Lessons from Europe, or ‘Europe’

A protester gestures during a demonstration against the government’s pension reform, Paris, December 5, 2019. (Christian Hartmann / Reuters)
It’s no model for what leftist schemes would create here.

A nationwide series of protests, some of them violent, is convulsing France. The proximate cause is pension reform, and the French are having a splendid time: In news photos, the protesters are positively beaming, and a recent BBC report described the mood, amid the arson and destruction of property, as “festive.”

I suspect that the American version of that will be less festive, when the time comes.

Paul Krugman of the New York Times, who as a columnist always has had a particularly unkeen sense of timing, in November attacked the “Europhobia” of centrist Democrats. “Going on about how terrible things are in France is a sure sign that you have no idea what you’re talking about,” he wrote. I do not think France is a particularly badly governed country, but the French are mad as hell about it, and surely their opinion must count for something.

If you are wondering where Professor Krugman is seeing all those centrist Democrats who were terrified of France in early autumn, it is helpful to know that the column is one long stage whisper at Steven Rattner, the Obama-administration Treasury official who wrote in the New York Times that Warren is the candidate for those who “want to live in France (economically).” Warren’s policies, Rattner wrote, would impose dirigiste European practices on U.S. firms. Rattner, who is after all an Obama guy, is generally supportive of New Deal–style welfare statism but fears Warren’s

intention to impose vast new regulatory burdens and to revamp the way business functions, which could have an even more negative effect on our economy. Many of America’s global champions, like banks and tech giants, would be dismembered. Private equity, which plays a useful role in driving business efficiency, would be effectively eliminated. Shale fracking would be banned, which would send oil and natural gas prices soaring and cost millions of Americans their jobs. And on and on.

The loudest voices in the Democratic party at the moment belong to confessing socialists such as Alexandria Ocasio-Cortez and Bernie Sanders, and to bitter partisans such as Professor Krugman, who insists “good people can’t be good Republicans,” and his headline writer, who proclaims: “Republicans Only Pretend to Be Patriots; Republicans Don’t Believe in Democracy; The G.O.P. Goes Full Authoritarian,” etc. Conservative critics of President Donald Trump (I am one) will recognize the dynamic at work here: The angry us-and-them tribalists who control 98 percent of the conversation resent the hell out of the 2 percent of us who say, “Yes, but . . . .” As though Steven Rattner’s were a name to conjure with.

He does deserve a hearing, especially from conservatives looking (as they should be looking) for any tendency within the Democratic party that should be encouraged and that might provide some basis for future bipartisan reform efforts.

Rattner is worried less about the tax-and-spend redistribution policies in vogue among Warren et al. than he is about the socialism — the government takeover of parts of the economy — although unlike Senator Sanders and Representative Ocasio-Cortez, he does not choose to use that word. He worries about the hypothetical Warren administration seizing control of most major corporations because . . . the non-hypothetical Senator Warren proposes having the federal government seize control of most major corporations, i.e., all those with $1 billion or more in revenue. As Rattner notes, Warren would require these companies to go to the federal government and beg for permission to operate (corporate charters currently are written at the state level). These companies “could lose their charters if they failed to adhere to an often vague set of principles,” he says. “That would give a President Warren enormous power to punish companies (including putting them out of business) for not adhering to her subjective vision of corporate responsibility.” Why bother owning the means of production when you can avoid a lot of trouble and still treat them as your property?

Rattner’s case against Warren contains much: new schemes of corporate welfare and political steering in the name of “good American jobs,” anti-trade policies far beyond what even the Trump administration has considered, opportunistic currency devaluation, the government dictating the composition of corporate boards, etc. Rattner is a lifelong Democrat. So was Ronald Reagan before the Democratic party left him.

But what about the view from Paris?

The problem with comparisons between the United States and Europe is a lack of granularity. There is no such thing as “Europe,” economically or politically, the best efforts of the ladies and gentlemen in Brussels notwithstanding. There are many different European systems of taxation, of health care, of regulation, of providing welfare benefits. This fact is reliably lost on the American Left: Van Jones, speaking on Chris Cuomo’s program, offered the following daft claim: “In Europe, they have health care. They don’t have health-care insurance, they have health care.”

This claim is both false and preposterous. The British-style monopoly system is in fact an outlier, but even in the United Kingdom and Canada people have health insurance. Health insurance forms the basis of health-care coverage in most of Europe, from Germany to France to Switzerland to Poland. In fact, those monstrous Europeans are way out ahead of the Trump administration: You cannot get a Schengen-area visa without having health insurance.

There are many models of health care in Europe, but none of them is the one that American progressives such as Van Jones seem to believe defines “health care in Europe.”

The lack of specificity is widespread. For example, many progressives will point out that industrial and manufacturing workers in Germany seem to be in pretty good shape, and that their employers are in pretty good shape, and that Germany has much more powerful unions than does the United States. That is all true. But it also is true that Germany’s biggest union, IG Metall, is of a very different character from its U.S. counterparts such as the corrupt and feckless UAW and many others. Of course, our progressive friends will say, “Yes, but when we say we want more power for unions, we want more power for effective and honest unions, not corrupt and ineffective ones.” But that is just another way of saying, “The idealized version of what I want is ideal.” The real world matters, too.

We hear this sort of thing very often when it comes to taxes. In most of the wealthy countries of Western Europe, taxes are a bit higher or much higher than they are in the United States. (Switzerland is an exception.) In the prosperous Nordic countries, taxes are radically higher than in the United States. But being higher is only one way in which they are different. For example, many European countries have relatively low taxes on business income and on capital gains. Sweden has lower corporate income taxes than does the United States; so do Switzerland, Norway, and Denmark. By contrast, most European countries impose substantially higher income taxes on the middle and upper-middle classes than does the United States: Sweden’s top rate (of nearly 70 percent) kicks in at around $100,000, but relatively few people pay it.

Direct comparisons are in some ways difficult to make, being either so oversimplified as to be false or so complex as to be unusable. A lot of very happy and stable countries such as Germany, Norway, and France collect between 45 percent and 55 percent of GDP in taxes, but then so do Cuba and Lesotho. The gross figures do not tell us very much that is useful. France has been recognizably France for a long time, under many different kinds of government policies. There was an England before there was an NHS.

Professor Krugman tells us Eurosclerosis is a thing of the past and that France’s lower per capita economic output is really only a matter of vacation time, “a choice about work-life balance, not an economic problem.” The BBC tells us France is “paralyzed.” The French prime minister, Édouard Philippe, offers the very intelligent rationale (U.S. leaders would do well to heed it) that France’s pension system is not yet in a meltdown, which means that this is precisely the time to act, “reasonably, progressively, without brutality, when we still have time.”

Maybe you think the lessons from Europe are that we should have more generous health-care subsidies and more bicycle paths. Fair enough. But maybe the lesson is that our tax system is too easy on the middle class and that entitlement reform is best undertaken earlier rather than later.

There is much to be said for many European practices, things to admire both for the Left and the Right in the United States. But Rattner’s principal complaint with Senator Warren is not that she supports larger health-care subsidies or more stable fiscal policy. It is that she would use the power of the federal government to radically alter the legal regime in which major U.S. firms do business, centralizing market power in Washington, subjecting corporate boards and managers to political litmus tests, and diminishing the property rights of shareholders. If there is a very good model of Senator Warren’s desired policies producing the desired results, it is not to be found in Europe, or even in “Europe.”

 

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