Monday, July 16, 2007

Goin' mobile

Anyone of you who has made the move from from America to a European country might have had personal experience with the suggestion--be it from friends or family--that you're not just changing nations but undergoing a far more significant transition: you're 'leaving freedom behind'. This might not be said so directly, but I have found that it comes packed in many different forms, from vaguely hostile to slightly pitying.

(Sometimes it's just bewildering. During a phone call with a dear college friend shortly after I arrived here, the issue of German politics came up: 'So,' he asked, 'do they have democracy there?' I felt it necessary to set him straight, of course, and explained to him that the complicated system of feudal rights and obligations had been somewhat reformed, and that on the third Wednesday of every month the king was now willing to listen to the complaints of his subjects. Better than nothing....)

Of course, Euro-critique of the more venomous form requires that you're dealing with people at least a few ticks to the right, politically speaking. Liberals, especially in recent years, make the opposite mistake, seeing Europe as some form of enlightened social utopia. I have come to the conclusion that, for Americans, 'Europe' is simply a projection of their own fears or desires. As a real place, it simply doesn't exist.

Anyway, while there are many facets to this argument, it usually ends up being about 'opportunity' and 'social mobility', those foundations of what some still refer to, with no apparent irony, as 'The American Dream'.

The New York Times (via Atlantic Review) had an interesting commentary on this issue last Friday:

When questioned about the enormous income inequality in the United States, the cheerleaders of America’s unfettered markets counter that everybody has a shot at becoming rich here. The distribution of income might be skewed, but America’s economic mobility is second to none.

That image is wrong, and these days it abets far too many unfair policies, including cuts in essential programs like Head Start or Medicaid. The poor, we are told, can use their own bootstraps. President Bush got away with huge tax cuts for the rich in part because non-rich Americans, who make up most of the population, believe everybody has a chance of making it into the club. Unfortunately, the American dream is not that broadly accessible.

Recent research surveyed by the Organization for Economic Cooperation and Development, a governmental think tank for the rich nations, found that mobility in the United States is lower than in other industrial countries. One study found that mobility between generations — people doing better or worse than their parents — is weaker in America than in Denmark, Austria, Norway, Finland, Canada, Sweden, Germany, Spain and France. In America, there is more than a 40 percent chance that if a father is in the bottom fifth of the earnings’ distribution, his son will end up there, too. In Denmark, the equivalent odds are under 25 percent, and they are less than 30 percent in Britain.

America’s sluggish mobility is ultimately unsurprising. Wealthy parents not only pass on that wealth in inheritances, they can pay for better education, nutrition and health care for their children. The poor cannot afford this investment in their children’s development — and the government doesn’t provide nearly enough help. In a speech earlier this year, the Federal Reserve chairman, Ben Bernanke, argued that while the inequality of rewards fuels the economy by making people exert themselves, opportunity should be “as widely distributed and as equal as possible.” The problem is that the have-nots don’t have many opportunities either.


I may print this out and keep it handy the next time I'm stateside. It might save me a lot of talking.

And protect me from a few pitying looks.

Also via Atlantic Review, I discovered an Economist article that will tell you more good news about the German economy than you can shake a Würstchen at.

This being the Economist, they manage a certain amount of gloom about anything that deviates too far from current economic orthodoxy in the Anglosphere. For instance, they seem strangely appalled by the fact that German shops--with a few exceptions--close on Sunday, something that I've come to see as one of those many Really Nice Things about living here.

There are a few bits in the article which strain my economic knowledge, but a couple of particularly interesting nuggets stand out.

For example:

Confusingly, Germany has two definitions of unemployment, and both rates are falling fast. On the basis used by the Federal Labour Agency, unemployment was 9.1% in June, down from 10.8% a year before; on the International Labour Organisation's definition, which is comparable with other countries' figures, the rate was 6.4% in April, down from 8% 12 months before. That is well below France's 8.1% and not so far above Britain's 5.5%.

I don't know the history of this curious difference, but it's an intriguing one.

Of course, the Federal Labour Agency numbers are the ones that Germans hear day in and day out, which, as you can imagine, has been getting them all rather down in recent years.

How much more happy might they be if they paid attention to the ILO figures, which show them doing not all that badly (or at least much less badly) compared with other countries, particularly the ones they are always told they need to emulate?

Also, trying to explain to Germans (particularly those who look fondly back to the golden age of the Deutsche Mark) that the euro has benefited them is nearly impossible.

Thus, this, is very interesting:
Since 2001 Germany's unit labour costs have fallen by around 20% relative to Italy's and Spain's. Viewed another way, however, this is as much a reflection of an old German virtue as of a new one. In the days before monetary union, German business time and again sharpened its blade on the hard stone of a strong D-mark: to get France and Italy, in particular, out of trouble, devaluations of the franc and lira were dressed up as revaluations of the D-mark. In the euro zone, however, national currencies no longer exist, so nominal national exchange rates cannot change. Real rates can be devalued—but only through having a lower inflation rate than other members of the club. Since the euro was born, the Germans have proved themselves as competitive as they ever were.
And, finally, the following is also worth thinking about:
By luck or by judgment, Germany is in the right businesses at the right time: China, India, Russia and other countries in central and eastern Europe are growing fast and wanting the goods in which Germany specialises. Indeed, exports to Russia and other European countries to Germany's east now exceed those to the United States.

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