Saturday, January 09, 2010

Europe: The New Evil (And Dying) Empire

That is a popular meme by American conservatives who view Europe as weak, morally corrupt and dying. We all remember the Freedom Fries, eh?

But underlying all those stories about the sinful-yet-fruitless streets of Old Europe is the old conservative fear: That a less capitalistic and more sharing society might actually economically outperform a Wild West one, the kind the conservatives would like to see here. Whether it would turn into a Banana Republic is of no concern to those who would live in the guarded enclosures.

The most recent story in this vein has to do with James Manzi's article in National Affairs:

But it is important to see that this robust growth means only that America has not lost ground in global economic competition, not that it has gained much. From 1980 through today, America's share of global output has been constant at about 21%. Europe's share, meanwhile, has been collapsing in the face of global competition — going from a little less than 40% of global production in the 1970s to about 25% today. Opting for social democracy instead of innovative capitalism, Europe has ceded this share to China (predominantly), India, and the rest of the developing world. The economic rise of the Asian heartland is the central geopolitical fact of our era, and it is safe to assume that economic and strategic competition will only increase further over the next several decades.

The story has been eagerly picked up by all sorts of conservative writers. But John Chait and Paul Krugman have doubts about Manzi's data:

But as Jonathan Chait quickly pointed out, Manzi's definition of Europe included the Soviet bloc (!), so that he was attributing to social democracy an economic decline that was mainly about the collapse of communism. Chait also suggested that Manzi wasn't comparing the same dates for America and Europe; and most importantly, Chait pointed out that to the extent there has been a growth divergence, it's almost entirely because America has faster population growth; since 1980, real GDP per capita in Western Europe and the US have grown at almost the same rate.

But I went back to Manzi's source of data, and it turns out that it's even worse than that. If you use the broad definition of Europe, which includes the USSR, it did indeed have 40 percent of world output in the early 1970s. But that share has not fallen to 25 percent — it's still above 30 percent.

The only thing I can think is that Manzi compared Europe including the eastern bloc in 1970 with Europe not including the east today.