Why Germany Has It So Good -- and Why America Is Going Down the Drain
Stay up to date with the latest headlines via email.
While the bad news of the Euro crisis makes headlines in the US, we hear next to nothing about a quiet revolution in Europe. The European Union, 27 member nations with a half billion people, has become the largest, wealthiest trading bloc in the world, producing nearly a third of the world's economy -- nearly as large as the US and China combined. Europe has more Fortune 500 companies than either the US, China or Japan.
European nations spend far less than the United States for universal healthcare rated by the World Health Organization as the best in the world, even as U.S. health care is ranked 37th. Europe leads in confronting global climate change with renewable energy technologies, creating hundreds of thousands of new jobs in the process. Europe is twice as energy efficient as the US and their ecological "footprint" (the amount of the earth's capacity that a population consumes) is about half that of the United States for the same standard of living.
Unemployment in the US is widespread and becoming chronic, but when Americans have jobs, we work much longer hours than our peers in Europe. Before the recession, Americans were working 1,804 hours per year versus 1,436 hours for Germans -- the equivalent of nine extra 40-hour weeks per year.
In his new book, Were You Born on the Wrong Continent?, Thomas Geoghegan makes a strong case that European social democracies -- particularly Germany -- have some lessons and models that might make life a lot more livable. Germans have six weeks of federally mandated vacation, free university tuition, and nursing care. But you've heard the arguments for years about how those wussy Europeans can't compete in a global economy. You've heard that so many times, you might believe it. But like so many things, the media repeats endlessly, it's just not true.
According to Geoghegan, "Since 2003, it's not China but Germany, that colossus of European socialism, that has either led the world in export sales or at least been tied for first. Even as we in the United States fall more deeply into the clutches of our foreign creditors -- China foremost among them -- Germany has somehow managed to create a high-wage, unionized economy without shipping all its jobs abroad or creating a massive trade deficit, or any trade deficit at all. And even as the Germans outsell the United States, they manage to take six weeks of vacation every year. They're beating us with one hand tied behind their back."
Thomas Geoghegan, a graduate of Harvard and Harvard Law School, is a labor lawyer with Despres, Schwartz and Geoghegan in Chicago. He has been a staff writer and contributing writer to The New Republic, and his work has appeared in many other journals. Geoghagen ran unsuccessfully in the Democratic Congressional primary to succeed Rahm Emanuel, and is the author of six books including Whose Side Are You on, The Secret Lives of Citizens, and, most recently, Were You Born on the Wrong Continent?
Terrence McNally: You start your book Were you Born on the Wrong Continent? with a personal experience, a stopover in Zurich. Could you talk about that?
Thomas Geoghegan: In 1993 I got it in my head, for reasons too long to tell, to go see a woman I'd met who happened to be in Moscow. Because of the coup in October 1993, all the flights to Moscow were canceled, and I ended up in Zurich. I had not been in Western Europe for years, and, while I was waiting for clearance, I happened to walk around the streets and I was just thunderstruck by how nice it was. Every bookstore seemed like a boutique and even the train station was like a perfumery. And I thought, how did this part of the world get so wealthy without my knowing it? That was the epiphany that led me to take a bigger and bigger interest in how Europeans live, and to ask ultimately, were you born in the wrong continent?
McNally: In talking about that walk, you point out that if you don't have much poverty, life is better for everybody. Not just better for the poor, but for everybody.
Geoghegan: You have more of the city available to you. [My hometown] Chicago's fantastic, but there's a huge swath of it that you don't particularly want to go to -- not because of any criminal danger, but just because it's run down. Largely white ethnic neighborhoods on the northwest side are unattractive and dilapidated. Plus there are huge parts of the city that are downright dangerous. Europe isn't like that. It's the argument for social democracy: more equality and less poverty and disorder.
McNally: In their book, The Spirit Level, Richard Wilkinson and Kate Picket point out that on average everything is worse for everybody in the countries with the most unequal distribution of wealth.
Geoghegan: As a labor lawyer, I can see that janitors and truck drivers I represent would be better off in a social democracy. I make the argument in the book that even people who are doing relatively well would be literally, materially better off in a more egalitarian social democracy. Some of the public goods that are available there for free- - university education, for example, are skewed towards the people who are relatively at the top.
McNally: Someone who doesn't go to university doesn't get that benefit, but a family who sends two or three kids gets an enormous benefit.
Geoghegan: Of course, low income sectors do better too. Nonetheless, it could be said, there's a growing amount of poverty in Germany. Especially during the 1990's and the early part of the last decade, there was a scaling back of social democracy. For a while the bubble of casino capitalism in the US and the UK led to an allocation of capital into the US and UK looking for hot returns. Since the collapse of casino type capitalism in 2008, money has shifted back where it should have been in the first place, to the virtuous economies of the world like Germany, based in manufacturing.
McNally: I recall Kevin Phillips pointing out in his book Bad Money that year after year the US shifted more and more of our money and our best and brightest young people into finance. When the casino seemed to be paying off, other countries also shifted in our direction, but when it broke, we didn't have the manufacturing and export base a country like Germany has to fall back on.
Geoghegan: The Germans had a certain amount of schadenfreude about the whole thing. They're basically a very pessimistic people by temperament, and when they saw a world debacle that they weren't responsible for, they actually became a little more upbeat.
They had what they call a good recession. The German government was very quick off the mark, and immediately put in place what they called kurzabeit. Through this short work-week program, the government paid people to stay on the job when they otherwise might have been let go.
We got ahead of the curve," one German labor minister said, "employment didn't drop here the way it did in the US." When the economy recovered, there was no incentive to hold off hiring because the people were already on the job. Their unemployment is now significantly lower than ours and the economy is booming.
McNally: When asked why Obama didn't pursue a similar policy to stem the economic bleeding, Larry Summers dismissed the idea, saying the White House wanted to create new jobs not preserve old ones.
Geoghegan: A pretty lame answer.
Terrence McNally: And an arrogant one. Good for you, Larry. What about the guy who lost his job? And his family and his kids?
Geoghegan: Larry Summers is the villain of my book. He was an architect of deregulation, and was doing a war dance back in the late 1990's about how the US model was triumphant over all. Now, the shoe's on the other foot.
McNally: What's the status of the crisis in Europe right now? The EU includes not only virtuous, productive economies like Germany, but also others not nearly so.
Geoghegan: Those less virtuous economies were the so-called "new Europe" that Donald Rumsfeld was touting. People in the countries that are in trouble now economically were the ones willing to go to Iraq -- and there is a connection. These are the countries that were much more inclined to go the American route, going into debt heavily, using housing speculation as the engine of the economy, and opening their economies big time to global bank debt and finance.
Goldman Sachs poured tons of money into Greece, and other New York, London and German banks poured money into Spain. None of the bubbles occurred in Germany and in the "old Europe" that Donald Rumsfeld wrote off. Part of Europe is in trouble to the extent -- and only to the extent -- that it's involved in the American model. Those countries most resistant to the American model are doing fine.
By the way, why was Goldman Sachs willing to lend money to weak economies like Greece? Because Greece was in the EU. Because Spain was in the EU. These countries would never have gotten all this money from US banks. And what is so important about the EU? At the end of the day the Germans with their trade surplus are able to pay -- and in fact that's what has happened.
McNally: How is the relationship unfolding between Germany and the economies it is bailing out?