Is Being Best in Europe Good Enough?

Blogger OJ at RightViews (a blog well worth reading) disputed parts of my previous post about Sweden. OJ favors cutting back Sweden's welfare state, and he's optimistic:

The unemployment numbers cited as stated by LO are not exactly accurate. As with any statistic, numbers can be twisted from selected segments to reflect your opinion. The dispute revolves around counting or not counting sickleave and long term disability into unemployment numbers since there seems to be a higher incidence of disability claims in areas with low employment. . .

The analysis in this post is a bit disingenuous.

OJ also predicts increased electoral support for Sweden's Moderates (center right). Finally, he suggests I turn my guns on socialist France--always good advice, and already employed many, many times. (I've even peeked into Sweden's past.)

OJ's view is encouraging. Still, I wonder: where's data to support the sunshine? In the spirit of debate, here's my info:

• Labor Costs: Swedish labor is expensive. After peaking at over 30 percent in 1992, average non-wage costs (social insurance, pensions) of hiring additional workers in Sweden remain high at 28 percent (as compared with 22 percent in the U.S.) Except for 2001 and 2002, wage levels of workers in manufacturing historically are higher in Swedish than in the U.S., making Swedish manufacturing less competitive. (Sweden's wages/hour are comparable to the U.S.)



• Employment: Overall, it's clear that Europe lags the U.S. in jobs and job creation. The exact numbers are disputed, especially, as the WSJ article said, in Sweden, where statistics may exclude many without jobs but receiving lucrative government benefits. The U.S. Labor Department compensated for such statistical reporting differences and found the Swedish unemployment rate (6.6 percent in 2004) lower than the European average but higher than the U.S. (5.5 percent in 2004). Moreover, except for 2003, OECD data shows term-term unemployment rates in Sweden two or three times greater than the U.S. (2003 appears anomalous -- the OECD estimate of U.S. unemployment (11.8 percent) is almost double the U.S. Department of Labor's calculation (6 percent)).



• Taxation and regulation: As noted below, Forbes magazine says Sweden's fourth most inhospitable jurisdiction for business, with the highest overall tax burden (50.8 percent of GDP) and the highest overall government spending (58.3 percent of GDP) of the 30 nations surveyed. The Heritage Foundation agrees that Sweden's "income tax burden is one of the heaviest among the world’s industrialized economies: a 60 percent top income tax rate" and the "government consumed 28.3 percent of GDP in 2003."
  
  Writing about the future of the welfare state, Weekly Standard senior editor Christopher Caldwell linked increased immigration to growing Swedish dissatisfaction:

  The economic historian Rojas [says,] "High levels of taxation require that the people taxed be a community," he says. "And this has for a long time been a tribal society. . . . A good tribe! Very peaceful and nice! But a tribe."

  If the sense of identity dissipates, ordinary Swedes will be unwilling to fund the needlessly unemployed.



• GDP: Sweden's better than the European average. Still, America has outpaced Europe as a whole, and Sweden in particular, in GDP per capita:
  
  
  
  GDP/Capita 14 Countries (source: BLS)
  
  
  
  EU GDP/Capita Growth (Source: EuroFrame)
  
  
  
  US GDP/Capita Growth (Source: BEA)
  
  
  The data for Gross National Income is even more disparate.
  
  The statistics go gloomier when calculated on a purchasing power parity basis (i.e., factoring in cost of living). According to the New York Times:

  Swedish research organization, Timbro, . . . compared the gross domestic products of the 15 European Union members (before the 2004 expansion) with those of the 50 American states and the District of Columbia. (Norway, not being a member of the union, was not included.)
  
  After adjusting the figures for the different purchasing powers of the dollar and euro, the only European country whose economic output per person was greater than the United States average was the tiny tax haven of Luxembourg, which ranked third, just behind Delaware and slightly ahead of Connecticut.
  
  The next European country on the list was Ireland, down at 41st place out of 66; Sweden was 14th from the bottom (after Alabama), followed by Oklahoma, and then Britain, France, Finland, Germany and Italy. The bottom three spots on the list went to Spain, Portugal and Greece.
  
  Alternatively, the study found, if the E.U. was treated as a single American state, it would rank fifth from the bottom, topping only Arkansas, Montana, West Virginia and Mississippi. In short, while Scandinavians are constantly told how much better they have it than Americans, Timbro's statistics suggest otherwise. So did a paper by a Swedish economics writer, Johan Norberg.
  
  Contrasting "the American dream" with "the European daydream," Mr. Norberg described the difference: "Economic growth in the last 25 years has been 3 percent per annum in the U.S., compared to 2.2 percent in the E.U. That means that the American economy has almost doubled, whereas the E.U. economy has grown by slightly more than half. The purchasing power in the U.S. is $36,100 per capita, and in the E.U. $26,000 - and the gap is constantly widening."

  As I've previously observed:

  The scope and intensity of government-ordered redistribution is the principal reason why Western European GDP growth rates have been half that of America over the past two decades. No wonder Sweden's poorer than Alabama with more crime than Mississippi!

Conclusion: I don't want Sweden -- or Europe -- to fail. And I'm pleased about prospects for a change in government. But the overall trend is clear: years of secular paternalism gave birth to excessive dependency, attracting immigrants wanting handouts without assimilating, multiplying civic pessimism, which allowed elites to drain European democracy. The result: Europe traded religious faith for slow suicide:

Europe "cannot summon the will to reproduce itself. It has aborted and contracepted its birthrate down toward demographic disaster: perhaps 1.4 children per couple across the western end of the continent, when simple replacement requires a rate around 2.1.

And, says Mark Steyn, it's unlikely to change:

The longer it gets, the harder it will be, because it's a race against time, against lengthening demographic, economic and geopolitical odds. By "demographic," I mean the Muslim world's high birth rate, which by mid-century will give tiny Yemen a higher population than vast empty Russia. By "economic," I mean the perfect storm the Europeans will face within this decade, because their lavish welfare states are unsustainable on their shriveled post-Christian birth rates.

Not even a conservative government can cure that.

More:

Tyler Cowen and Roaring Tiger are debating whether Americans work more than Europeans.

(via NIF)

Still More:

No comprehensive reply yet, but here's the source for "cooking the books on Swedish unemployment." Interestingly, it's not a labor union plot--they're accused of suppressing the data.