“It is strange, I mean the way things work out,” said a guest at dinner last night. “It seems like a kind of madness wanders around the globe. While, here in Europe, we were trying to batter each others’ brains out, you, in America, were smart. You were sitting back and taking orders. Now you’re the ones who have gone mad.”
Our guest had described the world of the 19th and 20th century — the days when the idea of an American empire was still repugnant and absurd. While wars, revolutions, pogroms, stormed over Europe — and much of the rest of the world — America kept to itself, reluctant to get involved. Attractive new ideas popped up all over Europe like poisonous mushrooms. But, for the most part, Americans kept their heads. Most went about their business — seeking happiness in their own private ways…trying to get rich. “The business of America is business,” Calvin Coolidge explained.
Money isn’t everything, we suddenly recalled. Lusting after wealth is not always becoming, not always rewarding, rarely flattering or dignified. There is something vulgar about the hustle a real business needs…like sweat-stains on a starched shirt or a cold cup of coffee and stubbed out cigarettes. A man who wants to make a real fortune usually has to grub for it; it’s hard to be elegant or refined when you’re scratching for cash or market share. But grubbing for money is still better than a lot of other things men do. What follows is a long, rambling reflection on what the lust for money is better than.
First, we pause to deliver a shocking update.
People love myth, fraud and claptrap — especially when it flatters them. Maybe their food, life expectancy, crime rates, transportation, liquor, women, and architecture are nothing to brag about, say Americans to each other, but when they grub for money, they grub good. "Old Europe," they say, making a comparison, “is too rigid, fossilized, hidebound…a museum.”
And yet, even this is a fraud. Despite Laffer’s curve, Greenspan’s Bubbles, Friedman’s monetarism and Reagan’s revolution, the U.S. economy has done no better than Europe.
This week’s Economist examines the evidence.
Of course, everybody knows that America grew a lot faster than Europe over the last 10 years. But the figures, in terms of GDP/person are very close — 2.1% per year for America against 1.8% for Europe. Take out Germany — which has struggled with absorbing its formerly communist cousins from the East — and the two regions are exactly the same.
And productivity? “A study by Kevin Daly, an economist at Goldman Sachs, finds that, after adjusting for differences in their economic cycles, trend productivity growth in the euro area has been slightly faster than that in America over the past 10 years,” says the Economist.
What about jobs? America is the greatest jobs machine on the planet, right? Again, excluding Germany, “jobs in the rest of the euro area grew at exactly the same pace as in America,” concludes the Economist. “And since 1997 more jobs have been created in the euro area as a whole; total employment has risen by 8%, compared with 6% in America.”
And get this…”GDP per hour in Germany and France now exceeds that in America.”
It’s true that Americans earn more and spend more than Europeans…but they work a lot more hours.
“Compare France with America,” the Economist invites. “Between 1970 and 2000, America’s GDP per hour worked rose by 38% and average hours worked per person rose by 26%, so GDP per person increased 64%. French GDP per hour rose by a more impressive 83%, but hours worked per person fell 23%.
“Europeans simply enjoy leisure more,” the Economist concludes.
But what about the "recovery?" Hasn’t it been much more vigorous in America than in Europe?
Well, only on the surface. Spiked up by the biggest dose of fiscal and monetary juice in history, America’s economy has slightly outpaced Europe’s. But the figures are hard to compare. Europe calculates GDP growth more conservatively than America…and understates the truth, rather than overstates it, as they do at the Labor Department. More importantly, America’s jolt of growth has come at great cost. While Europe got no net stimulus, America has gotten enough to give it the shakes.
“Super-lax policies of the past few years have left behind large economic and financial imbalances that cast doubt on the sustainability of America’s growth,” says the Economist. “From a position of surplus before 2000, the structural budget deficit (including state and local governments) now stands at almost 5% of GDP, three times as big as that in the euro area. America has a current-account deficit of 5% of GDP, while the euro area has a small surplus. American households now save less than 2% of their disposable income; the savings rate in the euro area stands at a comfortable 12%. Total household debt in America mounts to 84% of GDP, compared with only 50% in the euro zone.”
Barely has the 21st century begun and America finds itself in a remarkable position. It has, what it believes is, the world’s most powerful economy…and the world’s most powerful military force. Like the defunct Soviet Union, it has a sickle in one hand and a hammer in the other. The sickle, alas, has an awkward bend in it.
“The U.S. suffers from…structural deficits that will limit the effectiveness and duration of its crypto-imperial role in the world,” explains Niall Ferguson. “The first is the nation’s growing dependence on foreign capital to finance excessive private and public consumption. It is difficult to recall any empire that has long endured after becoming so dependent on lending from abroad.”
But it suffers no deficit of raw power. The hammer — U.S. military might — is real. Americans are no better or worse than any other race; is it any wonder they will want to take a whack at someone?
Putting it another way: grubbing for money might be fine for a modest nation working its way up in the world; is it worthy of a great nation on a roll?
“The trouble with the emphasis in conservatism on the market,” William F. Buckley said to Corey Robin, “is that it becomes rather boring. You hear it once, you master the idea. The notion of devoting your life to it is horrifying if only because it’s so repetitious. It’s like sex.”
Another old "conservative," Irving Kristol said this to Corey: “What’s the point of being the greatest, most powerful nation in the world and not having an imperial role?”
“It’s too bad,” Kristol lamented about money-grubbing. “I think it would be natural for the United States…to play a far more dominant role in world affairs…to command and to give orders as to what is to be done. People need that.”
“When I think of all the crazy things that went on here in France during the last century,” continued our dinner guest. “Or maybe I should say in Europe. You know, we invented most of the awful ideas back then. Deconstructionism, Freudianism, Nazism, Conceptualism, Socialism, Syndicalism, Minimalism, Communism, Functionalism…come to think of it almost all the worst ideas came from Europe. And even in America, if I’m not mistaken, almost all the new developments in philosophy, art and architecture came from immigrants…or maybe refugees…from Europe. Just about everything. Of course, most of it was harmless. Funny even…like Dadaism. But politics wasn’t so harmless. And now you do what we did. You come up with the new ideas…and you try to force other people to accept them. You have that…what do they call it…neo-conservatism.”
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century.