western soil.
MARCU$
— mlindroo · Jan 7, 10:06 PM · #
@Marcu$: a difference of 2-2.5% and 4% is very significant, meaning the U.S. is spending anywhere from 80-100% more relative to its GDP on military vs. Europe. In real dollars this translates to per capita cost of about $1800 per American citizen ($565 billion spent on military against ~300 million citizens in the US).
I could not find EU totals, but if we look at the biggest EU economies, we see Germany at 1.5% of its GDP being spent on military, France with 2.6%, UK with 2.4%, and Italy with 1.8%. These total out to about $218 billion, which calculates out to be about $810 per capita.
Note that many European total numbers are a bit skewed by Russia’s spending. I’m limiting the numbers to countries that most benefited from America’s military presence. (that being said, UK could actually be excluded)
That’s quite a significant amount of money that can be re-allocated to social programs within these nations’ budgets.
— Ron · Jan 7, 10:38 PM · #
Excellently put, Andrew.
— Dwight · Jan 7, 11:21 PM · #
All this stuff about needing more power to thwart evil in the world is a red herring to distract from the blatently disengenuous arguement that started this all: That the US has a bigger GDP because it has greater social insecurity. The evidence is at best abiguous on this point. What is clear is that the vast majority of the disparity in recent economic performance between Europe and the US is simply a function of population. If Manzi wants to argue that economic insecurity increases GDP because it encourages people to have babies then be honest and say so. Less ideologically limited people might simply wonder why one could not have population growth and a civilized social system, like say Canada, or Australia. Australia is even relatively pro-military.
— tvd · Jan 8, 05:21 AM · #
— tvd · Jan 8, 12:21 AM · wrote:
> All this stuff about needing more power to thwart evil in the
> world is a red herring to distract from the blatently disengenuous
> arguement that started this all: That the US has a bigger GDP because
> it has greater social insecurity. The evidence is at best abiguous
> on this point.
I agree. Does Jim Manzi truly believe that if Western European voters had consistently elected an army of Margaret Thatchers in 1980-2010, the demographic decline would have slowed down to American levels…?
As THE ECONOMIST and TNR’s Chait point out, all this talk about relative “global economic output” is really about population growth and little else. “Social democracy” vs. “innovative capitalism” seems to be almost totally irrelevant.
MARCU$
— mlindroo · Jan 8, 12:04 PM · #
I’m sorry, but you still don’t seem to grasp that even though total GDP matters for military domination and the like, you still need to have a large population to achieve that. So, comparing the US and Europe through time in terms of prosperity, you need GDP per capita!!! Put another way, one day in the next 10-20 years, China will become the biggest economy in the world. It will however lag vastly to the US in terms of citizen welfare. So, total Chinese GDP will be biggest than US GDP, but per capita GDP bigger in the US.
— fp3690 · Jan 10, 05:00 AM · #
And from this thread we learn the ultimate futility of trying to be a semi-honest conservative intellectual 2010. The movement has so thoroughly descended into the fraudulent jingoism’s and sophistry of Beck and Palin and complete intellectual bankruptcy that anyone who like Manzi tries to keep one foot on descent ground is immediately and ruthlessly exposed, and forced to flee the thread with only his embarrassment and loss of face left for all to see.
— Danny · Jan 10, 06:39 AM · #
I don’t trust this data set that you are using, Mr. Manzi. It states that Hungary has seven times the share of the world’s GDP that Poland has, despite their table of Historical Real GDPs showing that Poland’s economy is four times the size of Hungary’s. The latter correct, and means that Hungary’s share of the world’s economy is actually a quarter that of Poland. That’s an error by a factor of 28 in the table you are using.
There is also a much better comparison to make if you want to look at the relative value of social democracy vs. US style capitalism: Canada. If you look at the social democracy with which we see the smallest number of demographic and geographic differences, the change in relative economic power almost vanishes.
I’d also like to know how those USDA tables handle the various ways that different countries handle economic data, particularly inflation rates.
— J. Michael Neal · Jan 10, 07:16 AM · #
This table is also interesting for the conclusions of this text
http://www.eupedia.com/forum/showthread.php?t=24193
“If we further divide by the average number of hours worked in the country, we get the productivity per worker per hour. Another way to calculate it is to take the GDP (PPP) per capita per hour and divide it by the employment rate, which should give exactly the same result, if the stats used are the same.
Here are the numbers I obtained (US$ produced per hour per worker ):
Luxembourg : 57.5
France : 56.6
Belgium : 55.9
Ireland : 51.8
Italy : 50.3
Austria : 46.4
Germany : 45.0
Netherlands : 44.5
Sweden : 42.6
Finland : 42.6
UK : 42.0
Denmark : 40.4
Malta : 35.7
Spain : 34.2
Estonia : 34.0
Greece : 33.1
Slovenia : 30.7
Slovakia : 27.8
Cyprus : 27.3
Portugal : 25.6
Latvia : 23.9
Hungary : 23.1
Poland : 22.4
Lithuania : 21.5
Czech Republic : 18.6
Bulgaria : 17.8
Romania : 10.0
—————————
Iceland : 29.4
Norway : 53.0
Switzerland : 35.6
Turkey : 28.5
Japan : 37.3
USA : 49.6”
In a way this table shows that the real productivity of U.S. workers is not very different from developed European economies. Thus the differences between U.S. and Europe must be explained by differences in basic unemployment. In a way it is sure that welfare system raises incentives for “permanent unemployment”, but to me it does not seem that it really influences competitiveness in any meaningful way. Therefore the right question is how to provide strong safety net which helps personal tragedy during downturns while increasing incentives for the beneficiaries to search for a job.
— physicist · Jan 10, 01:29 PM · #
“economic output per person is now 20 to 25% higher in the U.S. than in Japan and the major European economies”
This is utter nonsense! Both the IMF and the Worldbank numbers of GDP/capita show that Germany stands at about $44500 (2008) and the US at about $47000. Looks like we’re only about 5% behind the US. So, check your numbers, there has to be a serious error in them.
Oh, and btw, how can we Germans be so closely behind the US, if we allegedly have fallen back constantly since the 80s? Your whole argument doesn’t make much sense. Rather, it looks like for a nation without serious natural resoueces to speak of (unlike the US), and with a population that is working less than the US one, we’re keeping up very well, thank you.
— Gray, Germany · Jan 10, 07:38 PM · #
Using the USDA data Manzi quotes, I calculate that EU15 GDP per capita increased faster than in the US for the period 1970-2009 (1,9% per annum in EU15 v. 1,7% in US).
Meanwhile, it is hardly surprising that US GDP has grown so much faster than EU15 GDP over the same period. The same data set shows that over this period, US population increased from just over 200 million to just over 300 million (+50%), while EU15 population increased from just over 340 million to just under 390 million (+15%). Population growth alone therefore suggests that US GDP should have grown much faster than the EU15’s and that it would thus also have fared better as a percentage of world output.
Honestly, is anyone supposed to take Manzi’s analysis seriously when he demonstrates such a casual disregard for basic facts ?
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— abass · Jan 19, 07:48 AM · #