not the Europe we had in mind

Matt Yglesias points us to this chart, which is depressing enough on its own:

Then, both he and Kevin Drum, go on to point out that job losses are likely going to be long-term.

Drum writes:

I don’t want to push this theme too far because I haven’t yet done the work to really get a reliable sense of what’s going on.  But I wonder, when this recession is finally over, if we’re going to find ourselves in a European-esque mode with a large and growing population that’s almost continually unemployed or, at best, underemployed.

I posed this question to some friends the other night over beers: If immigration restrictions between the U.S. and the E.U. were lifted entirely, what would happen?

Now, most of my friends are fairly liberal.  I live in a liberal college town and I’ve lived a fairly bohemian life, all things told, so many of my fellow travelers are environmentalists, starving artists, and the like.  Thus I was not surprised by the initial response, which boiled down essentially to the idea that all the educated, cosmopolitan liberal-types would pack it up and head off to Europe and all the right-wingers in Europe would high-tail it here.  In other words, Europe would go a deeper shade of blue and America would go a deeper shade of red.  We’d have the guns, but they’d have the numbers.  Or something like that.

There are a number of problems with this.  But the one I wanted to address was unemployment.  It’s easy to look at Europe and think they’ve figured it all out.  I recall Bill Maher ranting on about this on the Daily Show not long ago, about how the small-minded right-wingers in the U.S. were preventing his dream of realizing a more Europeanized nation, by which he meant a more secular, more cosmopolitan, and more egalitarian society.

But there really are some serious problems with the tightly regulated European economic model, not the least of which is the “permanent unemployment or underemployment” that Drum is talking about.  When we talk about redistribution of wealth and egalitarianism and fairness, it’s easy to simplify this and think wholly in terms of taxes, and how progressive the tax-code is, or how equitable the social services are, but that leaves out a very fundamental consideration, which is essentially the employment factor.

Ask yourself, what has provided more for you in your life – government social services or your job?  If it’s social services, that means you’ve been living off welfare, and that’s probably not a good thing.  A safety net is no place to reside permanently.

In a poor neighborhood, with unemployment rates through the roof, what would change more peoples’ lives – more welfare, or more jobs?

Now, obviously these two things, safety nets and economic opportunity, are not wholly mutually exclusive.  But there does come a point when taxes or regulations or government intervention into the economy really does start to effect the private sector’s ability to create jobs.  Or resources are shifted in such a way that jobs that might have been created in a community are artificially created elsewhere.

This is what has happened in many parts of Europe, where unemployment has remained consistently high, and underemployment keeps even these bad numbers looking better than they should.  In some parts of Europe, like the Netherlands, the trend in recent years has been toward decentralization, liberalization of the economy, and less government intervention into the economy.  What this has meant for the Netherlands is a gradual decrease in the unemployment rate from a three-decade peak of 10% in 1983 to only 2.8% in 2008.

Now compare the Netherlands to France, which has continued to protect its labor unions and maintains tight controls over its economy; and the United States, which has, since the Reagan days, also economically liberalized a great deal:

Netherlands Unemployment Rate 1980 - 2008

France Unemployment Rate 1980 - 2008

United States Unemployment Rate 1980 - 2008

Since 1980 France’s unemployment rate has dipped below 8% only twice.  By contrast, before the recession we are currently in, the United States only reached unemployment above 8% once in nearly thirty years.  The French numbers are more stable, but also consistently nearly as high as the unemployment rate in the United States during this economic downturn.  I’m not sure that would have me rushing to Paris.

So, to make a long story short, it’s important to note that the success stories in Europe right now are due to moves toward a more “American” way of doing things, though certainly countries like the Netherlands have learned a great deal about smart ways to implement safety nets over the years.  If borders were opened and travel and work restrictions abolished between the U.S. and the E.U, however, I think you’d see the immigration flow move more towards countries with low unemployment, low barriers to entry for new businesses, and low taxes, not to countries with strict price controls, wage regulations, and the resultant high unemployment.  And, of course, things like the Bill of Rights are nice, too.

In the end, it’s the economy, stupid.  It always will be.

Note: I don’t mean to call anyone stupid.  Not really.  We’re a very huggy bunch here at the League, after all.