Reader Alex C sent a link to an article in the Guardian by Mark Weisbrot in which he surveys some recent findings aht disproved cherished myths about the US economy. Two are related to the widely-held fantasy that America is a land of dynamic entrepreneurship. In fact, a recent study found that the US ranks low among advanced economies in the proportion of people employed by smal businesses. The likely culprit? Lack of universal health care. But you won’t see that on the agenda of organizations like the right-leaning Kauffman foundation, whose mission is to promote entrepreneurship and innovation. And I must say from my own sample that most of the self-employed people I know did not have a career goal of starting a business, but out of necessity, due to job loss or being badly stymied at their employer and unable to land comparable new work.
A second element of the entrepreneurship myth is that the US is a land of economic mobility, that if you work hard and apply yourself, you can improve your economic standing considerable. Again, the US scores poorly in by international standards in economic mobility. The have-nots tend to remain have-nots.
In addition. the high level of US carbon production is due to a surprisingly significant degree to our lifestyle, working long hours to consume, rather than “consuming” more vacation as Europeans do.
From the Guardian:
The Great Recession is allowing some widely held beliefs about the US economy – which were the source of much evangelism over the last few decades – to run up against a reality check….
This month my CEPR colleagues John Schmitt and Nathan Lane showed that the United States is not the nation of small businesses that it is regularly dressed up to be for electoral campaign speeches and editorials. If we look at what percentage of our overall labour force is self-employed, or what percentage of manufacturing workers or high-tech workers are employed in small businesses – well, the US ranks at or near the bottom among high-income countries….
And as both the authors of the paper and Krugman note, there is a plausible explanation for the US’s low score in the small business contest: our lack of national health insurance. There are enough risks associated with choosing to start a business over being an employee, but the Europeans don’t have to worry that they will go bankrupt for lack of health insurance.
A number of other alleged advantages of America’s “economic dynamism” are also mythical. Most people think that there is more economic mobility in America than in Europe. Guess again. We’re also near the bottom of rich countries in this category, for example as measured by the percentage of low-income households that escape from this status each year.
The idea that the US is more “internationally competitive” has been without economic foundation for decades, as measured by the most obvious indicator: our trade deficit, which peaked at 6% of GDP in 2006. (It has fallen sharply from its peak during this recession but will rebound strongly when the economy recovers).
And of course the idea that our less regulated, more “market-friendly” financial system was more innovative and efficient – widely held by our leading experts and policy-makers such as Alan Greenspan, until recently – collapsed along with our $8tn housing bubble.
On the other hand, most Americans pay a high price for the institutional arrangements that bring us these mythical successes. We have the dubious honour of being the only “no-vacation nation”, ie no legally required paid time off and of course some weeks fewer actual days off per year than our European counterparts enjoy. We have a broken healthcare system that costs about twice as much per capita as that of our peer nations and delivers worse outcomes, as measured by life expectancy and infant mortality. We are near the top in terms of inequality among high-income countries and at the bottom for parental leave policies and paid sick days. The list is a long one…
There is another area where the comparison between the American and European model has serious implications for the future of the planet: climate change. “Old Europe” uses about half as much energy per capita as the US does. A big part of this difference is because Europeans, in recent decades, have taken much more of their productivity gains in the form of increased leisure time, rather than working the same (or longer) hours in order to consume more.
We estimated that the US would consume about 20% less energy if it had the work hours of the EU-15. This would have a significant impact on world carbon emissions. Furthermore, when the world economy recovers, there are a number of middle-income countries that will approach high-income status in the not-too-distant future (South Korea and Taiwan are already there). Whether they choose the American or the European model will have an even bigger impact on global climate change.
The major media in both Europe and the United States have played an important role, for decades, in helping politicians capitalise on economic mythology to push policy in economic and socially destructive directions on both sides of the Atlantic. It remains to be seen how much the Great Recession will influence the thinking and reporting of these influential institutions.