Europe Is Doing Better At Creating Jobs Than The U.S.

The caricature on the left (by DonkeyHotey) is of Paul Krugman -- winner of the Nobel Prize for economics, and columnist for the New York Times. In a recent NY Times column, Mr. Krugman reveals something that may surprise most Americans -- that in spite of what American right-wingers want us to believe, the so-called "welfare states" of Europe are actually doing better at creating jobs for their citizens than the United States is doing.

Here is most of what Krugman had to say:

European economies, France in particular, get very bad press in America. Our political discourse is dominated by reverse Robin-Hoodism — the belief that economic success depends on being nice to the rich, who won’t create jobs if they are heavily taxed, and nasty to ordinary workers, who won’t accept jobs unless they have no alternative. And according to this ideology, Europe — with its high taxes and generous welfare states — does everything wrong. So Europe’s economic system must be collapsing, and a lot of reporting simply states the postulated collapse as a fact.

The reality, however, is very different. Yes, Southern Europe is experiencing an economic crisis thanks to that money muddle. But Northern European nations, France included, have done far better than most Americans realize. In particular, here’s a startling, little-known fact: French adults in their prime working years (25 to 54) are substantially more likely to have jobs than their U.S. counterparts.

It wasn’t always that way. Back in the 1990s Europe really did have big problems with job creation; the phenomenon even received a catchy name, “Eurosclerosis.” And it seemed obvious what the problem was: Europe’s social safety net had, as Representative Paul Ryan likes to warn, become a “hammock” that undermined initiative and encouraged dependency.

But then a funny thing happened: Europe started doing much better, while America started doing much worse. France’s prime-age employment rateovertook America’s early in the Bush administration; at this point the gap in employment rates is bigger than it was in the late 1990s, this time in France’s favor. Other European nations with big welfare states, like Sweden and the Netherlands, do even better.

Now, young French citizens are still a lot less likely to have jobs than their American counterparts — but a large part of that difference reflects the fact that France provides much more aid to students, so that they don’t have to work their way through school. Is that a bad thing? Also, the French take more vacations and retire earlier than we do, and you can argue that the incentives for early retirement in particular are too generous. But on the core issue of providing jobs for people who really should be working, at this point old Europe is beating us hands down despite social benefits and regulations that, according to free-market ideologues, should be hugely job-destroying. . .

I’m sure that many people will simply refuse to believe what I’m saying about European strengths. After all, ever since the euro crisis broke out there has been a relentless campaign by American conservatives (and quite a few Europeans too) to portray it as a story of collapsing welfare states, brought low by misguided concerns about social justice. And they keep saying that even though some of the strongest economies in Europe, like Germany, have welfare states whose generosity exceeds the wildest dreams of U.S. liberals.

But macroeconomics, as I keep trying to tell people, isn’t a morality play, where virtue is always rewarded and vice always punished. On the contrary, severe financial crises and depressions can happen to economies that are fundamentally very strong, like the United States in 1929. The policy mistakes that created the euro crisis — mainly creating a unified currency without the kind of banking and fiscal union that a single currency demands — basically had nothing to do with the welfare state, one way or another.

The truth is that European-style welfare states have proved more resilient, more successful at job creation, than is allowed for in America’s prevailing economic philosophy.