In a decent universe, the failure of the proposed new constitution for the European Union to gain the allegiance of voters in France and the Netherlands would be an opportunity for pundits to try to help the American people understand something about the politics and policy of European integration. This is an important topic, involving America's closest military allies. And the European Union is a trading bloc that -- despite much recent hype about Asia -- remains, by a very large margin, larger, wealthier, and more significant than India and China combined.
Instead, we got exactly what you would expect from the real universe: hack propaganda aimed at scoring cheap points in domestic politics. We were told that the "no" votes represented the failure of the European social model, which goes to show that American liberalism is bad, and, therefore, we should privatize Social Security or not worry about the massive proportion of our children who live in poverty or our desperately broken health care system. Overlooked in all this is the fact that most Europeans are neither French nor Dutch; significantly more countries approved the constitution than voted it down. Asking why Europeans are rejecting the European Union is a bit like wondering why the American people lost their faith in Ronald Reagan in 1984. There's nothing to explain, because the thing didn't happen. The constitution failed not because it was overwhelmingly rejected but because the procedural barriers to approval were so high.
But no matter, for the constitution was only a red herring: yet another opportunity for the rhetoricians of the right to tar American liberalism with the economic problems of France and Germany. And it's a catching disease. Without explicitly mentioning Europe, the notion that, if federal spending rises above 22 percent of GDP or so (which it will if we fully fund Social Security, Medicare, and other scheduled priorities), the United States will become an economic basket case has been a running theme in Matt Miller's guest stint at The New York Times op-ed page and generally pervades conventional wisdom here in Washington.
Worrywarts would do well to look at the actual numbers. The French public sector spent an astounding 54.5 percent of national output in 2004. The figure for the United States, once state and local government is factored in, was 35.6 percent. Federal spending would need to nearly double to reach that level. Even Germany's more modest state sector absorbed 47.8 percent of that country's GDP last year -- more than would be needed to maintain America's entitlement programs unchanged. What's more, the dread socialized medicine of the continent is actually cheaper than America's public/private mishmash. The French government spends about $1,000 less per capita on health care than does the U.S. government, despite the fact that the France covers everyone, needs to deal with a more elderly population, and has a higher life expectancy than we do. On top of that, France spends far less on private sector health care, freeing up resources for consumers to spend on other things.
Nevertheless, it's no paradise. Critics on the right are correct to say it would be wrong for Americans to slavishly imitate the French model. But France's problems, like Germany's, lie elsewhere: in labor market regulations and immigration policy that no one is suggesting for the United States.
When you get the little things right, it's easy enough to make very expansive welfare states compatible with strong economic growth. Iceland spent 45.9 percent of GDP on the public sector in 2004 and got 3.9 percent growth. Sweden got 3.3 percent growth and spent 57.5 percent. A more realistic model for the sort of country American liberals would like to build is the United Kingdom, where, as we saw a few weeks ago, economic growth was strong enough to propel the Labour Party into an unprecedented third term despite the personal unpopularity of Prime Minister Tony Blair, widespread disapproval of his foreign policy, and the British government's spending 44.4 percent of the country's GDP.
The point isn't that big government is an economic panacea. Clearly, things have gone rather awry in France and Germany; more subtly, it seems unlikely that the Scandinavian social model is compatible with the high levels of immigration that the United States has traditionally, and quite properly, permitted. But neither is it some sort of doomsday device. All sorts of things influence economic growth, and the developed world provides plenty of examples of countries combining economic dynamism with a robust safety net. Indeed, in a business climate increasingly characterized by uncertainty, such safety nets are arguably conducive to the kind of risk-taking necessary to participate in contemporary capitalism. Just as all those helmets, complicated ropes, and other safety gear let people climb dangerous rocks, the guarantee that you'll be protected from economic turbulence that is beyond your power to control can increase flexibility in the labor market, encourage entrepreneurship, and otherwise facilitate growth.
For the contrary view, one can look at the Mississippi-Alabama social model of non-union, low-wage work; low taxes; little regulations; poor public services; and minimal investments in health care, education, and basic infrastructure. These are not, needless to say, the great American success stories. Nor, I dare say, are the mandarins of American opinion journalism clamoring to leave their comfortable homes in the blue suburbs of Washington to move there.
Matthew Yglesias is a Prospect staff writer.
