Ao minuto: Trump concorda com cessar fogo de duas semanas proposto pelo Paquistão

[Keyser Soze]

Zona EuroImpostos iguais aos dos EUA aumentariam riqueza em 12%

A redução dos impostos pagos pelas empresas e particulares da Zona Euro para níveis semelhantes aos existentes nos EUA resultaria, no longo prazo, num crescimento de 12% no produto interno bruto da Zona Euro, num aumento de 14% no número de horas trabalhadas e numa subida superior a 11% do rendimento disponível dos particulares.

As conclusões resultam de um estudo elaborado este mês pelo Banco Central Europeu, após a análise dos impostos em vigor tanto nos EUA como nos diversos países que compunham em 2004 a Zona Euro (não incluindo, por isso, a Eslovénia).

http://www.jornaldenegocios.pt/default. ... tId=295009

[Keyser Soze]

Entrepreneurial Culture
Why European economies lag behind the U.S.
BY EDMUND S. PHELPS

Mr. Phelps, a professor at Columbia University, is the 2006 Nobel Laureate in economics.

Monday, February 12, 2007 12:01 a.m. EST

The nations of Continental Western Europe, in the reforms they make to try to raise their economic performance, may prove to be a testing ground for the view that culture matters for a society's economic results.

As is increasingly admitted, the economic performance in nearly every Continental country is generally poor compared to the U.S. and a few other countries that share the U.S.'s characteristics. Productivity in the Continental Big Three--Germany, France and Italy--stopped gaining ground on the U.S. in the early 1990s, then lost ground as a result of recent slowdowns and the U.S. speed-up. Unemployment rates are generally far higher than those in the U.S., U.K., Canada and Ireland. And labor force participation rates have been lower for decades. Relatedly, the employee engagement and job satisfaction reported in surveys are mostly lower, too.

It is reasonable to infer that the economic systems on the Continent are not well structured for high performance. In my view, the Continental economies began to be underperformers in the interwar period, and have remained so--with corrective steps here and further missteps there--from the postwar decades onward. There was no sense of a structural deficiency during the "glorious years" from the mid-'50s through the '70s when the low-hanging fruit of unexploited technologies overseas and Europeans' drive to regain the wealth they had lost in the war powered rapid growth and high employment. Today, there is the sense that a problem exists.

What could be the origins of such underperformance? It may be that the relatively poor job satisfaction and employee engagement on the Continent are a proximate cause--though not the underlying cause --of the poorer participation and unemployment rates. And high unemployment could lead to a mismatch of worker to job, causing job dissatisfaction and employee disengagement. The task is to find the underlying cause, or causes, of the entire syndrome of poorer employment, productivity, employee engagement and job satisfaction.

Many economists attribute the Continent's higher unemployment and lower participation, if not also its lower productivity, to the Continent's social model--in particular, the plethora of social insurance entitlements and the taxes to pay for them. The standard argument is fallacious, though. The consequent reduction of after-tax wage rates is unlikely to be an enduring disincentive to work, for reduced earnings will bring reduced saving; and once private wealth has fallen to its former ratio to after-tax wages, people will be as motivated to work as before.

An indictment of entitlements has to focus on the huge "social wealth" that the welfare state creates at the stroke of the pen. Yet statistical tests of the effects of welfare spending on employment yield erratic results. In any case, it is hard to see that scaling down entitlements would be transformative for economic performance. (Indeed, some economists see increased wealth, social plus private, as raising the population's willingness to weather market shocks and helping entrepreneurs to finance innovation. I am skeptical.)

In my thesis, the Continental economies' root problem is a dearth of economic dynamism--loosely, the rate of commercially successful innovation. A country's dynamism, being slow to change, is not measured by the growth rate over any short- or medium-length span. The level of dynamism is a matter of how fertile the country is in coming up with innovative ideas having prospects of profitability, how adept it is at identifying and nourishing the ideas with the best prospects, and how prepared it is in evaluating and trying out the new products and methods that are launched onto the market.

There is evidence of such a dearth. Germany, Italy and France appear to possess less dynamism than do the U.S. and the others. Far fewer firms break into the top ranks in the former, and fewer employees are reported to have jobs with extensive freedom in decision-making--which is essential at companies engaged in novel, and thus creative, activity.

Further, I argue that the cause of that dearth of dynamism lies in the sort of "economic model" found in most, if not all, of the Continental countries. A country's economic model determines its economic dynamism. The dynamism that the economic model possesses is in turn a crucial determinant of the country's economic performance: Where there is more entrepreneurial activity--and thus more innovation, as well as all the financial and managerial activity it leads to-- there are more jobs to fill, and those added jobs are relatively engaging and fulfilling. Participation rises accordingly and productivity climbs to a higher path. Thus I see the sort of economic model operating in the Continental countries to be a major cause-- perhaps the largest cause--of their lackluster performance characteristics.

There are two dimensions to a country's economic model. One part consists of its economic institutions. These institutions on the Continent do not look to be good for dynamism. They typically exhibit a Balkanized/segmented financial sector favoring insiders, myriad impediments and penalties placed before outsider entrepreneurs, a consumer sector not venturesome about new products or short of the needed education, union voting (not just advice) in management decisions, and state interventionism. Some studies of mine on what attributes determine which of the advanced economies are the least vibrant--or the least responsive to the stimulus of a technological revolution--pointed to the strength in the less vibrant economies of inhibiting institutions such as employment protection legislation and red tape, and to the weakness of enabling institutions, such as a well-functioning stock market and ample liberal-arts education.

The other part of the economic model consists of various elements of the country's economic culture. Some cultural attributes in a country may have direct effects on performance--on top of their indirect effects through the institutions they foster. Values and attitudes are analogous to institutions--some impede, others enable. They are as much a part of the "economy," and possibly as important for how well it functions, as the institutions are. Clearly, any study of the sources of poor performance on the Continent that omits that part of the system can yield results only of unknown reliability.

Of course, people may at bottom all want the same things. Yet not all people may have the instinct to demand and seek the things that best serve their ultimate goals. There is evidence from University of Michigan "values surveys" that working-age people in the Continent's Big Three differ somewhat from those in the U.S. and the other comparator countries in the number of them expressing various "values" in the workplace.

The values that might impact dynamism are of special interest here. Relatively few in the Big Three report that they want jobs offering opportunities for achievement (42% in France and 54% in Italy, versus an average of 73% in Canada and the U.S.); chances for initiative in the job (38% in France and 47% in Italy, as against an average of 53% in Canada and the U.S.), and even interesting work (59% in France and Italy, versus an average of 71.5% in Canada and the U.K). Relatively few are keen on taking responsibility, or freedom (57% in Germany and 58% in France as against 61% in the U.S. and 65% in Canada), and relatively few are happy about taking orders (Italy 1.03, of a possible 3.0, and Germany 1.13, as against 1.34 in Canada and 1.47 in the U.S.).

Perhaps many would be willing to take it for granted that the spirit of stimulation, problem-solving, mastery and discovery has impacts on a country's dynamism and thus on its economic performance. In countries where that spirit is weak, an entrepreneurial type contemplating a start-up might be scared off by the prospect of having employees with little zest for any of those experiences. And there might be few entrepreneurial types to begin with. As luck would have it, a study of 18 advanced countries I conducted last summer found that inter-country differences in each of the performance indicators are significantly explained by the intercountry differences in the above cultural values. (Nearly all those values have significant influence on most of the indicators.)

The weakness of these values on the Continent is not the only impediment to a revival of dynamism there. There is the solidarist aim of protecting the "social partners"--communities and regions, business owners, organized labor and the professions--from disruptive market forces. There is also the consensualist aim of blocking business initiatives that lack the consent of the "stakeholders"--those, such as employees, customers and rival companies, thought to have a stake besides the owners. There is an intellectual current elevating community and society over individual engagement and personal growth, which springs from antimaterialist and egalitarian strains in Western culture. There is also the "scientism" that holds that state-directed research is the key to higher productivity. Equally, there is the tradition of hierarchical organization in Continental countries. Lastly, there a strain of anti-commercialism. "A German would rather say he had inherited his fortune than say he made it himself," the economist Hans-Werner Sinn once remarked to me.

In my earlier work, I had organized my thinking around some intellectual currents--solidarism, consensualism, anti-commercialism and conformism--that emerged as a reaction on the Continent to the Enlightenment and to capitalism in the 19th century. It would be understandable if such a climate had a dispiriting effect on potential entrepreneurs. But to be candid, I had not imagined that Continental Man might be less entrepreneurial. It did not occur to me that he had less need for mental challenge, problem-solving, initiative and responsibility.

It may be that the Continentals finding, over the 19th and early 20th century, that there was little opportunity or reward to exercise freedom and responsibility, learned not to care much about those values. Similarly, it may be that Americans, having assimilated large doses of freedom and initiative for generations, take those things for granted. That appears to be what Tocqueville thought: "The greater involvement of Americans in governing themselves, their relatively broad education and their wider equality of opportunity all encourage the emergence of the 'man of action' with the 'skill' to 'grasp the chance of the moment.'"

The most basic point to carry away is that the empirical results related here lend support to the Enlightenment theme that a nation's culture ultimately makes a difference for the nation's economic performance in all its aspects--productivity, prosperity and personal growth.

It was a mistake of the Continental Europeans to think that they expressed the right values--right for them. These values led them to evolve economic models bringing in train a level of economic performance with which most working-age people are now discontented. Perhaps the way out--to go from unsatisfactory performance to high performance--will require not only reform of institutions but also a cultural shift that returns Europe to the philosophical roots that put it on the map to begin with.

http://www.opinionjournal.com/editorial ... =110009657

[Pata-Hari]

ó keyser, mas de onde pescas tu tanto artigo interessante? és um portento, man!

[Keyser Soze]

Wednesday, 31/1/2007:

12:14 - SACHS ON SWEDEN:

Many have asked me what I think about Jeffrey Sachs´ article in Scientific American where he praised the Nordic economies.

At the time, I actually wrote a response to the magazine. It wasn´t published, so here it follows:

Jeffrey Sachs claims that Friedrich Hayek’s thesis on “the road to serfdom” was wrong since the Nordic welfare states outperform the liberal Anglo-Saxon economies for the moment.

But Hayek didn’t say that social spending would lead to serfdom. He said that government control of the productive forces would, and one of the pillars of the Nordic model has always been private businesses in open markets. And in that environment our companies have been competitive. And that began before we had higher taxes than the US, so it is hardly an argument for high taxes.

Since then we have lagged behind, partly because social spending has pushed people onto the welfare rolls (hidden from the official unemployment statistics). For example, McKinsey estimates Sweden’s real unemployment to 15 percent. On a per capita-income basis, only the oil kingdom of Norway can compete with the US today. If Denmark moved to the US, it would be the tenth poorest state, Sweden would be the sixth and Finland the fifth poorest.

The Nordic countries have mixed economies, and they produce mixed results. Just what Hayek would have predicted.

Johan Norberg, Stockholm

http://www.johannorberg.net/?page=displ ... =2007#2135

[Keyser Soze]

O outro lado do Fisco

Apesar do Governo dizer que em 2006 as despesas registaram o menor crescimento dos últimos anos, a verdade é que os gastos continuam a subir

É triste ver como o trabalho que está a ser feito na área fiscal serve para alimentar antigos vícios. É consensual que a máquina tributária está mais eficiente e que portanto se torna mais difícil a fuga ao pagamento de impostos. Qualquer contribuinte cumpridor fica satisfeito quando todos os que sistematicamente fugiam com as suas obrigações são trazidos para o sistema.

Só que esta satisfação desaparece assim que se percebe o que o Estado anda a fazer com o dinheiro.

O problema do défice não está resolvido. Apesar do Governo dizer que em 2006 as despesas registaram o menor crescimento dos últimos anos, a verdade é que os gastos continuam a subir. O mesmo será dizer que o monstro continua a gastar mais e mais. Depois de cinco anos de combate ao défice a redução da despesa pública continua por fazer. E contra esta verdade inconveniente não existe contraponto possível.

