Life in the social democracies of Western Europe is nice…really nice. Beautifully neat, well-organized cities are connected via plentiful and inexpensive mass transit. Work-life balance is an obsessive cultural priority. European countries feature six weeks of paid vacation, maternity leave, ready access to high quality, tax-subsidized healthcare, very little crime and virtually no violence by US standards. They enjoy far higher levels of social mobility than the US alongside economic growth rates that rival any of the developed nations.
Those who have experienced it might describe the European Dream as the envy of the world. Bernie Sanders’ campaign for the Democratic Presidential nomination is drawing America’s attention to this social/political alternative. So, why shouldn’t the US import more of this approach to economics and politics?
There’s a simple answer. Europe’s economic model has a critical dependency that is often overlooked. La Dolce Vita has its price. The model depends heavily on America’s willingness to bear the burden of relentless creative destruction and a global security obligation. If the US adopted this model it would begin to suffocate under its own weight. Beyond this weakness lies a deeper question of values, a philosophical conflict which, though intangible, should not be ignored.
How does the European model work? For starters, don’t call it socialism. Western Europe began to dismantle state ownership of capital, forced unionization, and the other elements of socialist economics half a century ago and little remains of that model. For many Americans who have grown accustomed to the idea that any state spending is Communism, that concept may be a little challenging. Here’s a primer.
European social democracy today rests on a sort of loose state-capitalism subsidized by American military patronage. At the nation-state level, the system operates as a three-way deal. Capital is almost entirely in private hands, but workers enjoy high levels of job security and other protections. The state regulates private industry very heavily. On top of a dense network of market regulations the state also imposes deeply intrusive management rules, like mandating employee representation on boards of directors. In exchange, those enterprises enjoy tremendous levels of state sponsorship, subsidies and protection. The same rules that burden each firm also raises barriers to the entry of fresh new competition. European economics is a tight partnership between state, capital, and labor.
Critical to that deal is the American military juggernaut. If you paid taxes in the US last year, one fifth of that total went to your military. Consider veterans’ health care and that percentage rises to nearly a quarter. That’s more than the US spends on Medicare.
If you paid taxes in Germany last year, military spending accounted for less than 1/20th of your burden. Even if you contend that much of US military spending is unnecessary, Europe still enjoys a massive public windfall from its ability to disregard any concern for national defense and security.
That windfall is larger than it appears on paper, for if European countries were responsible for their own defense it is unlikely that the EU would even exist as a political and economic entity. International and sectarian tensions currently subsumed beneath the blanked of US military dominance would undermine regional economic collaboration. The EU is a happy consequence of the US military-industrial complex.
The model works for now, within certain bounds. For all the noise about Greece, European economies are relatively stable, chugging along at a fairly predictable rate compared to the volatile swings in America. The model produces higher unemployment levels and slightly slower growth than the US, but compensates with a more generous social safety net. Tax rates are relatively high, but not nearly as high as Americans tend to imagine, comparable to levels experienced in New York or California. Meanwhile government services are remarkably efficient, politics is relatively transparent and representative, tax codes are simple, civil liberties are broad, and citizens enjoy access to plentiful public capital.
For all its benefits, European social democracy experiences a built-in vulnerability. In a time of spectacular economic and political dynamism, it is intensely conservative. Here again, Europeans benefit from the relatively chaotic nature of the US economic model.
Containing the collateral impact of disruption through tightly managed social and political order has been a vital key to maintaining Europe’s quality of life. In effect, European democracies have outsourced dynamic capitalism to the US. They enjoy the benefits of a messy, turbulent, disruptive economic order in the form of a steady flow of technological innovation while insulating their state-corporate entities from the disruptive impact of that innovation.
You can see the effects of this model most starkly in the software industry. By conventional logic Europe should be a hotbed for software development. With a highly educated population and large sophisticated economies, you might expect a vibrant technology industry. It exists, but it looks very different than the US.
Europe’s only software giant, SAP, was built on software discarded by IBM in a merger forty years ago. Most of Europe’s other major software players emerged from large state industries or coops, like Dassault and DATEV. They are just as slow, old, bloated, and deeply tied to the old state-capital partnership model as any of the region’s steel companies. Europe embraces technology exports from the more vibrant US, but only very carefully and usually through state-supported channels like public telephone and health care companies.
There is a bubbling start-up culture in Europe, but it has yet to produce a massive, mature company. Europe’s most exciting tech ventures, like Spotify and Skype, achieve lasting success though American buy-outs. Software and other tech industries have not been allowed to exert the same cultural influence in Europe that they have achieved in America.
It is often mentioned that Europe is culturally less friendly to economic risk takers than the US, but seldom does anyone explain why. The era of information capitalism that is transforming American life is dangerous to European social democracy. Entrepreneurship is an inherently disruptive activity. Successful entrepreneurs change the landscape around them in ways that ripple out far beyond the presence of a new product or a new shop.
Allowing established firms with thousands or hundreds of thousands of employees to be rendered obsolete by a few punks in their garage could wreak havoc. There is no market for disruption in Europe. It is an anti-value. Innovation, like any other disruption, is tightly managed. European social democracy is an inherently conservative social order.
When Uber, for example, arrived in American cities there was resistance from politically entrenched business models, but that resistance is rapidly breaking down. Many current business models for taxis are disappearing into bankruptcy as they should. For the most part, the American public is pleased.
When Uber arrived in Paris there were riots and its executives were arrested. That’s European social democracy in a nutshell.
If the US adopted the European model of social democracy the entire enterprise would lose its oxygen supply. American dynamism is the unacknowledged keystone of the European social order.
Even if these weaknesses could somehow be resolved, there remains one more issue that renders the European model less appealing to Americans. Living in Europe surrounded by the ancient beauty of its castles, monuments, museums, and cathedrals, one nagging discomfort lingers. It feels as though everything important that was ever going to happen there is already in the past. Europe is boring, a living vacation-land where nothing of real consequence or meaningful human significance is going to happen. Europe is where the Western World went to retire.
We should not be too quick to abandon the vibrant chaos that defines American life. With that chaos comes opportunity. There is a vital spiritual value in the continuing uncertainty that Americans embrace and even cultivate. It feeds life, liveliness and vitality.
One can have too much security, too much comfort. There is something electric about living in the place where practically everything that really matters in human affairs is happening. We have much to learn from our cousins across the pond, but we must not admire their model to death.