Date created:6 August 2001 Last modified: 6 August 2001 Maintained by: John Quiggin John Quiggin
21 June 2001
Bubbles can be filled with all sorts of noxious gases and, when they burst, the resulting smell can be unpleasant. This point was illustrated by the bursting of the Japanese bubble of the 1980s, which was accompanied by a good deal of breastbeating about 'the Japan that can say no' and chauvinistic revisionism about World War II. In recent weeks, we have seen similar effluvia from the rapidly-deflating US economic bubble, notably in connection with the visit of President Bush to Europe.
As is usual with a new US Administration, there has been a good deal of tension between the United States and Europe. Indeed, trans-Atlantic verbal sniping has been going on ever since the Declaration of Independence. What is remarkable is the rancour with which American commentators have responded to European criticism of US policies on such issues as global warming, missile defence and the death penalty.
During the boom of the late 1990s, US commentary on Europe was characterized by a tone of complacent triumphalism, while European discussion of the US bordered on panic. Thomas Friedman's best selling book The Lexus and the Olive Tree exuded calm assurance that European social democracies would soon be forced to don the 'Golden Straightjacket' of deregulation, privatisation and US-style labour markets. On the other side of the Atlantic, Hans-Peter Martin and Harald Schumann in Global Trap made much the same predictions, but presented them as prophecies of doom.
American complacency was particularly evident in comments about the French, the only rivals of the United States in national hubris. The French decision to legislate for a 35-hour week was discussed as if it was a 20th century equivalent of the legendary attempt by King Canute to command the tides. The US consensus was that the policy would be a disaster, except that it was too impractical ever to be implemented.
All of this has changed in 2001. While European discussion of Bush has been condescending, even patronising, American commentators have been almost apoplectic. Charles Krauthammer (US foreign policy cut free at last, 12-6-2001) refers to the Europeans as having 'spent the best part of the last 500 years raping and pillaging vast swaths of the globe'. Michael Kelly, former editor of The New Republic, refers to the Europeans, having 'historically, been more at odds (and frequently at war) with each other' now united only by their fear of an America 'superior in economic, political, military and cultural terms'.
Krauthammer's bombastic style is not all that surprising. As a syndicated right-wing commentator, he is expected by his readers to adopt a vitriolic tone at all times and on all subjects. (This is also true in Australia. Why supposedly conservative advocates of traditional values like civility should place such a high market premium on vituperation is an unresolved puzzle).
Kelly is another matter. The New Republic is as mainstream and sophisticated as a US opinion journal can get. Until recently, its attitude to Europe has been very much that of Thomas Friedman. When its former editor resorts to smears about the European wars of the past, the US opinion elite is becoming seriously unsettled.
This change in tone may be explained by the fact that sentiment about national economic performance is closely attuned to the ten-year business cycle. Over the last decade, the US economic cycle has led that in Europe by two or three years. So while GDP per person in the US is already declining, the European business cycle is just beginning to turn down. France, in particular, has experienced strong growth and declining unemployment, much of which is officially attributed to the reduction in the working week.
In addition to timing differences, the amplitude of the current business cycle in the US has been very high. An exceptionally strong boom has been followed by a very rapid deceleration. The resulting shift from absurd optimisim to renewed pessimism has clearly soured many tempers.
A longer-term view may provide greater balance. The choice between European and US models of the mixed economy depends mainly on values and tastes. The US economy elicits high levels of effort from workers, and produces easily the highest level of output per person in the world. On the other hand, several European economies have overtaken the United States in terms of output per hour worked. The United States offers more chances to become seriously rich, but Europeans face less risk of becoming poor, and those who do fall into poverty have a greater chance of escaping it. These differences will persist long past the current cycle of boom and bust.
Professor John Quiggin is an Australian Research Council Senior Fellow based at the Australian National University and Queensland University of Technology. Professor John Quiggin is a Senior Research Fellow of the Australian Research Council, based at the Australian National University and Queensland University of Technology.Read more articles from John Quiggin's home page