Nos últimos anos assistimos a uma aumento da carga fiscal sobre o contribuinte. O IVA, principal receita do Estado, aumentou por duas vezes. O IRS tem sido agravado para muitas classes profissionais e, apesar das taxas não terem alterado, as mexidas nos escalões têm contribuído para o agravamento fiscal. O imposto sobre os produtos petrolíferos é um dos mais altos da Europa e o imposto automóvel indescritível. A única alteração a esta paisagem terrível foi a diminuição do IRC, insuficiente para conseguir atingir os objectivos pretendidos em termos de atracção de investimento.

Este é um erro colossal e uma das maiores injustiças praticadas nos últimos anos. Não me importo de pagar mais impostos, importo-me que eles sirvam para manter o «statu quo».

Uma melhor cobrança deveria permitir uma menor cobrança de impostos. A eficiência fiscal devia ser utilizada para a redução do nível de fiscalidade sobre o contribuinte e a economia. Um prémio para quem passa metade do ano a trabalhar para o Estado.

Além de que o aumento da carga de imposto é contraproducente com a tentativa de diminuição da fuga, pois quanto maior o imposto maior a tendência do contribuinte em não o pagar. Como resultado desta política inadequada assistimos cada vez mais à fuga de negócios e de consumo para a vizinha Espanha, e, claro, de impostos também.

O contribuinte começa a aperceber-se da injustiça e o tempo para agir a esgotar-se. É altura do Governo reavaliar a sua política fiscal.

jvpereira@expresso.pt

[Keyser Soze]

http://www.heritage.org/research/featur ... /index.cfm

[Keyser Soze]

Portugal
* Rank: 43
* Regional Rank: 24 of 41

Quick Facts

* Population: 10.5 million

* GDP (PPP): $206.1 billion
1.1% growth in 2004
1.3% 5-yr. comp. ann. growth
$19,629 per capita

* Unemployment: 6.7%

* Inflation (CPI): 2.4%

* FDI (net inflow): –$5.1 billion

* Official Development Assistance: None

* Exports: $51.9 billion
Primarily clothing, footwear, machinery, chemicals, cork and paper products, hides

* Imports: $65.4 billion
Primarily machinery, transport equipment, chemicals, petroleum, textiles, agricultural products

Portugal's economy is 66.7 percent free, according to our 2007 assessment, which makes it the world's 43rd freest economy. Its overall score is 1.1 percentage points higher than last year, partially reflecting new methodological detail. Portugal is ranked 24th freest out of 41 countries in the European region, and its overall score is slightly lower than the regional average.

Portugal enjoys high levels of business freedom, trade freedom, monetary freedom, investment freedom, property rights, and freedom from corruption. The average tariff rate is low, but non-tariff barriers include distortionary EU subsidies on agriculture and other goods. Business formation is efficient, although other commercial operations are often slowed by bureaucracy. Inflation is low, and the government actively promotes foreign investment. Case resolution is slower than the EU average, but the judiciary is independent and free of corruption.

Portugal is weak in freedom from government and labor freedom. Total government spending equals almost 50 percent of GDP, and the labor sector is highly restrictive in all areas, from maximum workweek hours to employment severance procedures.

Background:
Since the 1974 "Revolution of the Carnations" that overthrew the country's long-running dictatorship, Portugal has been central to both European integration and the transatlantic alliance. In January 2006, Anibal Cavaco Silva became the first conservative president of the democratic era. Although his role is largely ceremonial, the president must deal with a Socialist Party that won its first overall parliamentary majority since the revolution. Currently, the public sector consumes the equivalent of 15 percent of gross domestic product in wages alone. Portugal's main exports include agricultural produce, textiles, wood products, and electrical equipment.
Business Freedom - 79.6%

Starting a business takes an average of eight days, compared to the world average of 48 days. Such ease of entrepreneurship is good for job creation. Obtaining a business license can be difficult, but closing a business is easy. Bureaucratic obstacles and delays are ongoing problems. The overall freedom to start, operate, and close a business is relatively well protected by the national regulatory environment.
Trade Freedom - 76.6%

Portugal's trade policy is the same as those of other members of the European Union. The common EU weighted average tariff rate was 1.7 percent in 2005. Various non-tariff barriers are reflected in EU and Portuguese government policy, including agricultural and manufacturing subsidies, regulatory and licensing restrictions, and other market access restrictions. The government also implements burdensome pharmaceutical regulations and non-transparent government procurement rules. Consequently, an additional 20 percent is deducted from Portugal's trade freedom score.
Fiscal Freedom - 79.6%

Portugal has a high income tax rate and a moderate corporate tax rate. The top income tax rate is 42 percent, and the top corporate tax rate is 27.5 percent. Other taxes include a value-added tax (VAT), a property tax, and a vehicle tax. In the most recent year, overall tax revenue as a percentage of GDP was 23.2 percent.
Freedom from Government - 49.6%

Total government expenditures in Portugal, including consumption and transfer payments, are high. The government's privatization plans include divestment of state holdings in such traditional industries as paper and pulp. In the most recent year, government spending equaled 46.4 percent of GDP, and the government received 0.6 percent of its revenues from state-owned enterprises and government ownership of property.
Monetary Freedom - 80.2%

Portugal is a member of the euro zone. Inflation in Portugal is relatively low, averaging 2.4 percent between 2003 and 2005. Relatively low and stable prices explain most of the monetary freedom score. As a participant in the EU's Common Agricultural Policy, the government subsidizes agricultural production, distorting the prices of agricultural products. The government also influences prices through state-owned enterprises and utilities. Consequently, an additional 10 percent is deducted from Portugal's monetary freedom score to account for these policies.
Investment Freedom - 70.0%

Portugal does not discriminate against foreign investments. Foreigners may invest in almost all economic sectors that are open to private enterprise. Approval is required for non-EU investment in the defense industry, water management, public service telecommunications operators, railways, and maritime transportation. Portugal also restricts non-EU investment in regular air transport and television operations. Residents and non-residents may hold foreign exchange accounts. There are no controls or restrictions on repatriation of profits, current transfers, payments for invisible transactions, or real estate transactions.
Financial Freedom - 50.0%

Financial institutions may offer a variety of services, and banks increasingly sell insurance products. The government has been privatizing state financial institutions since the late 1980s, and the sole remaining state-owned financial services firm, Caixa Geral de Depósitos (CGD), is Portugal's largest financial group. Following a period of banking consolidation, CGD and four large private banks dominate the market and account for about 80 percent of banking assets. The government also influences the allocation of credit through a program that is designed to assist small and medium-size enterprises. The insurance sector is dominated by three firms, two of which are owned by CGD. Capital markets and the stock market were bolstered by government privatization in the 1990s but remain small by European standards. The stock exchange participates in Euronext, the common trading platform linking the bourses of Paris, Brussels, and Amsterdam.
Property Rights - 70.0%

The judiciary is independent. The court system is slow and deliberate, and the number of years it takes to resolve cases is well above the EU average.
Freedom from Corruption - 65.0%

Corruption is perceived as present. Portugal ranks 26th out of 158 countries in Transparency International's Corruption Perceptions Index for 2005.
Labor Freedom - 46.0%

The labor market operates under inflexible employment regulations that hinder overall productivity growth. The non-salary cost of employing a worker is high, and dismissing a redundant employee is costly. Regulations related to increasing or contracting the number of work hours are not flexible. Portugal's labor freedom is one of the 20 lowest in the world

http://www.heritage.org/research/featur ... d=Portugal

[Keyser Soze]

2007-01-05

Diáspora: Cem mil deixaram Portugal em 2006
Crise aumenta emigração

O Instituto Nacional de Estatística (INE) diz que, em 2006, 30 mil portugueses fixaram residência por mais de um ano noutros países, mas a Igreja Católica e os sindicatos dizem que, no ano que agora terminou, foram mais de cem mil os cidadãos lusos a procurar emprego e melhor sorte além-fronteiras, o que corresponde a um aumento de 20 por cento em relação a 2005.

As dificuldades que o nosso país atravessa levam cada vez mais a trabalhar para o estrangeiro

“O secretário de Estado das Comunidades disse há umas semanas que o fluxo migratório dos portugueses está a diminuir, mas o que nós observamos, através das nossas missões espalhadas pelo mundo, é que, ao contrário do que aconteceu entre meados da década de 90 e 2004, são cada vez mais os nossos compatriotas a procurarem lá fora a solução para os seus problemas financeiros e de emprego”, disse ao Correio da Manhã o padre Rui da Silva Pedro, o responsável pela Obra Católica Portuguesa das Migrações (OCPM), um organismo da Conferência Episcopal Portuguesa.

Esta constatação da Igreja Católica é aprovada e até sublinhada por Manuel Carvalho da Silva, coordenador nacional da CGTP, para quem, em matéria de emigração, “os números do INE não correspondem minimamente à realidade”.

“É preciso não esquecer os milhares de portugueses que têm contratos sazonais, os muitos milhares que estão ilegais e os milhares que trabalham em Espanha, indo ao domingo e vindo à sexta-feira”, disse Carvalho da Silva.

A OCPM estima que só para o Reino Unido, no ano passado, tenham emigrado cerca de 40 mil portugueses, tornando--se assim, devido às vantagens cambiais, o destino preferido dos nossos emigrantes. Aliás, os últimos dados indicam que a comunidade lusa nas ilhas britânicas já deve passar as 400 mil pessoas.

Destino emergente para os portugueses é a Espanha, para onde vão trabalhar cada vez mais compatriotas nossos na construção civil. Os ordenados são mais altos e têm a possibilidade de vir a casa todos os fins-de-semana. Mas há também muita gente a fixar residência no país vizinho. Estima-se que, só na Galiza, já residam 40 mil portugueses.

Também a Suíça se mantém como grande destino da nossa emigração. Manuel Beja, conselheiro das comunidades portuguesas eleito pela Suíça, diz que, em 2006, “terão passado os Alpes, à procura de trabalho, cerca de 15 mil portugueses”.

“Nos últimos tempos criou-se a ideia de que Portugal tinha passado de país de emigrantes (exportador de mão-de-obra) para país de imigrantes (importador de mão-de-obra), o que não é verdade. Somos, de facto, um país de imigrantes, mas continuamos a ser também pátria de emigrantes”, diz o padre Rui da Silva Pedro, sublinhando que “o aumento do desemprego e o excessivo endividamento das famílias são as grandes causas do recente aumento da emigração”.

E o que é facto, diz o padre Rui Pedro, é que “a emigração voltou a fazer parte dos planos de vida de muitos jovens portugueses”.

"HÁ QUEM PASSE FOME"

Adão Mendes, coordenador da União dos Sindicatos de Braga, diz que há milhares de portugueses que são explorados e que vivem e trabalham em “péssimas condições” em vários países estrangeiros, nomeadamente em Espanha. “Nós temos conhecimento, através dos nossos camaradas espanhóis, que vão carrinhas de Portugal com pessoas que são colocadas em obras, de onde só saem para vir no fim-de-semana a Portugal e onde passam dias inteiros num regime que raia a escravatura”, disse.

Manuel Carvalho da Silva, coordenador nacional da CGTP, assegura, por seu lado, que “há muitos portugueses a viver situações dramáticas no estrangeiro, perante a passividade dos nossos governantes”. O padre Rui Pedro vai mais longe e diz que “há pessoas a passar fome” e que “só não são em maior número porque as missões ajudam no que podem”. O sacerdote revela que “os contornos da emigração portuguesa são cada vez mais parecidos com os que se viviam nos anos 60 e 70”.

GOVERNO ESQUECE COMUNIDADES

O padre Rui da Silva Pedro, que conhece a maioria das comunidades portuguesas espalhadas pelo Mundo e que todos os dias recebe informações dos 122 padres diocesanos que a Conferência Episcopal Portuguesa tem em 14 países, diz que “os nossos governantes, que vivem tão preocupados, e bem, a criar condições de integração aos imigrantes que nos procuram, estão a abandonar cada vez mais os seus cidadãos que procuram melhor vida no estrangeiro”.

