By Clive Crook
Published: April 18 2010 20:52
Republicans accuse Barack Obama, the US president, of trying to turn the US into Europe. The accusation stings, because the US likes to think of itself as exceptional, and because the charge is not baseless. Comprehensive healthcare reform was indisputably a move in Europe’s direction. Though shy about saying so, many Democrats do want the US to draw closer to the European norm.But which European norm? There are so many, a fact not properly understood in the US. What if America should converge on the wrong one? This odd-seeming scenario is actually not so hard to envisage.
To start with, the gap between the US and Europe as a whole gets exaggerated. The gap is there, to be sure. All across Europe, voters have long seen healthcare as a basic entitlement. This aspect of the American exception always struck them as bizarre. But in other ways, Europe’s governments – leftwing, rightwing, and everything in between – have found much to admire in American capitalism.
The market for that model is a little depressed at the moment, admittedly, but it will recover. Meanwhile, many European countries have moved, as it were, well out into the mid-Atlantic. For years their governments privatised and deregulated. They cut taxes on business. They brought down top rates of income tax. Many tried, in short, to move west, and to some effect. It will take more than the Great Recession to push them back.
For its part, even before Mr Obama revived the Democrats’ ambitions, the US was also moving offshore. When commentators look at the size of government in the US and in Europe, they often measure federal spending in the US against consolidated government spending elsewhere. Compare like with like by adding in US state and local government spending, which is large and trending up: the gap shrinks.
Current figures are muddied by the massive temporary surge in US spending, so look at 2007. US general government spending that year was 37 per cent of gross domestic product. Germany’s was 44 per cent. A handful of smaller European economies spent about the same as the US. The eurozone average was 46 per cent. True, there was a gap, but it was less than an ocean wide. (In dollars per head adjusted for purchasing power, by the way, US general government spending sat way up the table: higher than in Germany, Italy and the UK, to name just three.) And the Democrats were not yet in charge.
Now consider the reach of Mr Obama’s ambitions, and the fiscal hazards of healthcare reform. New taxes, including a value added tax, are starting to be discussed. The idea that the US might meet some parts of Europe crossing from the other side does not require an extreme leap of imagination.
Quite possibly, if this happened, the US might be pleased with the results. Convergence in public spending, however, is not the most interesting aspect of this speculation. What really matters is which European norm the US might be heading for. Here, I think, lies the greater danger.
Over the years, some European countries have been more successful than others in combining growth with interventions to curb poverty and inequality. The terms of that trade-off were milder in countries such as Denmark and the Netherlands than in Britain. Why this might be is partly guesswork, but there is evidence that social cohesion and solidarity made the difference. Social direction – including strong trade unions – has worked well when supported by a centrist consensus. Add similar institutions to divided or adversarial societies, and things go wrong.
Europeans used to laugh at US politics, because it seemed not to matter whether Democrats or Republicans were in charge. Politics was lively but the parties were not cleanly split on ideological lines. Continuity was possible. Compare this with the UK, pre-1997. Up to and including Margaret Thatcher, the Conservative leader, the policy pendulum would smash to and fro, according to whether Labour or the Tories were in power. Decades of oscillation laid the country low.
These stereotypes appear to have switched. Labour and the Tories have merged in the post-Thatcher middle, jostling with the revived Liberal Democrats. Democrats and Republicans have moved apart and resolved that “elections have consequences”. The US parties have clashing ideologies and the middle ground has been vacated. US politics is more polarised than anybody can recall. Luckily, the constitution provides checks and balances.
The US is nobody’s idea of a homogeneous country. Not riven by class in the British sense, it is divided by interest group, by cultural affiliation, and by race. The culture wars have not abated: they are being fought on new fronts. As for industrial relations, think how the country’s diminished unions destroyed the US car industry; see how they throttle the schools. In this respect, the US has more in common with Britain circa 1975 than with Germany or Scandinavia. Mr Obama sees strong unions as good for growth and equality. In parts of Europe, maybe. In the US, as in Britain, I think not.
Americans are indeed exceptional. The energy, the drive, the work ethic, to say nothing of the hospitality, are hard-wired. To know the people is to understand this country’s amazing achievements. But cross American turbulence with polarised politics and “European” ambitions, and watch out.
Copyright The Financial Times Limited 2010.
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