Social structure, economy turn to Euro for salvation

Monday, July 13, 1998

Social structure, economy turn to Euro for salvation

EUROPE: Nations must remain alert for pitfalls inherent in U.S.
system

By Steven Hill

Sitting in a Paris cafe on the eve of Europe’s quest for a
common currency, one can’t help but be struck by the miracle of it
all. A continent that has fought numerous bloody wars this century,
last century and every century before, is standing on the threshold
of a peaceful union to promote mutual economic prosperity.

Paris is also the site this year for the World Cup of soccer.
Watching Europeans of various nationalities patriotically cheering
their teams, one can’t help but reflect on the remaining barriers
to this European "union." Nationalism lends a distinctive flavor to
each European nation’s culture and charm, and Europeans cling to it
with a tenacious tribalism that can be both attractive and
alarming.

Unemployment is the buzz word on most everyone’s lips here these
days, and it presents additional challenges to the Union.
Unemployment rates hover around 10 to 20 percent, depending on the
country. The World Cup must be a welcome distraction. Much
hand-wringing and introspection has accompanied economic
uncertainty as the various European nations gear up for
unprecedented cross-border competition and reaching the Maastricht
Treaty eligibility requirements for entering the Union.

For economic inspiration, some Europeans are looking westward
toward American shores. The American model is seen as one that is
marked by low unemployment (4 to 5 percent), market and labor
flexibility, low deficits and increased worker productivity. The
Europeans are right to strive for low unemployment, but important
distinctions should be noted about U.S. practices.

First, the American version isn’t just a "model." The United
States is a competitor that has the distinct advantage of a vast,
relatively homogeneous market of 250 million people. If need be,
workers in Michigan can relocate to jobs in New Mexico and capably
fit into their new environs using the same language, the same
currency and largely the same culture. MacDonald’s, AT&T and
Microsoft have seen to that.

Europe’s quest for the Euro currency is designed to achieve some
of this advantage, but will workers from Spain be welcome in, say,
Germany, or the Irish in Italy? Watching World Cup nationalism on
display in European cafes and listening to the burly choruses of
patriotic anthems ringing in the streets, this seems unlikely – at
least not any time soon.

Second, in the punishing free-for-all of free trade and open
markets, the American model promises with one hand but takes away
with the other. The rate of homelessness in American cities has
reached a epidemic scale that Europeans can scarcely imagine. Forty
million people, most of them children, are without health care.
Children are the fastest growing poverty sector. Prisons are one of
the fastest growing economic sectors, as relative spending on
education decreases. The income ratio of the top 20 percent of
earners to the bottom is about 10 to 1 in the United States,
comparable to Latin America’s rate, and double that of Europe.

Yes, U.S. workers have jobs and comparatively high productivity
– but too many of these jobs are temporary or dead-end service
sector jobs. U.S. workers also have less vacation, less parental
leave, less affordable daycare and work more hours per week than
their European counterparts. These are not coincidences. In the
United States, they are two sides of the same coin.

In a highly competitive world, there are winners and losers,
just like in the World Cup. The greater the competition, the more
some get left behind. Is Old World Europe ready for the importation
of these ways of New World America? Or is it a wooden shoe that
doesn’t fit? Can Europe carve out its own independent course,
borrowing some features from the United States model and leaving
others? That question is what tugs greatly on the European
conscience right now.

The quest for a European union and common currency can be put in
its proper perspective by answering a simple question: Who is to
benefit? The United States never adequately addressed this
question. The negotiated side agreements to NAFTA and GATT
regarding the environment, labor, and health and safety are
toothless watch dogs. The bounty of the current economic expansion
has ameliorated conditions for those who are positioned to benefit,
but expansions are always followed by downturns – witness hapless
Asia.

When that downturn comes to American shores, the gutted social
safety net (already modest by European standards) will catch
relatively few, and the Americans’ values for compassion, pluralism
and fairness will be sorely tested.

Perhaps Europe can find another way.

As one wise old American and former Ambassador to France,
Benjamin Franklin, once remarked on the eve of the American
revolution: "We must all hang together, or most assuredly we will
all hang separately." Europeans must decide to whom the "we"
refers.