US vs Europe
A front page story in the New York Times considers European governments’ refusal to take the Obama administration’s advice and spend lots of money to stimulate their economies. The article gives further insight into (1) why we ought to enact a guaranteed basic income, Citizen Dividends, and (2) why basic income is very different than European social policies; it’s not socialism.
The article, here, opens by describing an employer calling a meeting of the 50 workers at his factory:
But rather than resorting to layoffs, Mr. Koppe asked half his employees to come in every other week. The government would make up roughly two-thirds of their lost wages out of a fund filled in good times through payroll deductions and company contributions.
…
The Europeans say they have no need for further stimulus right now because their social safety nets, derided in good times by free market disciples as sclerotic impediments to growth, are automatically providing the spending programs that the United States Congress has to legislate.
Europe’s extensive job protections and unemployment benefits are “bad in the upswing, because firms don’t dare to hire people, because then they are glued to them,” said Hans-Werner Sinn, president of the Ifo Institute for Economic Research in Munich. “In the downswing, it’s good if the people are glued to the companies. They keep their jobs. They keep their income. They keep consuming.”
European workers are “glued” to their companies. Those companies are constrained and dependent on their governments. That’s what makes European society and economies more stable than ours.
Citizen Dividends, in contrast, will provide greater freedom to workers and companies. Workers will have an absolute financial safety net regardless of economic conditions. Companies will be more able to innovate; they won’t be “glued” to workers or government.
European approaches are fairly static. The basic income alternative will be much more dynamic.
European approaches are bureaucratic and paternalistic. The basic income alternative is more minimalist and libertarian.
It’s during downturns that European approaches are especially attractive, and that’s illustrated in two more paragraphs from the Times article:
Indeed, to travel between the United States and Germany is to find two countries experiencing the economic slowdown completely differently. The severity of the downturn does not appear to have sunk in yet in for Germans. There was no real estate bubble here, and few people have a substantial portion of their savings or retirement accounts invested in the stock market. The unemployment rate has risen more than a percentage point, to 8.5 percent in February from 7.1 percent last November. But, significantly, the latest figure is still lower than it was just a year ago.
“In contrast to America, our social systems are not on the decline right now,” Mrs. Merkel said Sunday night in a widely watched interview on a television talk show. “Pensions are not cut, unemployment insurance is not reduced. On the contrary, we can register stable and, in some sectors, also rising expenditures, and this makes me hope that our social market economy will enable us to cope with this complicated situation.”
Basic income will protect us and liberate us at the same time, in the downturns and the upswings.
Steven Shafarman
Tags: economic stimulus, other countries