Sem se referir em concreto ao encerramento de consulados e embaixadas, o sacerdote que mais sabe de emigração em Portugal não tem dúvidas de que “as comunidades portugueses nunca, no pós-25 de Abril, estiveram tão esquecidas pelo Governo português como agora”. A questão vai, aliás, ser abordada no próximo dia 14, Dia Mundial do Migrante e Refugiado.

SAIBA MAIS

QUASE CINCO MILHÕES

São cálculos da Obra Católica Portuguesa das Migrações: em 121 países do Mundo inteiro residem 4,8 milhões de portugueses, que anualmente enviam para o nosso país mais de dois mil milhões de euros.

122 MISSIONÁRIOS

A Conferência Episcopal Portuguesa tem, como missionários junto das nossas comunidades em 14 países, 122 sacerdotes. Conta ainda com a colaboração de 30 religiosas, 22 diáconos permanentes e 68 leigos com formação teológica.

SONHO CANADIANO

Apesar de todas as dificuldades de legalização dos portugueses no Canadá, amplamente noticiadas em finais de 2005 e início de 2006, os açorianos continuam a arriscar uma vida nova neste país da América do Norte. Trata-se de uma espécie de sonho americano que, muitas vezes, acaba em pesadelo.

Secundino Cunha, Braga

http://www.correiomanha.pt/noticia.asp? ... l=10&p=200

[ptmasters]

Como de costume somos um caso inédito a nível mundial -- um país em vias de subdsenvolvimento!

Eh pá... mas temos a maior Árvore de Natal da Europa, o maior fogo de artício no Guiness, o clube com mais sócios do mundo (e eu sou benfiquista sócio...), e outros tantos "melhores do mundo" que a minha memória tratou de "amnesiar" (se é que isto existe)

O problema destes estudos "falaciosos", é que não usam os indicadores e critérios correctos!!! Fossem eles usar alguns destes pontos acima, e estávamos em 1º em muitas situações!!!!

1 abraço

[Keyser Soze]

Estudo da OCDE sobre a Zona Euro
Dívida pública portuguesa será a única que continuará a crescer

Portugal deverá ser o único país da Zona Euro que verá o peso da dívida pública continuar a crescer nos próximos anos. De acordo com projecções hoje divulgadas pela Organização para a Cooperação e Desenvolvimento Económico (OCDE), o rácio da dívida pública portuguesa sobre o PIB deverá atingir 75% em 2010, o que traduz um aumento de três pontos percentuais face aos números de 2005.

A verificar-se a evolução antecipada pela OCDE, Portugal será o único, entre os agora 13 países do euro, onde a consolidação orçamental, medida pela dívida acumulada para as gerações futuras, dará passos atrás.

Os números da OCDE, incluídos num longo documento onde a organização realiza uma avaliação pormenorizada do impacto da união económica e monetária europeia – que completa este ano oito anos de existência, e cinco anos desde a entrada em circulação das notas e moedas de euros – sugerem que Itália continuará a ser a "campeã" em matéria de dívida pública, que deverá manter-se em 120% do PIB.

Em contrapartida, a Espanha – que, ao contrário de Portugal, parece ter abandonado definitivamente a "era" dos défices e vai já no terceiro ano de excedente orçamental – prepara-se para registar uma das mais notáveis reduções da dívida, com o rácio a passar de 50% para 35% do PIB, entre 2005 e 2010.

[atomez]

Como de costume somos um caso inédito a nível mundial -- um país em vias de subdsenvolvimento!

[PIKAS]

Em definitivo, a culpa é Deus.

Quando Ele dividiu os continentes, alguém lhe disse: faz favor de pôr Portugal no norte de África. Teimoso, Ele argumentou: não, fica aqui no canto da europa, não há problema, fica bem aqui e é só um bocadinho mais acima. O outro disse: vê lá, acho que é melhor pôr Portugal no continente africano.

Moral da história: se estivessemos 200 kms mais abaixo estariamos entre os 10 primeiros. Assim, estamos condenados a ser agora e sempre os últimos.

Já não tenho paciência para isto. À velocidade a que os novos países da EU a 25 estão a crescer dentro de 5 a 8 anos estamos atrás da Estónia, Letónia, Lituânia, Eslováquia, etç, etç...

Cumprimentos,

[Keyser Soze]

Caso português usado para ilustrar erros a evitar

Depois dos anos dourados que se seguiram à adesão à União Europeia (UE), Portugal passou a ser apontado como exemplo do que não se deve fazer, e essa transformação do "bom" em "mau" aluno está a ser utilizada por Bruxelas para alertar os países que se preparam para entrar no euro.

"Explosão e recessão em Portugal: lições para os novos membros do euro" ("Portugal´s boom and bust: lessons for euro newcomers", no original em inglês) é o título de um artigo que acaba de ser publicado pela Direcção-geral de Economia e Finanças da Comissão Europeia, em que se sistematizam os erros cometidos em Portugal na fase imediatamente seguinte à da entrada na união económica e monetária, em 1999, e com base nos quais se retiram cinco ensinamentos que devem ser seguidos pelos países que vierem a entrar na Zona Euro - a Eslovénia será o próximo, já a 1 de Janeiro do novo ano.

"Portugal´s boom and bust: lessons for euro newcomers"

http://ec.europa.eu/economy_finance/pub ... 2006en.pdf

[Keyser Soze]

Miguel Frasquilho
Número de funcionários públicos: A confirmação de uma certeza

O número de funcionários públicos no nosso país é uma das questões sistematicamente referidas quando o problema do défice público é abordado. O peso das despesas com o pessoal das Administrações Públicas no PIB indicia que o número de funcionários públicos em Portugal é excessivo quando comparado com a realidade europeia: é isto, pelo menos, o que se pode concluir quando se comparam os cerca de 14% que pesa na nossa economia a folha salarial da função pública contra os cerca de 10.5% que pesa na UE-25 ou os 10% que pesa na Zona Euro.

E sabe-se igualmente que, entre 1996 e 2000, foram contratados mais de 130 mil novos funcionários (em termos líquidos, isto é, descontando já aqueles que saíram ou se reformaram), num período que contribuiu decisivamente para a deterioração das nossas contas públicas e para o problema (de um défice excessivo) que, ainda hoje, continua por resolver (já agora: quem estava no Governo nessa altura, quem estava?...).

Porém, até agora, dada a escassez de estatísticas credíveis que pudessem comparar o número de funcionários públicos em Portugal com o resto da Europa, íamo-nos ficando pelos indícios ou pelas sensações. Mas isso foi até ao mês passado. É que uma reportagem - por sinal muito bem conseguida - do jornal "Correio da Manhã" do passado dia 20 de Novembro, com base em dados do Eurostat, prova, preto no branco, que no universo da Administração Pública Central (isto é, o Estado Central e excluindo as Administrações Locais e Regionais), a tese do número de funcionários públicos em excesso é mesmo real. Os dados da figura em anexo são (assustadoramente) reveladores.



A coluna do número de funcionários públicos do Estado Central em cada país diz, evidentemente, pouco ao leitor, pois este indicador é pouco revelador quando tomado em termos absolutos. O caso é, porém, diferente, se compararmos o número de habitantes em cada país com o número de funcionários públicos. É esta realidade que as barras horizontais à direita, seguidas do respectivo número e ordenadas por ordem crescente, mostram. Naturalmente, e em princípio, quanto mais elevado for o número de habitantes por funcionário público, melhor: maior será a eficiência e a organização na Administração Pública de um país (além dos menores custos - leia-se, menores impostos - que daí resultam para todos os contribuintes).

Do mesmo modo, quanto mais baixo for o rácio acima referido, pior. Ora, o que se constata é que, infelizmente, Portugal surge em primeiro lugar, ou seja, é o país em que este indicador é mais baixo: apenas cerca de 18 habitantes por funcionário público, logo seguido pelo Luxemburgo com 19. Na Europa (UE-25) existem, em média, cerca de 31 habitantes por cada funcionário público da Administração Central, na vizinha Espanha este rácio é quase o dobro do nosso (36) e nas três primeiras posições surgem a Finlândia (com 46.5), a Lituânia (44.7) e a Polónia (com 42.3).

É certo que não foi possível conhecer as estatísticas relativas às Administrações Locais e Regionais, mas também é verdade que é na Administração Central que se concentra o maior número de funcionários públicos (como se pode constatar pelo caso português, em que, de acordo com o Governo, as Administrações Públicas empregam pouco menos de 778 mil funcionários, dos quais 568 mil se encontram no Estado Central) - pelo que esta realidade é já muito reveladora.

Estas estatísticas provam, assim, a urgência de uma reforma da Administração Pública em Portugal - e, nomeadamente, de uma reforma da Administração Central. Apesar de estar (muito) atrasado, o Governo prevê que o famoso PRACE comece a ser aplicado em 2007. Sinceramente, espero bem que tal aconteça? mesmo! É que a sua entrada em vigor estava prevista ainda para 2006 - mas só no final de Outubro foram publicadas em Diário da República as leis orgânicas dos Ministérios com as novas macroestruturas, para as quais se continua a desconhecer que poupanças deverão gerar, se é que deverão gerar algumas poupanças de todo... até porque, ainda recentemente, o Ministro das Finanças declarou, a propósito deste assunto, que "ninguém ficará a perder no processo de revisão de carreiras, vínculos e remunerações" na Administração Central do Estado. Isto para além de, em várias ocasiões, ter repetido que tinha "sérias dúvidas de que existissem funcionários públicos a mais". Depois dos números atrás apresentados, se não é uma brincadeira de mau gosto, parece?

Enfim, uma palavra ainda para as reacções dos sindicatos da função pública à reportagem do "Correio da Manhã" (e na posse dos dados do Eurostat): a coordenadora da Frente Comum referiu que "até hoje ninguém conseguiu provar que há funcionários públicos em excesso"; um dirigente da Frente Sindical da Administração Pública afirmou que "este é mais um problema político do que real"; um dirigente do Sindicato dos Quadros Técnicos do Estado disse que "aquilo que queremos é que o país tenha um melhor serviço público, isso é que é fundamental" e frisou que "Portugal está na cauda da União Europeia em matéria de número de funcionários".

Mais palavras para quê?!... A não ser que os dados do Eurostat estejam absolutamente desfasados da realidade, confesso que nem queria acreditar no que lia no "Correio da Manhã"?

Portugal está, de facto, num dos extremos da União Europeia no número de funcionários públicos - mas infelizmente está no pior extremo. E sem dúvida que o problema é político: pois se foram os vários governantes (uns mais, outros menos?) que ao longo dos anos contrataram todos os funcionários públicos hoje existentes, é também a eles que compete enfrentar e resolver o problema. Espero pois que quem governa neste momento tenha coragem para promover as alterações necessárias (e que há tanto tempo têm vindo a ser adiadas?), mas todos os sinais que vão sendo transmitidos deixam muitas dúvidas que desta vez seja "a sério". Além das declarações que vão sendo emitidas (e a que já acima fiz referência), basta lembrar, por exemplo, o desprezo com que a proposta das rescisões amigáveis (devidamente negociada com Bruxelas e com recurso à emissão de dívida pública), efectuada pelo presidente do PSD em Maio deste ano, foi recebida? E já agora: o país da Europa melhor classificado nesta matéria é, como se viu, a Finlândia - que é muitas vezes citado como exemplo a seguir em várias áreas pelo primeiro-ministro. Pois aqui fica uma sugestão ao engenheiro Sócrates: faça lá também da Finlândia um modelo a seguir nesta matéria. Isso é que era!...

Quanto aos que fingem não ver o que se passa e assobiam para o lado - como acontece com as organizações sindicais atrás citadas -, acabam por fazer mais parte do problema do que da solução...

Os dados do Eurostat vêm confirmar a certeza que já se tinha: existem funcionários públicos a mais em Portugal. É mais do que tempo de agir em conformidade.

