American Exceptionalism

14 October 2010 at 1:39 pm 8 comments

| Dick Langlois |

From a review by Andrei S. Markovits of Peter Baldwin, The Narcissism of Minor Differences: How America and Europe Are Alike — An Essay in Numbers:

Baldwin commences his data-rich book with the economy, where he demonstrates convincingly that the stereotype of America’s being ruled by an unfettered free market with minimal state intervention and low taxes, while Europe is controlled by the dirigiste étatism of faceless bureaucrats who stifle all market initiatives with high taxes and cumbersome regulations, is totally erroneous. Indeed, Baldwin musters impressive data that a) taxes on income and profits are lower in ten European countries than they are in the United States, b) America’s income tax progressivity hovers in the middle among European states, c) its taxation of the wealthy far exceeds those in any European country, and d) its property taxes are only surpassed by those of Luxembourg, France, and the United Kingdom.

The U.S. is in the middle of the pack in almost all other statistical categories as well. The book is a tour de force, says the reviewer, but it will have no impact, since the idea — or, rather, multiple formulations of the idea — that the U.S. and Europe are fundamentally different is so strongly entrenched on both sides of the political spectrum on both sides of the Atlantic.

Entry filed under: - Langlois -, Myths and Realities, Public Policy / Political Economy. Tags: .

Diamond-Dybvig (1983) and the Financial Crisis Econometrics Quote of the Day

8 Comments Add your own

  • 1. US not the paradigm of laissez faire at Catallaxy Files  |  14 October 2010 at 4:25 pm

    [...] the rampant free market and Europe demonstrates the triumph of democratic socialism. There is an important corrective in the literature. The U.S. is in the middle of the pack in almost all other statistical categories [...]

  • 2. srp  |  14 October 2010 at 8:18 pm

    Up until our recent economic unpleasantness and the responses to it I would have disagreed with this book’s thesis. (Current policy moves us more in a European direction.) The issue is regulation and state intervention, not taxes and spending per se.

    Try to do any important business in France without due regard for the interests and policies of the state and you will find out the difference–ask any of the entrepreneurs who move from France to the US, or people who have taught MBAs in France. These are places where even discounts on books are illegal, to take one of a zillion examples that this type of budgets-and-taxes analysis completely misses.

    Things are probably less regulated in Scandinavia and the UK, and I am constantly amazed at the routine regulatory idiocy in the US, but come on. There’s a reason why EMI launched the CAT scanner in the US and not its home market, why Carrefours has been more successful abroad than at home, and why the US exports coal to Europe. Non-market forces are simply a much more important part of the business environment in most European countries.

  • 3. Jon  |  15 October 2010 at 2:56 am

    This is a another quote from the review of the book, which I think is an important point, and which is often forgotten when people try to generalize about the US and Europe:

    “Baldwin demonstrates convincingly that on any one of these myriad dimensions, intra-European differences surpass those between the United States and a number of European countries. In other words, the gap between, say, Greece and Sweden or Finland and Ireland often exceeds any such divergences between the United States and each or any of these individual countries. As the book’s jacket notes so poignantly, “America is not Sweden, for sure. But nor is Italy Sweden, nor France, nor even Germany. And who says that Sweden is Europe? Anymore than Vermont is America?””

    There are huge differences within Europe, and the different countries have been able to develop all kinds of national idiosyncrasies. Regulation and state intervention is an important issue here, but equally important are perhaps differences in norms? Even between the Nordic countries, which are very similar (especially linguistically), there are subtle but important differences that have ruined business opportunities and prevented closer political integration.

    However, I in general I agree with srp that non-market forces probably are more important in Europe as a whole. In smaller, more homogenous countries, it is easier to agree on various kinds of non-market ways of coordinating activities. It can be more desirable as well, because national markets would be too small, and there may be externalities with national strategic importance, such as in the agricultural or cultural sector.

  • 4. Dick Langlois  |  15 October 2010 at 9:13 am

    Good comments. Actually, I agree with Steve: the real differences are generally regulatory not fiscal and thus less easy to spot. One egregious example showed up in the NYT this morning:

    http://www.nytimes.com/2010/10/15/world/europe/15greece.html

    This also puts a rather less positive spin on “non-market ways of coordinating activities” than Jon does.

    One could argue that, in the end, regualtory differences do show up in the bottom line: the GDP per capita of the EU as a whole or of countries big enough to be meaningfullly compared to the US is only about 75 per cent of the US in PPP terms. This is presumably why Sarkozy is so anxious to come up with an alternative measure that will make France’s policies look better.

  • 5. Anon  |  16 October 2010 at 4:11 pm

    As a foreigner to both America and Europe, I will say with confidence that the two are same. Their differences lie in trivial matters and thats unfortunately the only thing the populous sees.

  • 6. srp  |  18 October 2010 at 9:15 pm

    Dick:

    I see you found that amazing Greek pharmacy article yourself, which saved me the trouble of linking to it. It certainly dots the i on the point I was making. (BTW, manufacturers in California are pretty much in a completely hostile regulatory environment, so the intra-US variation is non-trivial, as Jon pointed out, but the variation across states seems to me much less than the difference between the US and the EU. Not sure how to measure that, though.).

  • [...] A clip from a review of Peter Baldwin’s, The Narcissism of Minor Differences: How America and Europe Are Alike. [...]

  • 8. woodworking projects  |  8 August 2011 at 4:58 pm

    That was a stupid comment.

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