Recently there have been articles that compare the United States economy with Europe, and conclude that Europe is doing better. Intuitively, that doesn’t seem possible, given the almost zero population growth of Europe, its rapidly aging population, its high tax rates, and smothering regulations.
I would think one sign of economic strength would be the growth of a county’s economy, so I wanted first to check and see how the US was doing. In the past ten years the US GDP grew almost five trillion dollars (1997, $8.2 trillion; 2006, $13.0 trillion). In fact, the US GDP grew $3.0 trillion in just the past five years.
To put these numbers in perspective, the growth alone in US GDP in the past ten years is larger than the entire GDP of the second largest economy, Japan, and the growth in the past five years is greater than the entire GDP of any nation besides Japan, including China.
So far it doesn’t seem the United States is falling behind surging European economic juggernauts.
Last year an article in Newsweek International (Europe: The Great Job Machine - Despite its laggard reputation, Europe continues to grow faster, and create more jobs, than America, by Emily Flynn Vencat) trumpeted that the European job growth rate was greater than the US (0.9% vs. 0.7%) since the beginning of the decade. Since the US unemployment rate has fallen steadily, and is now at about a rock-bottom 4.5%, I surmised that the European rate must be even lower.
What a shock to find the overall European rate hadn’t fallen below 8% for over a decade, and that for the four largest mainland European economies -- Germany, France, Italy, and Spain – the unemployment rates have been 10% or higher for that same period. In addition, the duration of unemployment in Europe tends to be very long. For example, in Germany and Italy, more than half of the unemployed have been that way for more than one year.
I’m not too sure just what the robust job growth in Europe statistics mean. Europe's population is expected to decrease by 2050 due to declining birth rates. By that time the population of Europe will be 18 million smaller than the United States. Europe already registers the world's lowest population growth rate at 0.03 percent. In the region of Eastern Europe, population growth is -0.2 percent.
Any Newsweek writer expecting to dig good economic news for Europe out of these population statistics is desperate indeed to convince readers that the United States should follow the European lead.
According to Newsweek:
“In America's roaring 1990s, the average annual job-growth rate was a whopping 1.4 percent, compared with Europe's 0.4 percent. But then, at the beginning of the decade, America's GDP growth halved from 4.4 to 2.2 percent, which hit jobs hard.”
How hard did America’s GDP growth fall? In 2003 GDP went up 2.45%, in 2004 up 3.1%, in 2005 up 4.4%, and in 2006 up 3.2%.
How does that compare with the Newsweek glowing comparison of Europe to the United States? Interestingly, I found “the United States ranks first in economic growth (compared to Canada, Japan, and the European Union) with an average annualized seasonally adjusted real GDP growth rate of 2.7 percent from the first quarter of 2001 through the third quarter of 2005.”
How did the European Union do? Their GDP growth rate for the same period was 1.5%, close to half of the United States growth rate.
The United States and the European Union (EU) both added five million jobs in that period. Since the US population is smaller than the EU, simple math shows the US had a higher rate of job growth for the almost five-year period starting in 2001.
The European unemployment rate was 8.8% vs. 5.4% for the US during that period, and the US rate has since fallen to 4.5%.
More from Newsweek:
“Europe was buoyed by the fact that its high-cost, high-value work model began to produce jobs in cutting-edge fields like IT, environmental technology and R&D. In the United States, by contrast, permanent losses in manufacturing, among other factors, made an easy rebound impossible.”
How does that square with the United States having a higher rate of GDP growth, and far lower unemployment? Or a 4.6% increase in industrial production compared to an EU increase of 1.2% for the almost five-year period?
American productivity -- output per employed person -- rose 9.4% vs. 3.2% for the EU during the period 2001 through 2005.
But enough of beating on hapless Newsweek and their socialist dreams.
What is obvious from even a casual review of these statistics is that the generous European welfare state health and pension systems are doomed to failure, and to failure soon. Already the average European is 35 years old, by far the oldest in the world. The older age groups in Europe are larger than the younger, and are increasing steadily in proportion.
However, all the statistics showing the positives for the United States, and the negatives for Europe, won’t stop or even slow down the Democrats and Main Stream Media from urging us to embrace socialism.
As you can see from the Newsweek International article, they are not going to stop at selective reporting and analyses of statistics (also known as lying) to try to lead us down the failed paths of the European nanny welfare states.
So remember that the magazine that brought us false tales of Korans being flushed is not above spreading falsehoods about how better off we would be if we just had higher taxes and more regulations.
Their messages have the full support and approval of the Democrat Party.