[Keyser Soze]

boa! solução para Portugal segundo o Presidente do nosso Banco Central: mais impostos !

Constâncio propõe imposto para combater a desigualdade
Vítor Constâncio defende a criação de mecanismos que promovam uma melhor redistribuição do rendimento em Portugal. O Governador do Banco de Portugal considera que "Portugal não está a ter um bom desempenho em termos de desigualdade de rendimento.

O governador do Banco de Portugal participou na conferência "Desafios para a economia portuguesa", que teve lugar sexta-feira e sábado na Fundação Gulbenkian, e que procurou discutir a situação da economia portuguesa oito anos após a entrada na União Económica e Monetária.

e já agora porque continuamos a pagar a este tipo o dobro do que ganha o Presidente da Reserva Federal dos Estados Unidos quando a tx. de juro e a politica monetária é determinada pelo Banco Central Europeu ?

[JOGO2006MARKITOS]

O mote está dado, o Estado tem de encolher e gastar menos.

[Keyser Soze]

Publicado 18 Dezembro 2006 11:37

Portugal entre os poucos países da UE onde o nível de vida se deteriorou

Portugal foi um dos únicos quatro países da União Europeia onde o nível de vida se deteriorou consecutivamente nos últimos três anos. De acordo com dados estatísticos hoje divulgados pelo Eurostat, o PIB per capita ajustado às paridades de poder de compra caiu em Portugal, entre 2003 e 2005, do equivalente a 73% da média europeia para apenas 70%.

Apenas Itália, que sofreu a queda de maior amplitude durante este período (de 106 para 100% da média comunitária), Malta (de 74% para 70%) e Alemanha (de 112 para 110) sofreram perdas sucessivas nos últimos três anos no seu nível de vida por comparação com a média da UE-25.

Não obstante esta evolução negativa, a posição relativa de Portugal no "ranking" europeu manteve-se inalterada: os portugueses são os 18º mais ricos, ou os 8º mais pobres, entre 25 povos da UE.

Durante este período, o nível de vida dos portugueses foi ultrapassado pelo dos checos, mas, em contrapartida, Malta perdeu dois lugares, situando-se agora imediatamente abaixo de Portugal.

Os novos números do Eurostat confirmam a persistência de enormes disparidades na UE, com o PIB per capita ajustado às paridades de poder de compra a variar entre 251% da média no Luxemburgo e 48% na Letónia.

[Keyser Soze]

«The Economist» aponta para a necessidade de acelerar as reformas
Portugal vai continuar na cauda da europa

Globalização e tecnologia, procura de energias alternativas mais eficientes e fim do modelo social nórdico marcam os acontecimentos em 2007.

O PIB português pode crescer 1,4% em 2007, antevê a revista «O Mundo em 2007», edição conjunta «Vida Económica»/The Economist. Este valor é inferior à meta fixada pelo Governo, que é de 1,8%.
O «Economist Intelligence Unit» analisa 66 países de seis continentes. Portugal não consegue reduzir o fosso que o separa da Grécia e vê a Irlanda distanciar-se. Relativamente à Espanha, a diferença mantém-se acentuada, 1,4%, contra 2,7%. Registe-se ainda o facto de a população espanhola ter aumentado em 2,4 milhões, sem afectar significativamente o rendimento per capita, quase 50% superior ao português.
Letónia e Estónia lideram o crescimento do PIB na União Europeia, com 7,5% e 7,8% respectivamente, obtendo um 10º e 12º lugares no ranking mundial.
José Ramos, vice-presidente da Salvador Caetano, um dos vários líderes nacionais que comentam as tendências para o próximo ano nesta edição especial «O Mundo em 2007», diz que poderemos assistir a uma retoma da economia nacional e dos índices de confiança dos portugueses caso este Governo continue persistente nas suas reformas.

[Keyser Soze]

Portugal é, desde 2000, o país da Zona Euro onde a despesa com pessoal é mais elevada. Entre 12 países, os gastos com funcionários na Administração Pública portuguesa, incluindo salários e fundos da Segurança Social, ascendem em 2007, segundo o Orçamento do Estado para o próximo ano, a 21 010 milhões de euros, 13,2 por cento de um Produto Interno Bruto (PIB).

Os dados da Comissão Europeia, constantes na previsão de Outono deste ano, deixam claro que, apesar de Portugal ter reduzido em 0,6 por cento os gastos com pessoal em 2006 e as previsões indicarem uma redução semelhante em 2007, o País continua a apresentar as despesas com funcionários mais altas da Zona Euro. Só a Finlândia, uma das economias mais competitivas do Mundo, tem um gasto semelhante a Portugal.

A confirmar-se uma redução acumulada de 1,2 por cento nestas despesas em 2006 e 2007, “será a terapia de choque mais intensa verificada desde 2000, no conjunto da área do Euro, com excepção da Áustria”, frisa o Sindicato dos Quadros Técnicos do Estado (STE). Mas “se Portugal continuar a ter um fraco crescimento e o investimento não inverter a tendência de diminuição dos últimos anos o esforço para reduzir o peso da despesa pública em pessoal na economia irá obrigar a grandes sacrifícios por parte dos funcionários públicos sem grande êxito”, conclui o STE.

Ao todo, em 2006 e 2007 a redução dos gastos com pessoal ascenderá a 718 milhões de euros, em consequência da redução do número de funcionários. O Governo conta diminuir ainda mais estas despesas através da mobilidade de funcionários. Para isso, será criada a Empresa de Serviços Partilhados da Administração Pública, como prevê o diploma do regime de mobilidade, a fim de garantir uma gestão mais eficaz desse processo.

[Keyser Soze]

Os dados divulgados hoje pelo Instituto Nacional de Estatística revelam que a economia nacional cresceu 1,5% nos três meses terminados em Setembro por comparação com igual período do ano passado, e recuou 0,2% relativamente ao trimestre anterior. Ambos os valores colocam Portugal na cauda da tabela europeia.

Nenhuma das oito economias do euro para as quais existem dados disponíveis relativos ao terceiro trimestre teve um desempenho tão modesto quanto a portuguesa. Na variação homóloga, os números oscilaram entre 1,7% em Itália e 4,3% na Grécia.

Já na evolução em cadeia, o pior resultado havia sido observado em França (que estagnou), enquanto a Grécia registou o maior salto também face ao trimestre anterior, ao crescer 2,1%. Só Portugal apresenta, neste momento, uma variação de sinal negativo.

mas segundo o nosso Ministro da Economia:

Os números do PIB no terceiro trimestre de 2006 confirmam que há uma clara recuperação económica em Portugal e não põem em causa a meta de 1,4 pct para o crescimento no final deste ano, disse o ministro da Economia, Fernando Teixeira dos Santos.

A recession is defined in macroeconomics as a decline in a country's real Gross Domestic Product (GDP) for two or more successive quarters of a year (equivalently, two consecutive quarters of negative economic growth).

[Keyser Soze]

Vejam este site:

http://www.gapminder.org/

[C.N.]

Obrigado Keyser Soze por partilhares um artigo tao interessante, bem escrito, e bem sustentado.

O positivo (para mim) do artigo e a esperanca que a Irlanda nos da. Os factos:

1984
double-digit unemployment
an anemic economy
personal income top tax rate - 65%
capital gains tax rate - 60%
corporate income tax rate - 50%

Houve uma mudanca dramatica e hoje estamos em:
personal income top tax rate - 42%
capital gains tax rate - 20%
corporate income tax rate - 12.5%
strongest growth of all industrialized nations, expanding at an average of 7.7 percent annually during the 1990s
unemployment has dropped dramatically, and investment has boomed

Lembro-me de uma entrevista com o ministro das financas Irlandes em que se falava do crescimento economico do pais. Uma das frases sabias que ele disse foi "A Irlanda ja ha muito que percebeu que e melhor ter 12.5% de algo que 40% de nada".

Abraco e mais uma vez obrigado por partilhares.

CN

[Pata-Hari]

Epá, não tive tempo de ler tudo até ao fim mas isto é muito interessante!

No entanto há algo que acho à partida muito interessante e que é a ideia/realidade de que quanto maior do que é gerado é desviado para o estado, menor eficiência económica, menor a riqueza e menor o emprego. Só que eu também conheço alguma da realidade americana e devo dizer que a europa, do ponto de vista social, é um mundo bem mais agradável. As diferenças sociais que são diluidas (sim, às custas de perda de eficiencia e de perda de rendimento gerado) mas têm mantido a europa um lugar com menor violencia, com melhor acesso à escolaridade para todos, com melhor acesso à saúde para todos.... Melhor que os dois sistemas eu ainda só conheço singapura que conseguiu aliar as duas coisas (às custas da perda quasi-total da liberdade de decisão do povo...).

[Keyser Soze]

[quote]October 25, 2006
Fiscal Policy Lessons from Europe
by Daniel J. Mitchell, Ph.D.
Backgrounder #1979
URL: http://www.heritage.org/Research/Budget/bg1979.cfm

The federal government spends an enormous amount of money. Measured as a share of national economic output, budgetary outlays are near a peace­time high, consuming almost 21 percent of gross domestic product (GDP).[1] Whether it is measured in nominal dollars, in inflation-adjusted (real) dollars, or on a per household basis, federal spending in America is at record levels.

Moreover, this is just the calm before the storm. Left on autopilot, the burden of federal spending will increase dramatically. This is partially due to demo­graphic forces, such as the looming retirement of the baby boom generation, but is also the result of reck­less policy choices, such as the creation of a new pre­scription drug entitlement.

In a worst-case scenario, the Congressional Budget Office (CBO) estimates that government outlays could consume as much as 55.8 percent of GDP by 2050. Even a more optimistic scenario shows that the burden of federal spending will still nearly double, climbing to more than 37 percent of GDP.[2] Further­more, these figures do not count state and local out­lays, which currently consume more than 11 percent of GDP and will probably expand in future years.[3]

Many European nations have already allowed the burden of government to climb to these levels. Gov­ernment spending consumes more than 50 percent of GDP in France and Sweden and more than 45 percent in Germany and Italy.[4] These nations provide useful lessons about the economic consequences of bigger government, and these lessons suggest that America is on the wrong track. Even a cur­sory review of European economic performance shows that excessive government has serious adverse effects: slower growth, higher unem­ployment, lower living standards, and a bleak future.

One of the most important les­sons to be learned is that GDP is linked to policy. For instance, the CBO’s long-run forecasts assume that inflation-adjusted GDP will grow by about 2 percent annually, regardless of whether government consumes 21 percent of economic output or 56 percent of economic output. The dismal performance of the European economies shows that this is a deeply flawed assumption and indicates that America’s future is at even greater risk than the CBO estimates suggest. Bluntly stated, the United States is in danger of becoming a decrepit welfare state like France.

Comparing Europe and the United States

Western Europe[5] and the United States are wealthy, and both achieved this status over the past two centuries in part because of sensible policies and institutions. While much of the world was and still is crippled by the absence of functioning mar­ket economies, Europe and the United States have enjoyed centuries of remarkable growth thanks to property rights, the rule of law, and minimal gov­ernment.



For much of the 19th century, many European nations were richer than the United States. The United Kingdom and the Netherlands at various times have enjoyed the globe’s high­est living standards.[6] The United States took the lead in the first half of the 20th century, thanks to strong growth, but also because World War I and World War II caused extensive damage to Europe.

In 1950, the United States had nearly twice the per capita GDP of Western Europe. Over the next two decades, however, European econo­mies enjoyed strong growth.[7] Amer­ica’s advantage shrank, and a number of European nations appeared to be on pace to surpass the United States.

Europe’s Shift to Statism

However, Europe and the United States then began to move in oppo­site directions, and public policy seems to be one of the biggest rea­sons for the shift. Beginning in the late 1960s and early 1970s, politi­cians in most European nations increased the size and scope of gov­ernment. Government also expanded in America during that period, but the increase was more muted. More important, beginning in 1980, Amer­ica began to liberalize its economy and curtail the growth of government.

