Is Europe Really More Equal?

Posted by: Michael Mandel on November 09

I like France. I’ve spent portions of my last two vacations there, (pictures available on request) and would happily go back there again, even with all the troubles.

But I never understood why so many people are so convinced that Europe in general, and France in particular, were more open societies, in terms of economic opportunity, than the U.S. Yes, I know all about studies of intergenerational mobility—I’ve even written about them. But it didn’t feel right to me. The U.S. still felt like a more open, economically mobile society.

I just came on a new paper, Unemployment in Europe: Some American Suggestions, by James K. Galbraith (son of JK Galbraith) that helps explain some of this for me.

Pay inequality in Europe today is notoriously of a different kind. Within individual European regions, it is highest where middle class jobs, usually associated with manufacturing industry and robust service employment at good wage rates, are scarce or absent. It is in Europe’s dualistic economies, with a handful of good jobs and many undesirable ones, that structural unemployment festers. These exist mainly on the European periphery, and of course very extensively among the accession countries. And an even larger source of overall inequality in Europe is between these regions and the rich regions of the European center. The notion of Europe as an egalitarian continent is an illusion, based on the fact that Europe’s statistics do not yet consider the continent as an integrated entity (as America’s do), and therefore overlook this source of inequality.

In other words, part of the problem is that the poor in France are competing against poor workers in other parts of Europe. His solution is more convergence.

It follows that an egalitarian growth policy–with directed measures to raise overall growth rates absolutely and relative growth rates in the poorer regions of Europe–would be the single most powerful medium-term measure for the reduction of European unemployment.

and he writes

Overall, however, income convergence of the poorer members of the EU has largely stopped. The new countries to the East are so far not enjoying the credit and service-employment expansion that has occurred in Spain. Getting convergence started again is first of all a matter of making this a declared priority of the Union. Europe needs income convergence targets more than it needs deficit targets or even growth targets.

Interesting stuff.

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