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June 09, 2004



Lots of points that I could comment on here, but if I can just add to one of them: I tend to concur with your views of economic interdependence as opposed to "bloc" competition. A key driving force behind the concentration of European capital investment in the US and vice-versa remains the rule of law and, in the context of capital market related flows, liquidity. For emerging markets the political and economic risks have, until relatively recently, been a major influence on decision making process and the irony that the german banks in particular just got comfortable with Asia in time for the 1997 crash is an irony not lost on those of us who have at one time or other worked for such august institutions in the region.

John Turnbull

"...Stephen [Pollard] and I occupy a similar position politically on the Left..."

I have difficulty reconciling most of what you write, Oliver, with your claim to "on the Left". But Stephen Pollard!!! On the Left!!! In which universe?


Yes, US and EU growth performance over 30 years is comparable, although the US started from a significantly higher base.

But 30 years' timescale masks changing fortunes. The US went from stagnation 20-30 years ago, to keeping pace 10-20 years ago, to robust growth in the last 10 years. European countries came off the back of reconstruction 20-30 years ago but have not performed so well more recently.

Demography matters, yes. But whilst it benefits the US in growth terms, it flatters European productivity data. Not only do Europeans have fewer working-age people, fewer of them work. This explains their very high labour productivity (GDP per hour worked) performance. Whoever it was who attacked the Thatcher Government's record in terms of raising the batting average by only fielding the best XI (Kaldor??) would've had a field day with this one.



Excellent post. The Economist had some good figures on how US FDI into (I think) Belgium was higher than into China.

But are your figurse of $2.5tr and 12m people correct? That would be an awfully high $200,000+ per worker.


ps Calling Paul Krugman 'shrill' is a joke at the expense of the Right, yes?


Yes Matthew I read that article too.

I don't remember how much it was for Belgium (or was it the Netherlands?) but it was about $4bn for Ireland which was about 2 and a half times the FDI into China from the US...


There is a significant omssion from Oliver's extract; here is a quote from the Council of Ministers:
“More than 15 million Europeans are still out of work . . . Long-term structural unemployment and marked regional unemployment imbalances remain endemic in parts of the Union. The services sector is underdeveloped . . . There is a widening skills gap.”
"Competitiveness" matters because the EU exports manufactured goods in exchange for oil, rubber and other goods. Over the last few years, China has been eroding the terms of trade for such activity; it too exports manufactures in exchange for the same goods.
The EU's response has been to enact the Social Chapter, a measure that seems designed to discourage economic activity; and to invent the euro.
The impact of the euro is plain to see. Germany, which needs a looser monetary policy is stuck in recession. Ireland, which needs a higher base rate, must live with an inflationary boom.


That figure of 15 million Europeans unemployed is not very significant if you break it down. The majority of it is made up by a couple of countries who are currently in a period of high unemployment such as Germany.

For instance Germany has an unemployment rate of about 10% and that equates to about 8 million people (pop. 80m approx). That is more than 50% of the unemployment from a country that does not contribute even near 50% of the total population of the EU. Therefore it is reasonable to say there is not an unemployment problem across the EU.



It's 10% of the workforce, not population. More like 4-5m in Germany.

A better line of criticism is differences in measuring 'unemployment' between the US and European countries, most of which have the effect of lowering US and raising European. But there's still a gap.


Apologies, you're right Matthew...

Mike Wood

My work means that I have to sit through rather more European Parliament debates than is probably healthy. I would have to disagree with the assertion that the rationale behind the single market is not is not to act as a counterweight to the United States.
It is rare for any debate to go by without reference to forming a European bloc to challenge American dominance within that sphere. Debates on the economy tend to focus on challenging American economic dominance (more in terms of European prestige than in raising the living standards of European people); debates on defence are invariably conducted in terms of creating a second military superpower; initiatives within the sphere of foreign affairs (such as calls for an EU seat on the UN Security Council) are similarly discussed in terms of providing a diplomatic counterweight to the United States. Even areas of policy such as environmental standards often seem to be considered in terms of making the U.S. record look bad rather than in the merits of the policy.
Such an approach, which is advanced by Memebrs of the European Parliament, the European Commission and representatives of national governments, suggests an inferiority complex.
Whilst I don't think of myself as being anti-European (and certainly would not wish to suggest that the European Union is in any way equivalent to the Soviet Union), such bloc politics is something that I had hoped we had defeated with the end of the Cold War.
I would tend to agree with Stephen that Europe should concentrate on the things it does well and doing them better (such as encouraging trade), rather than becoming obsessed with grandiose visions of a united Europe that can rival the United States.


Reportedly, the American consumer needs about 25 acres each for all their consumption. If everyone in the world was the same, we would need five worlds to do it all.
The Globalist Free Traders ignore this. The end goal of globalization is everyone enjoying similar life styles. Imagine what a 300 million more automobiles
in China and India would do to the world. Obviously, Free Trade is limited to using workers who can not buy the things they make.
See http://tapsearch.com/tapartnews/id7.html

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