As a result of these historical differences, the bur­den of government in Europe is substantially larger than it is in the United States. Chart 2 shows that the burden of government spending relative to GDP has risen dramatically in Europe, while the U.S. has largely avoided the same mistake.



The growth of government in Europe has re­sulted in considerable economic damage because both spending and taxes undermine incentives to engage in productive behavior. On the spending side of the ledger, bigger government encourages people to rely on handouts rather than individual initiative. On the revenue side, the higher marginal tax rates needed to finance programs reduce incen­tives to work, save, and invest.

Not surprisingly, these divergent policies resulted in different economic outcomes.[8] Simply stated, the United States is now substantially outperforming Europe. As the following statistics indicate, this has dramatic consequences for the economic well-being of citizens on both sides of the Atlantic.



#
Per capita economic output in the U.S. in 2003 was $39,700, almost 40 percent higher than the $28,700 average for EU-15 nations.[9] (See Chart 3.)
#
Over the past 10 years, the U.S. economy has grown at an average annual rate of 3.3 percent in real terms, 50 percent faster than the EU-15’s growth rate of 2.2 percent.[10] (See Chart 4.)
#
A report prepared for the European Commis­sion admitted that “since 1996 the average annual growth in EU [European Union] output per head has been 0.4 percentage points below that of the US. From holding its own, Europe is now losing ground.”[11]
#
The report also acknowledged that “labour pro­ductivity in the EU is on a trend growth path which is lower than that of the US. Over the period 1996–2003, the EU-15 productivity growth rate averaged 1.4%, as opposed to 2.2% recorded for the US.”[12]
#
“In the EU,” confesses another European Com­mission report, “there has been a steady decline of the average growth rate decade after decade and per-capita GDP has stagnated at about 70% of the US level since the early 1980s. The dis­parity between the EU and the US has been par­ticularly remarkable in recent years. For instance, over the period 1995 to 2001, the US economy accounted for over 60% of the cumu­lative expansion in world GDP, while the EU, with only a slightly smaller economy, contrib­uted less than 10%.”[13]
#
Americans enjoy more leisure than Europeans because they can afford to purchase labor and goods that reduce the amount of time spent working at home. According to one German study, “overall working time is very similar on both sides of the Atlantic. Americans spend more time on market work but Germans invest more in household production.” The report further notes that “these differences in the allo­cation of time can be explained by differences in the tax-wedge and wage differentials.”[14]



#
A comparative study by Timbro, a Swedish think tank, found that EU countries would rank with the very poorest American states in terms of liv­ing standards, roughly equal to Arkansas and Montana and only slightly ahead of West Vir­ginia and Mississippi, the two poorest states.[15]
#
In August 2006, unemployment in the European Union was 8.0 percent, including a 7.9 percent unemployment rate in the group of nations that use the euro. The U.S. unemployment rate in the same month was only 4.7 percent.[16]
#
Unemployment rates tell just part of the story because they measure only the number of unemployed compared to the number of those in the labor force. The size of the labor force is an equally important statistic. In the United States, more than 70 percent of the working-age population has a job, compared to less than 65 percent in the European Union.[17] (See Chart 5.)
#
Not only is the unemployment rate in the U.S. significantly lower than the EU-15 unemploy­ment rate, but there is also a stunning gap between the percentage of unemployed who have been without a job for more than 12 months—12.7 percent in the U.S. versus 42.6 percent in the EU-15.[18] (See Chart 6.)



According to an article in The American Enterprise, “Since the 1970s, America has created some 57 million new jobs, compared to just 4 million in Europe (with most of those in government).”[19]



#
The article also notes that “Europe’s best brains are leaving in droves. Some 400,000 E.U. sci­ence and technology graduates currently reside in the United States, and barely one in seven, according to a recent European Commission poll, intends to return”; that “European immi­gration to the United States jumped by some 16 percent during the 1990s”; and that “there are now half a million New York City residents who were born in Europe.”[20]
#
There are nearly 20 million unemployed in Europe, including nearly 20 percent of those who are under age 25.[21]
#
The European Commissioner for Economic and Monetary Affairs admitted, “The most pressing challenges that Europe currently faces are the lack of growth and new jobs, the grow­ing competitive pressures from an integrating world economy.… [T]he EU economy still lacks resilience.… Potential growth remains low at around 2%. Europe’s labour force is still grossly underutilised as witnessed by low employment rates as well as high and persistent unemployment.”[22]
#
A special competitiveness panel of the Euro­pean Commission acknowledged that “many young scientists continue to leave Europe on graduating, notably for the U.S. Too few of the brightest and best from elsewhere in the world choose to live and work in Europe.”[23]
#
Thanks in part to lower tax rates and the oppor­tunities created by an economy with less gov­ernment, “millions of Italians, Irish, Germans, and other Europeans have voted with their feet in favor of America’s balance between work and leisure, with no discernable flow in the oppo­site direction.”[24]
#
Thanks to higher levels of economic output and lower levels of taxation, Timbro found that the average person in the U.S. enjoys about $9,700 more yearly consumption than the average EU resident, a difference of 77 percent.[25] (See Chart 7.)
#
A study found that “American households…have far more domestic appliances, television sets, computers, telephones and cars than in most European countries.”[26]



*
Average total dwelling space in Europe is just under 1,000 square feet. In the U.S., it is 1,875 square feet for the average household and 1,200 square feet for poor households. Adjusting for household size, one finds that poor households in the United States have slightly more dwelling space than the average European household. The average poor American has more square footage of living space than does the average person living in London, Paris, Vienna, and Munich.[27]
*
British Prime Minister Tony Blair warned the European Parliament, “What type of social model is it that has 20 million unemployed in Europe? Productivity rates falling behind those of the USA? That, on any relative index of a modern economy—skills, R&D [research and development], patents, infor­mation technology, is going down, not up.”[28]
*
A study by Eurochambres esti­mated how long it would take Europe to catch up to America, assuming no more growth in the U.S. It would take Europe 18 years to reach U.S. income levels, 14 years to reach U.S. levels of productivity per employee, 24 years to reach U.S. levels of R&D investment, and 26 years to reach U.S. employment levels.[29]
*
According to German financial reporter Olaf Gersemann, “If labor productivity in Germany and the U.S. continue on the same path as from 1996 to 2003, per capita income in Germany will grow by only 44 percent by the time Amer­ican incomes double in 2026. Put differently, within a generation, Americans will enjoy twice the economic status that Germans do.”[30]
*
The Organisation for Economic Co-operation and Development (OECD) admits that Europe is lagging. As reported by The Wall Street Jour­nal, “GDP per capita in Germany, France and Italy is falling, relative to the U.S., to levels below those recorded in the 1970s…. ‘At cur­rent trends, with demographics the way they are, the average U.S. citizen will be twice as rich as a Frenchman or a German in 20 years,’ Jean-Philippe Cotis, chief economist at the OECD, told us.”[31]
*
In 1980, foreign direct investment in the United States totaled $127 billion, according to the Bureau of Economic Analysis. Today, it totals more than $1.7 trillion. In 1980, there was $90 billion of foreign portfolio investment (just counting holdings of government and pri­vate securities) in the United States. Today, there is more than $4.6 trillion.[32] Much of that money—capital that finances new invest­ment—comes from Europe and at least partly reflects the more market-oriented policy envi­ronment in the United States.
*
As noted by Jean-Claude Trichet, president of the European Central Bank (ECB), “When com­paring the euro area’s economic performance to the US, there is evidence of increasing dispari­ties in growth. Since the beginning of the 1990s, the gap in per capita income growth between the US and the euro area has continu­ously widened—by 0.8% on average per year during the 1990s, increasing to 1.3% per year from 2002 onward.”[33]
*
“Over a period of 20 years,” admits Trichet, “we have been the witnesses of a very significant structural change across the Atlantic. From the eighties to the first years of the twenty first century the growth of labour productivity per hour has been multiplied by more than two in the US when it has been divided by two in Europe. Overall in this respect the relative position of the US and of Europe has changed by a factor 4 to the detriment of Europe.”[34]
*
Women lag behind in Europe. Reporting on a study from the International Labor Organiza­tion, Newsweek noted that “women account for 45 percent of high-level decision makers in America, including legislators, senior officials and managers across all types of businesses. In the U.K., women hold 33 percent of those jobs. In Sweden—supposedly the very model of glo­bal gender equality—they hold 29 percent. Ger­many comes in at just under 27 percent, and Italian women hold a pathetic 18 percent of power jobs.… Europe is killing its women with kindness—enshrined, ironically, in cushy wel­fare policies that were created to help them.”[35]

These remarkable comparisons show Europe’s stagnation and are particularly embarrassing for EU politicians. With great fanfare in March 2000, EU officials committed themselves to the goal that, within 10 years, Europe would “become the most competitive and dynamic knowledge-based econ­omy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion.”[36] The Lisbon Strategy, as it is called, is a noble goal, but Europe has no chance of achieving this goal by 2010.

Indeed, Europe is falling farther behind the United States in terms of per capita economic out­put. As noted by the head of the European Central Bank, “since the launch in 2000 of the Lisbon strategy, the annual growth rate for the Euro area has averaged 1.8% per year (compared to 2.8% in the US), thus remaining behind its main competitor.”[37] Politicians in Europe sometimes act as if growth will magically materialize if they form another committee to discuss competitiveness, but others apparently understand what is happening: Only 29 percent of Europeans think the European Union will catch the U.S.[38]

What Is Wrong with Europe

Europe’s economy is weak because government is too big. Excessive levels of government spending result in the misallocation of labor and capital for unproductive uses. The taxes needed to finance these counterproductive outlays exacerbate the problem, particularly since many European gov­ernments impose high marginal tax rates on work, saving, investment, and entrepreneurship.

Chart 8 shows that government spending con­sumes nearly 50 percent of economic output in EU nations, compared to 36 percent of GDP in the United States. This is regrettable for Europe since academic research indicates that government spending has an adverse impact on economic per­formance, particularly when the public sector climbs above 20 percent–25 percent of GDP.[39]



Yet not all forms of government spending are created equal. Some types of outlays, especially government consumption and transfer spending, are particularly harmful to growth. Other outlays— such as those for defense, administration of justice, infrastructure, and education—impose less dam­age.[40] Europe is further disadvantaged because politicians spend more money on consumption and transfers. As shown in Chart 9, consumption outlays use up nearly 21 percent of GDP, compared to less than 16 percent in the United States. Simi­larly, transfers consume more than 15 percent of output in the European Union, compared to just 12 percent in the United States.



The tax side of the ledger is similarly dismal for Europe. Tax revenues consume more than 40 per­cent of GDP in European Union nations, compared to about 26 percent in the United States.[41] (See Chart 10.) Just as different types of government spending impose varying degrees of economic damage, the same principle applies for taxation.

Both theory and evidence confirm that taxes on income and profits are the most debilitating to eco­nomic performance, followed by payroll taxes. In both cases, European governments have generally made the wrong choices. Taxes on income and prof­its consume 14 percent of GDP in European Union nations compared to less than 12 percent in the United States. (See Chart 11.) The payroll tax gap is even larger, with such levies consuming almost 12 percent of GDP in Europe compared to less than 7 percent in the United States. (See Chart 12.)

While the overall tax burden is commonly calcu­lated by measuring tax revenues as a share of GDP, this is an imperfect measure. Its biggest shortcom­ing is that tax rates and tax revenue sometimes have an inverse relationship. If a nation has very high tax rates, taxpayers will have a much greater incentive to change their behavior in ways that reduce tax­able income. This Laffer Curve effect means that a nation collects very little revenue in absolute terms or as a share of GDP, even though the burden of taxation is very high. Ire­land and Germany illustrate this phe­nomenon. Germany has Europe’s highest corporate tax rate at 38 per­cent, yet corporate tax collections are only 1.3 percent of GDP. By contrast, Ireland’s 12.5 percent corporate rate generates revenues totaling 3.8 per­cent of GDP.[42]





Marginal tax rates are a better mea­sure of the tax burden because the dis­incentive effect of taxation is determined by the tax rate on incre­mental units of income. For instance, if taxpayers are allowed to earn $40,000 with no tax but then face a 100 percent tax rate on every dollar above that amount, they are highly unlikely to choose to earn more than $40,000 because the marginal tax rate on those additional dollars would be confiscatory. This extreme example highlights the importance of marginal tax rates, which is why the top tax rates on personal income and corporate income are good measures of whether a nation has a competitive tax regime. It is also important to compare the degree to which nations impose extra layers of taxation on income that is saved and invested, since the effective marginal tax rate on that income will be higher if governments are allowed to tax it more than one time. (For a discussion of the argument that Europe­ans are choosing leisure over work, see Appendix 2.)



