The New York Times, supposedly the reliable voice of bleeding-heart liberalism, has repeatedly attacked European welfare state institutions in its news pages. The latest assault was published today, informing us that pensions and other social benefits are no longer “affordable” and that the coddled European public must wake up and face reality. All such “analyses” require the reader to accept without questioning the strange notion that social programs that were instituted decades ago when Europe was substantially poorer have now become, after a long run of economic growth, too expensive to bear.
You might wonder how the article’s author (Steven Erlanger) deals with this conundrum. Wisely, he doesn't even try. A quarter of the article is taken up with man-on-the-street interviews, in which selected students, workers and pensioners say what Erlanger wants them to say. (No one says anything different; apparently European public opinion is monolithic on this issue.) The article tells us that the dependency ratio, the number of retired people as a proportion of the working population, has increased, but it doesn’t point out that economies have grown even faster. (The ratio of real economic growth to growth in the dependency ratio over the period 1980-2005 is 2.4 for the countries that now make up the Eurozone, and a whopping 6.6 for the US. Don’t let Pete Peterson hear about this.)
The article suggests that all sorts of damage has been caused by excessive concern for the old, the sick and other insufficiently productive citizens, with the result that “the region generally lacks competitiveness in world markets.” I have to rub my eyes every time I see a comment like this. Let’s get this straight: journalists tell Europeans to emulate America’s high-octane approach to economic efficiency when the Eurozone has approximately balanced trade with the rest of the world, while the US runs the largest trade deficits the world has ever seen.
It is true that the current economic stall, combined with immense, ill-considered financial bailouts, has diminished the fiscal space available to governments everywhere. This is a problem of, well, stalled economic growth and unwise bailouts. Europe, like the US, needs to deal with this. But those problems have nothing to do with “unaffordable” social welfare programs. On the contrary, maintaining transfers to the most vulnerable households is not only the right thing to do, it is also an excellent vehicle for sustaining effective demand in a downturn.
Maybe, if you prowled the cafes and restaurants of Europe long enough, you might find an interviewee or two to stick up for social solidarity.