While the United States enjoys a substantial advantage over Europe with regard to the aggregate tax burden, the advantage shrinks when one looks at marginal tax rates on personal income. The aver­age top tax rate in the European Union is nearly 50 percent, which is not that different from the 43 per­cent top tax rate (including the average of state income tax rates) in the United States. It is worth noting, though, that Americans can choose to live in states that do not impose income taxes, so the 35 percent federal tax rates is the mandatory maxi­mum, although the 2.9 percent Medicare payroll tax pushes the effective marginal tax rate higher.[43] Another interesting feature of the U.S. system is that the top tax rate is not imposed until income reaches more than $325,000. As Chart 13 illus­trates, the most punitive tax rates in Europe gener­ally are imposed once income reaches twice the average wage.



Irelandas a Role Model for Europe

By global standards, European nations enjoy comfortable living standards, but this is due largely to strong growth before the ex­pansion of the welfare state. Since then, economic perfor­mance has stagnated. Many of these nations now suffer from high unemployment and wide­spread pessimism about the fu­ture, but this does not mean that reform is hopeless. Even France and Germany, Europe’s least competitive economies, could restore economic growth by im­plementing the right policies.

The role model that they should follow is Ireland. Twenty years ago, Ireland was an economic basket case with double-digit unemployment and an anemic economy. This weak performance was caused partly by an oner­ous tax burden. The top tax rate on personal income in 1984 was 65 percent, the capital gains taxes reached a maximum of 60 percent, and the corporate tax rate was 50 percent.[44] Then poli­cymakers decided to reduce the burden of gov­ernment. Tax rates, especially on capital gains and corporate income, were slashed dramati­cally.[45] Today, the personal income tax rate is 42 percent, the capital gains tax rate is just 20 per­cent, and the corporate income tax rate is only 12.5 percent.



Supply-side tax cuts were matched by deep reductions in the burden of government spend­ing. As explained in a recent European Central Bank study:

The so-called “Programme for National Recovery” rested essentially on a deep-rooted expenditure reform. Almost the entire fiscal adjustment during Phase 1 was placed on the spending side, with primary expenditure falling by 12% of GDP over the seven-year period after 1982. In the second phase, public spending fell again by over 10% of GDP. For the total period since 1982, spending even came down by over 20% of GDP to around 35% of GDP in recent years.[46]

These aggressive free-market reforms yielded enormous benefits. The Irish economy has expe­rienced the strongest growth of all industrialized nations, expanding at an average of 7.7 percent annually during the 1990s.[47] In a remarkably short period of time, the “sick man of Europe” has become the “Celtic Tiger.” Unemployment has dropped dramatically, and investment has boomed.[48]

There is every reason to believe that other European nations would enjoy the same results if their politicians were to adopt similar reforms. The accompanying chart shows that free-market policies have led to a dramatic improvement in Irish living standards, whereas European nations that cling to statist policies are gradually losing ground to the United States.

The payroll tax is an area with a more significant American advantage. Payroll tax rates in the United States are 15.3 percent, and the rate falls to 2.9 per­cent as income climbs above $94,200. In Europe, by contrast, payroll tax rates average more than 30 percent, and those punitive tax rates are often imposed on all income—a policy that undermines the tenuous link between taxes paid and benefits received. (See Chart 14.)

The corporate income tax is one area in which America clearly is at a competitive disadvantage. As shown in Chart 15, the United States has an extraordinarily high corporate tax rate, particularly compared to the average 30 percent tax rate in Europe. The federal rate is 35 percent, and state tax rates (which generally cannot be avoided since states tax corporate income using formulas based on characteristics such as sales or assets) push the total tax rate closer to 40 percent. Moreover, the United States is one of the few nations that impose an additional layer of tax on companies that com­pete in global markets. As indicated in Chart 15, a handful of other nations impose “worldwide taxa­tion,” but U.S. rules are the most onerous.

Like many other nations, the United States imposes double taxation on some forms of income. For instance, income from equity investment is rou­tinely subjected to extra layers of tax. Income is first taxed at the corporate level, as discussed above. If the after-tax income is invested in the company, the increase in the company’s value is taxed by the capi­tal gains tax. If the after-tax income is distributed to shareholders, it is subject to the dividend tax. The good news is that Bush tax cuts reduced the double taxation of both dividends and capital gains to 15 percent. However, even with that much-needed reform, America still suffers from a competitive dis­advantage. (See Chart 16.)



Finally, the United States imposes a much smaller tax burden on con­sumption. European Union nations are required to levy a value-added tax (a comprehensive form of national sales tax) of at least 15 percent, and the average tax rate is 19.8 percent. The United States has no equivalent tax. Sales taxes exist in 45 states, but the rates average 5 percent, and these levies are usually imposed on a rather narrow base, leaving substantial shares of consumption untaxed. (See Chart 17.)

The Role of Other Policy Choices

Fiscal policy is one of many factors that affect economic performance. Trade, regulatory, monetary, environ­mental, and labor policies are just a few of the other factors that deter­mine competitiveness. As discussed, Europe suffers from slow growth, and most European nations have large public sectors. Could these fac­tors be unrelated? Is it possible that Europe’s stagnation is the result of non-fiscal policy choices?

Certainly, fiscal policy is just one of the factors that determine economic performance, and some evidence sug­gests that some European nations are suffering from excessive government intervention. Yet the relevant question is whether non-fiscal policy mistakes are responsible for the gap between Europe and the United States. The answer almost surely is no. According to the Index of Economic Freedom, every EU country is at least somewhat market-ori­ented, earning a ranking of either “free” or “mostly free.” If the fiscal policy variables are removed from the equation, one-third of the EU-15 nations actu­ally have more economic freedom than the United States.[49] (See Chart 18.)



The biggest non-fiscal policy impediment to European competitiveness is probably labor reg­ulation. Chart 19 shows that the burden of labor regulation is particularly severe in Europe. By contrast, European nations tend to be more laissez-faire in their approach to business regulation. (See Chart 19.)

Excessive regulation is partly responsible for Europe’s anemic economic performance, but even the nations with relatively market-oriented regula­tory systems enjoy less prosperity than the United States. (For a discussion of the deficiencies of the “Scandinavian model,” see Appendix 1.) High taxes and burdensome spending surely explain much of the gap between the United States and Europe. As the next section explains, big government and eco­nomic vibrancy are incompatible.



Learning from Europe’s Decline

The United States can learn much from Europe. First and foremost, Europe serves as a warning about the consequences of big government. If American politicians allow the welfare state to expand, economic performance will suffer. Since demographic pressures and misguided policies have put America on a path toward much bigger government, this is a particularly timely warning. Simply stated, a French-size government will mean French-style stagnation.



A larger government would have a debilitating impact on American competitiveness. Research clearly demonstrates that America’s advantage is due to a smaller burden of government. According to Nobel Laureate Edward Prescott:

Americans now work 50 percent more than do the Germans, French, and Italians. This was not the case in the early 1970s when the Western Europeans worked more than the Americans…when European and U.S. tax rates were comparable, [and] European and U.S. labor supplies were roughly equal.… [V]irtually all the large differences in the U.S. labor supply and those of Germany and France are due to differences in tax systems.[50]

Prescott also explains that “low labor supplies in Germany, France, and Italy are due to high tax rates. In these countries if someone works more and produces 100 additional euros of output, that individual gets to consume only 40 euros of addi­tional consumption and pays directly or indirectly 60 euros in taxes.”[51] Needless to say, there is every reason to think that onerous taxes in the United States would have a similar impact on employ­ment levels.



European scholars reach similar conclusions. As a study published by the European Central Bank noted:

It is a well established conclusion, supported by both theory and empirical work, that, once a tax administration is in place, the marginal cost of tax revenue is generally higher than the average cost, and that marginal costs can in­crease rapidly.… [T]he true cost to the econ­omy of the marginal dollar collected in taxes can significantly exceed the dollar received by the government.… Each addi­tional dollar of spending, re­quiring an additional dollar of revenue, will impose addi­tional and rising marginal costs on the economy unless that dollar comes from reducing some other spending.[52]

OECD economists have also found that high tax rates impose serious damage. A 1997 study found that “the increase in the average (weighted) tax rate of about 10 percentage points over the past 35 years may have reduced OECD annual growth rates by about ½ percentage point.”[53] According to a 2001 study, “The over­all tax burden is found to have a neg­ative impact on output per capita. Furthermore, controlling for the over­all tax burden, there is an additional negative effect coming from an exten­sive reliance of direct taxes.”[54]

The adverse impact is not just the result of high taxes. An ECB study explains the negative impact of excessive spending:

The best overall fit would probably be an inverted U that has its maximum somewhere in the low 30 percent of GDP expenditure range. Indeed, there is illustrative evidence of a negative relation between rising public expenditure and economic growth from about this range, as we get a correlation coefficient of –0.56 when we correlate public spending-to-GDP ratios against real GDP growth for all countries with public spending above 30 percent of GDP.[55]



Another ECB study found specifically that government spending undermines economic growth:

The illustration of the growth-spending dynamics in the very long run shows a strong correlation between total spending increases and growth declines. The same applies for a similar plot of gross fixed cap­ital formation (one of the main growth de­terminants) and public spending ratios in the 1990s, i.e. in the medium term. Econ­omy-wide capital formation is strongly and negatively correlated with total gov­ernment expenditure.[56]

Not surprisingly, ECB researchers have also dis­covered that economies perform better when the burden of government shrinks:

Ambitious reform episodes appear to co­incide with more lasting fiscal consolida­tion…while also yielding an important “tax cut dividend”. Ambitious reformers also experience a considerably more favourable growth performance.[57]

Interestingly, even the European Commission seems to recognize the importance of smaller gov­ernment. In a 2003 study, the Commission stated that “budgetary consolidation has a positive impact on output in the medium run if it takes place in the form of expenditure retrenchment rather than tax increases.”[58] Moreover, “Fiscal adjustments based on expenditure cuts rather than tax increases have expansionary effects.”[59]

OECD economists concur. According to research published in 2001:

Taxes and government expenditures affect growth both directly and indirectly through investment. An increase of about one percentage point in the tax pressure—e.g. two-thirds of what was observed over the past decade in the OECD sample—could be associated with a direct reduction of about 0.3 per cent in output per capita. If the investment effect is taken into account, the overall reduction would be about 0.6– 0.7 per cent.[60]

Reform or Stagnation?

Globalization makes good economic policy much more important because it is increasingly easy for jobs and investment to migrate from high-tax nations to low-tax nations. This is a critical challenge for many EU nations. They already are being pressured because capital and labor (“brain drain”) are shifting to the United States, and now they also must worry about reformist nations in Europe, including Ireland in Western Europe and Estonia and Slovakia in Central Europe.

Jurisdictional competition increases the penalty for bad policy, but globalization also increases the rewards for good policy. If the politicians in Europe’s stagnant welfare states choose reform, their nations can experience an economic renaissance.

Ironically, rather than reform, some of Europe’s politicians are fighting globalization. Working through international bureaucracies such as the European Commission,[61] the OECD,[62] and the United Nations,[63] these politicians are advocating tax harmonization policies to hinder the flow of jobs and capital from high-tax nations to low-tax jurisdictions.

In effect, these misguided proposals would ex­port Europe’s uncompetitive fiscal policy to the rest of the world. Tax competition benefits the global economy—a process that should be cele­brated rather than persecuted. Indeed, even though the OECD has been leading a campaign for tax harmonization, its economists have ad­mitted that “the ability to choose the location of economic activity offsets shortcomings in gov­ernment budgeting processes, limiting a ten­dency to spend and tax excessively.”[64] An ECB study likewise warns:

The importance of the efficient use of public resources and high-quality fiscal policies for economic growth and stability and for individual well-being has been brought to the forefront by a number of developments over the past decades.… Globalisation makes capital and taxpayers more mobile and exerts pressure on governments’ revenue base.[65]

Several Nobel Prize winners have commented specifically on tax competition. For example:

*
James Buchanan has pointed out that “the intergovernmental competition that a genu­inely federal structure offers may be constitu­tionally ‘efficient’” and that “tax competition among separate units…is an objective to be sought in its own right.”[66]
*
According to Milton Friedman, “Competition among national governments in the public ser­vices they provide and in the taxes they impose is every bit as productive as competition among individuals or enterprises in the goods and ser­vices they offer for sale and the prices at which they offer them.”[67]
*
Gary Becker has observed that “competition among nations tends to produce a race to the top rather than to the bottom by limiting the ability of powerful and voracious groups and politicians in each nation to impose their will at the expense of the interests of the vast majority of their populations.”[68]

Conclusion

Europe is stagnant and is losing its ability to com­pete in the global economy. Crippling levels of gov­ernment taxes and spending have undermined the economic prospects of its major economies. More­over, demographic trends suggest that the burden of government will become even more onerous in the future, although there is some hope that tax compe­tition will force the necessary reductions in the size of the public sector. (See Appendix 3.)

The United States is in a much stronger eco­nomic position, largely because its burden of gov­ernment is significantly smaller. America also has a modest advantage over some European nations because the burden of regulation is less onerous. Yet the key difference between the United States and Europe is the size of government, and it shows that big government imposes a heavy economic cost. Since the burden of government is smaller in the U.S., Americans enjoy more prosperity.

The demographic forces pushing Europe in the wrong direction also exist in America. The retire­ment of the baby-boom generation threatens to increase the share of economic output that is con­sumed by federal spending substantially, and recent decisions to expand entitlement programs have made a bad situation even worse. Left on autopilot, federal spending will climb from 21 per­cent of GDP to at least 37 percent of GDP. More­over, even these dismal projections tell only part of the story because they exclude state and local gov­ernment spending (currently 11 percent of GDP) and naively assume that the growing burden of government will not adversely affect GDP growth.

If the United States is saddled with a French-sized government, it will inevitably suffer from French-style economic stagnation. This means higher unemployment, lower living standards, and a loss of upward mobility. The economic mal­aise in Europe is tragic, but the dark cloud could have a silver lining if policymakers learn the right lesson and protect Americans from that fate by reducing the burden of government—both today and in the future.

Daniel J. Mitchell, Ph.D., is McKenna Senior Research Fellow in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

Appendix 1
Scandinavia Is Not a Role Model

Some argue that inefficient government, not big government, is the problem. Proponents of this view frequently cite the “Scandinavian model,”[69] which they claim combines both efficiency and equity.[70] Scandinavian nations certainly are among the world’s richest nations, but the relevant question is how they became rich and whether the welfare state aids or hinders their economic performance.

Scandinavian nations generally enjoy considerable economic freedom. According to the Index of Eco­nomic Freedom, Scandinavian EU members rank 8th (Denmark), 13th (Finland), and 20th (Sweden) in the world. Non-EU Scandinavian nations rank 5th (Iceland) and 31st (Norway).[71] In other words, Scan­dinavian nations are market-oriented. With the exception of fiscal policy, they score high. So it is hardly surprising that they are among the world’s wealthiest nations.

Yet how would they rank if there were no welfare state? Almost surely, the expansion of government in the 1960s and 1970s exacted a high price. As noted by a Belgian think tank:

In 1970, Sweden’s level of prosperity was one quarter above Belgium’s. By 2003 Sweden had fallen to 14th place from 5th in the prosperity index, two places behind Belgium. According to OECD figures, Denmark was the 3rd most prosperous economy in the world in 1970, immediately behind Switzerland and the United States. In 2003, Denmark was 7th. Finland did badly as well. From 1989 to 2003, while Ireland rose from 21st to 4th place, Finland fell from 9th to 15th place.[72]

Sweden is often cited as the main role model, but Swedish economists are not so sanguine. The direc­tor of Timbro warns:

There are nine million people in Sweden, and some 1.5 million people of working age don’t go to a job. The unofficial total unemployment is some 20 percent. In the EU-15 between 1995 and 2003, employment grew more in 11 EU countries than in Sweden. In 2004, according to UNCTAD [the United Nations Conference on Trade and Development], only 12 countries out of 183 in the survey had a net outflow of investments—the basis for any job creation—and one of them was Sweden.[73]

The Swedes still enjoy high living standards, but this is largely because of rapid growth before imple­mentation of the welfare state. As one examination of the Scandinavian model noted:

Between 1890–1950, [Sweden] had one of the highest growth rates in the world, with an aver­age tax burden (taxes collected as a percentage of gross domestic product) of 10–20%. This period explains much of today’s wealth. Of Sweden’s 50 largest companies, only one was started after 1970. That’s no big surprise as by 1980, the average tax burden had reached 50% (where it remains today) while the labor market became highly regulated and the size of the welfare state reached epic proportions. Sweden would pay dearly for these follies. According to the OECD, the country’s per capita GDP ranking slid from fourth place in 1970 to 13th place today. Offi­cially, unemployment hovers around 6% but once all those on sick-leave, early retirement or otherwise subsisting on state aid are included, the figure balloons to around 20%. Between 1995–2003, 11 of the EU-15 countries saw greater employment growth than Sweden.[74]

Even Denmark, the most market-oriented Scandinavian nation, is lagging. “In 1970, in terms of GDP per head,” according to the same source, “Denmark was the world’s third richest country, surpassed only by the U.S. and Switzerland. In 2003—after more than 30 years of expanding welfare statism—Denmark dropped to seventh.”[75]

Interestingly, even the Scandinavians understand that government has become too big. With the excep­tion of Norway, which uses oil revenues to finance much of its welfare state, the burden of government has been reduced substantially. To be sure, the reductions started from very high levels, and the welfare state is still very large, but the trend is in the right direction. An ECB study reported the following about the Swedish and Finnish experiences:

The [Swedish] public expenditure ratio had increased to a staggering 73% of GDP in 1993 while deficits exceeded 10% of GDP and public debt had risen rapidly to over 70% of GDP.

Fiscal reforms started in earnest after 1993 when the government passed three successive “con­solidation packages”. The strategy proved successful due to discretionary measures that com­bined revenue-enhancing tax increases with substantial reductions of public expenditure by almost 16 percentage points in the course of seven years. As fiscal balances improved and turned into surpluses, public debt also started coming down rapidly….

Finland started its reforms in a very difficult economic and fiscal environment. Following the end of the late 1980s bubble-economy and the disruption of trade with the Soviet Union, the country experienced a severe economic slump, which lasted from 1990 to mid-1993. GDP fell by almost 15% and unemployment rose to 19%. On the back of rising welfare spending and falling revenue, the spending ratio had reached nearly 65% of GDP and the deficit exceeded 7% while bailout costs for the banking sector further accelerated the increase in the public debt ratio.

In these circumstances, Finland undertook an ambitious expenditure reform program…. Primary spending growth of the central government was brought under control and was reduced successively. This resulted in a restrictive fiscal stance after 1994 when the measures started to bite fully. Total expenditure was reduced by 5% of GDP in the course of 2 years and by 15% of GDP to 49% of GDP over seven years. In the same time span, the fiscal balance improved by 14% of GDP to a surplus of 7% (including extraordinary revenue of 2% of GDP in that year). With fiscal consolidation and reviving growth, public debt also started declining rapidly towards the end of the 1990s.[76]

The Scandinavian model is hardly a route for prosperity. Even though these nations generally rely on free markets in most sectors, high tax rates and excessive government gradually reduce competitiveness. Scandinavian governments have sought to reduce the burden of government, but the reforms are just a small step on a long journey. Other nations would be well advised to avoid the mistakes that Scandina­vians are now trying to undo.

The Swedes, at least, seem to understand this lesson. In the September election, voters rejected the incumbent government, giving the Social Democrats their lowest share of the vote since 1914. High unemployment and stagnant living standards were key issues.[77]

Appendix 2
Is Europe Choosing Leisure?

Is it possible that high taxes and spending are not harming Europe and that lower levels of economic output merely represent cumulative voluntary decisions to choose higher levels of leisure? This is not a preposterous assertion. After all, very few people choose to maximize their income, preferring instead to enjoy weekends, vacations, and workweeks of about 40 hours.

However, this does not appear to be the case in Europe. As the president of the European Central Bank recently remarked:

Lower participation rates are not necessarily solely associated with personal preferences, but are also triggered by the legal and regulatory environment, tax systems and social institutions. Benefit systems that are too generous discourage job search, early retirement schemes encourage early withdrawal from the labour market—employment rates for older workers aged 55–64 stood at just 40.2% in the euro area in 2005 and, according to the OECD, at around 60% in the U.S.—and marginal tax rates that are too high discourage labour market entry and have a downward effect on average hours worked.[78]

An OECD study also threw cold water on the assertion that Europeans have freely chosen to work less:

[T]he leisure time enjoyed by individuals is obviously important for any evaluation of well-being, and workers’ choices on how to allocate their time have a direct bearing on cross-country comparisons of economic aggregates.… [A]s European workers worked more than their US counterparts up to the late 1960s, it is difficult to invoke long-standing cultural differences to explain current labour-utilisation patterns. A different explanation focuses on the role of policies and institutions, which may both depress and boost working hours.… [R]elatively low hours worked per person in Europe can be fully explained by policy distortions arising from high mar­ginal taxes on labour.[79]

The claim that Europeans enjoy more leisure is also a bit of a myth. The workweek is composed not only of hours in paid employment, but also of time spent in household production. A German study explains that Americans enjoy the same leisure as Germans:

…In principle, households can choose between gainful employment and the purchase of goods and services in the market on the one hand, and self-provision of these goods and services via household production on the other. The choice of products to be purchased in markets and goods to be provided via household production will be influenced by the relative costs of these two alter­natives. In general, market provision will be preferred to household production if the productivity differentials between these two modes of provision are high and/or if the differentials between the individual’s own wage and the wage of the professional are high and the wedge is small.

…[I]ncome taxes and sales taxes (valued-added tax in Germany) are higher in Germany, creating a bigger tax-wedge there than in the US. For this reason, it may be more attractive for German households to provide certain services themselves (“in-house”) rather than to purchase them in the market, whereas it may be better for Americans to purchase services in the market and work longer hours in gainful employment. In other words, more services should be produced in markets in the US, whereas similar services should be provided in household production in Germany.

According to the division of labor hypothesis, both time spent in gainful employment and time spent in household production should be taken into account when evaluating differences in work­ing hours between the US and Germany. This measure provides a very different picture of hours worked in the two economies.… [O]n average Americans and Germans spend roughly the same hours working, but Americans spend more time in market work while Germans spend more hours in household production. Americans do not work longer hours than Germans overall, but they allocate a larger share of working time to gainful employment and invest less in self-provision.

This analysis of time-use data in the US and in Germany has shown that the opportunity costs of time have a significant influence on the time-allocation for women. A lower wedge and a wider wage dispersion makes market work more attractive and this may actually be the key variable explaining transatlantic differences in time-use. In addition, women are represented a much higher share among the high-wage earners in the US than in Germany, that is that for relatively more women the decision will be made in favor of market work and market provision rather than housework and self-provision in the US.[80]

A study from the Boston Federal Reserve confirms that high income levels enable Americans to enjoy more leisure, even though the time spent in paid employment has not declined:

[L]eisure time—measured in a variety of ways—has increased significantly in the United States between 1965 and 2003.

[L]eisure has increased by 7.9 hours per week on average for men and by 6.0 hours for women between 1965 and 2003.… [T]he decline in total work (the sum of total market work and total non-market work) was nearly identical for the men and women (7.9 and 7.7 hours per week, respectively). These increases in leisure are extremely large. In 1965, the average man spent 61 hours per week and the average women spent 54 hours per week in total market and non-mar­ket work. The increase in weekly leisure we document between 1965 and 2003 represents 11 to 13 percent of the average total work week in 1965.

…Men increased their leisure by allocating less time to the market sector, whereas leisure time for women increased simultaneously with time spent in market labor. This increased leisure for women was made possible by a decline in the time women allocated to home production of roughly 11 hours per week between 1965 and 2003. This more than offset women’s 5-hours-per-week increase in market labor.[81]

Individuals should be free to choose the amount of labor or leisure that maximizes their happiness. When tax rates penalize paid employment, they simultaneously reduce hours in the work force and increase time spent in household production, especially since people with less income cannot afford to pay others to provide those services. Europe is not choosing leisure. Instead, high tax rates and an exces­sive burden of government combine to push workers into suboptimal choices.

Appendix 3
A More Dismal Future for Europe…and Maybe for America

Europe is suffering from excessive government. Cross-country comparisons illustrate that both taxes and spending harm economic performance. This should lead policymakers to reduce the burden of gov­ernment, but there are reasons to think that the problem will get worse before it gets better. Because of demographic changes, it is likely that the public sector will consume even more of Europe’s economic output in the future. Without reforms, the United States will suffer the same fate. The following sobering statistics come from a report published by the Center for Strategic and International Studies:

*
Life expectancy has increased more in the past 50 years than it did in the previous 5,000 years.
*
The share of the population in the developed world over age 65 will jump from 16 percent today to 27 percent in 2050—over 35 percent in Italy.
*
The number of beneficiaries is growing 14 times faster than the number of workers in the devel­oped world.
*
By 2050, most G-7 nations will have fewer than two workers per retiree. (See Chart 20.)
*
Europe’s work force will decline by 9 percent by 2030.
*
Social insurance taxes already consume 30 percent of wages in Europe—40 percent in Ger­many, France, and Italy.
*
To fulfill existing commitments, spending on government pen­sions will need to rise by 4.4 per­cent of GDP by 2050—7.0 percent according to private pro­jections.
*
Government health care spend­ing for the elderly will add another 2.5 percent of GDP to the burden—5.5 percent according to private estimates. Other health care outlays worsen the outlook.[82]



Other institutions have reached similar conclusions. The OECD projects that government retirement benefits will exceed 16 percent of GDP in Germany, France, and Italy by 2030. Unfunded pension liabili­ties in Germany already exceed 100 percent of GDP. Bad as that is, France and Italy are in worse shape with unfunded pension liabilities exceeding 200 percent of GDP. In most EU countries, the implicit debt of unfunded pension programs is two or three times greater than the explicit national debt.[83]

The European Commission’s Kok Report estimates that the “age-dependency ratio” in the European Union will climb from 26 percent to 49 percent, which means that there will be two working-age people for every old person rather than four working-age people for every old person. “[T]he average ratio of persons in retirement compared with those of the present working age in Europe will double from 24% today to almost 50% in 2050.”[84] In addition:

[T]he pure impact of ageing populations will be to reduce the potential growth rate of the EU from the present rate of 2–2.25% to around 1.25% by 2040. The cumulative impact of such a decline would be a GDP per head some 20% lower than could otherwise be expected. Already from 2015, potential economic growth will fall to around 1.5% if the present use of the labour potential remains unchanged. This same ageing will result in an increase in pension and health­care spending by 2050, varying between 4 and 8% of GDP.[85]

These estimates, moreover, may be too optimistic. The Kok Report assumes that the total employment rate in Europe will jump from 63 percent to 70 percent. Even less plausibly, it also assumes that the employment rate of older workers will jump from 40 percent to 59 percent. In addition, it predicts that potential growth between 2031 and 2050 will be 1.3 percent yearly, although this may be too optimistic. Likewise, the prediction that government spending will climb by only 4 percentage points of GDP may be too sanguine. As another study prepared by the European Commission acknowledged:

Europe’s population will be slightly smaller, and significantly older, in 2050. Fertility rates in all countries are projected to remain well below the natural replacement rate. Life expectancy at birth, having risen by some 8 years since 1960, is projected to rise by a further 6 years in the next five decades.… Starting already from 2010, the working-age population (15 to 64) is pro­jected to fall by 48 million (or 16%) by 2050. In contrast, the elderly population aged 65+ will rise sharply, by 58 million (or 77%) by 2050. The old-age dependency ratio, that is the number of people aged 65 years and above relative to those between 15 and 64, is projected to double, reaching 51% in 2050. Europe will go from having four people of working age for every elderly citizen currently to a ratio of two to one by 2050.[86]

The same report also admits that:

Overall, ageing populations is projected to lead to increases in public spending in most Member States by 2050 on the basis of current policies…. [F]or the EU15 and the Euro area as a whole, public spending is projected to increase by about 4 percentage points between 2004 and 2050…. [M]ost of the projected increase in public spending will be on pensions, health care and long-term care. Potential offsetting savings in terms of public spending on education and unem­ployment benefits are likely to be limited…. [T]he largest increases in spending are projected to take place between 2020 and 2040.[87]


[size=75][1] Office of Management and Budget, Historical Tables, Budget of the United States Government, Fiscal Year 2007 (Washington, D.C.: U.S. Government Printing Office, 2006), pp. 23–24, Table 1.2, at www.whitehouse.gov/omb/budget/fy2007/pdf/hist.pdf (July 19, 2006).

[2] Congressional Budget Office, “The Long-Term Budget Outlook,” December 2005, p. 12, at www.cbo.gov/ftpdocs/69xx/doc6982/12-15- ... utlook.pdf (July 19, 2006).

[3] Office of Management and Budget, Historical Tables, pp. 312–313, Table 15.3.

[4] Organisation for Economic Co-operation and Development, OECD in Figures, 2005, at http://213.253.134.29/oecd/pdfs/browseit/0105061E.pdf (July 19, 2006).

[5] Unless stated otherwise, references to Europe, Western Europe, and the European Union refer to the EU-15: the 15 nations (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, and the United Kingdom) that comprised the European Union before it expanded. The 10 new member nations (Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia) are not included in statistical comparisons because in most cases they are still recovering from decades of Communist enslavement, and their inclusion would unfairly depress European economic statistics.

[6] Angus Maddison, The World Economy: A Millennial Perspective (Paris: Organisation for Economic Co-operation and Devel­opment, 2001).

[7] A well-established economic theory suggests that living standards will generally converge over time in nations with different levels of income. This assumes, of course, that various nations have similar institutions and policies. For more information, see Nick Vanston, “Summary of a Workshop on Global Convergence Scenarios: Structural and Policy Issues,” Organisation for Economic Co-operation and Development, Economics Department Working Paper No. 483, May 12, 2006, at www.olis.oecd.org/olis/2006doc.nsf/
43bb6130e5e86e5fc12569fa005d004c/
b13adab5b356167bc125717000540aa5/$FILE/JT03208866.pdf (July 19, 2006).

[8] While fiscal policy is the major policy difference between the U.S. and Europe, the U.S. has an advantage in a few other areas such as labor regulation.

[9] Organisation for Economic Co-operation and Development, OECD in Figures, 2005, pp. 12–13.

[10]I bid., pp. 14–15.

[11] European Commission, “Facing the Challenge: The Lisbon Strategy for Growth and Employment,” November 2004, p. 14, at http://ec.europa.eu/growthandjobs/pdf/kok_report_en.pdf (September 29, 2006). Also known as the “Kok Report.”

[12]I bid.

[13] Independent High-Level Study Group, An Agenda for a Growing Europe: Making the EU Economic System Deliver, European Com­mission, July 2003, at www.euractiv.com/ndbtext/innovation/sapirreport.pdf (July 19, 2006; unavailable September 26, 2006).

[14] Ronald Schettkat, “Differences in US–German Time-Allocation: Why Do Americans Work Longer Hours Than Germans?” Institute for the Study of Labor, Discussion Paper No. 697, January 2003, at ftp://repec.iza.org/RePEc/Discussionpaper/dp697.pdf (July 19, 2006).

[15] Fredrick Bergström and Robert Gidehag, “EU vs. USA,” Timbro, June 2004, at www.timbro.com/euvsusa/pdf/EU_vs_USA_English.pdf (July 20, 2006).

[16] News release, “Euro Area Unemployment Up to 7.9%,” Eurostat, October 3, 2006, at www.epp.eurostat.ec.europa.eu/pls/portal/docs/PAGE/
PGP_PRD_CAT_PREREL/PGE_CAT_PREREL_YEAR_2006
/PGE_CAT_PREREL_
YEAR_2006_MONTH_10/3-03102006-EN-AP.pdf (October 3, 2006).

[17] Organisation for Economic Co-operation and Development, OECD Factbook 2005 (Paris: Organisation for Economic Co-operation and Development, 2005).

[18] Organisation for Economic Co-operation and Development, OECD in Figures, 2005.

[19] Joel Kotkin, “America Still Beckons,” The American Enterprise, October–December 2005, at http://taemag.com/printVersion/
print_article.asp?articleID=18720 (July 20, 2006).

[20] Ibid.

[21] Eurochambres, “Social Europe in a Global Environment,” October 2005, at www.eurochambres.be/PDF/
pdf_position_2005/Social%20Europe%20Oct%202005.pdf (July 20, 2006).

[22] Joaquin Almunia, “Economic Governance: Addressing the Challenges,” speech at the European Economic and Social Com­mittee Plenary Meeting, Brussels, February 15, 2006, at http://europa.eu/rapid/
pressReleasesAction.do?reference=SPEECH/06/87 (July 20, 2006).

[23] European Commission, “Facing the Challenge,” p. 20.

[24] Irwin M. Stelzer, “European Holiday,” The Weekly Standard, September 16, 2003, at www.weeklystandard.com/Content/Public/
Articles/000/000/003/123ezraq.asp (July 20, 2006).

[25] Bergstrom and Gidehag, “EU vs. USA.”

[26]I bid.

[27] Robert E. Rector and Kirk A. Johnson, Ph.D., “Understanding Poverty in America,” Heritage Foundation Backgrounder No. 1713, January 5, 2004, at www.heritage.org/Research/Welfare/bg1713.cfm.

[28] Olaf Gersemann, “Europe’s Not Working,” The American Enterprise, October–December 2005, at http://taemag.com/printVersion/print_ar ... leID=18719 (July 20, 2006).

[29] Eurochambres, “A Business Assessment of the First National Reform Programmes,” Spring 2006, at www.eurochambres.be/PDF/pdf_Lisbon/
060123-NAPbusinessAssessment/Final%20Report.pdf (July 20, 2006).

[30] Gersemann, “Europe’s Not Working.”

[31] Editorial, “The European Disease,” The Wall Street Journal, February 8, 2006.

[32] Elena L. Nguyen, “The International Investment Position of the United States at Yearend 2004,” U.S. Department of Com­merce, Bureau of Economic Analysis Survey of Current Business, Vol. 85, No. 7 (July 2005), pp. 38–39, at www.bea.gov/bea/ARTICLES/2005/07July/0705_IIP_WEB.pdf (July 21, 2006).

[33] Jean-Claude Trichet, “Structural Reforms in Europe,” speech at OECD Forum, Paris, May 22, 2006, at www.ecb.int/press/key/date/2006/html/sp060522_1.en.html (July 21, 2006).

[34] Ibid.

[35] Rana Foroohar, “Myth & Reality,” Newsweek, February 27, 2006, at www.msnbc.msn.com/id/11435567/site/newsweek (July 21, 2006).

[36] European Council, “Presidency Conclusions,” March 23–24, 2000, at www.consilium.e