Were You Born on the Wrong Continent? How Europe builds
better products for better lives

What We Can Learn: An Excerpt from Were You Born on the
Wrong Continent? How Europe builds better products for
better lives.

By Thomas Geoghegan

In These Times

July 26, 2010

http://www.inthesetimes.com/article/6194/what_we_can_learn

Americans may believe the United States is set up for the
middle class, and Europe is set up for the bourgeois. Or
let's put it this way: America is a great place to buy kitty
litter at Wal-Mart and relatively cheap gas. But it is not
designed for me, a professional without a lot of money.
That's who Europe is for: people like me.

OK, as a union-side lawyer, Europe's really set up for
people like my clients, or those who used to be my clients
before the unions in America collapsed. Let's put my own
self-interest aside: Where would my clients, who are not
poor, who make $30,000 to $50,000 a year and yet keep coming
up short, maybe by $100, $200 a month, really be better off?

That's easy: Europe. I can answer that as their lawyer, the
way a doctor could answer about their health. The bottom
two- thirds of America would be better off in Europe. I mean
the people who have not had a raise (an hourly raise in real
dollars) in maybe 40 years, and who do not even have a
401(k), nothing but Social Security, and either have no
health insurance or pay deductibles of $2,000 or more. Sure,
they'd be better off in Europe. When unemployed, they'd
certainly be better off in Europe. Over there, even single
men can get on welfare. And in much of Europe, contrary to
what we hear, unemployment is much lower than over here.

One of the ways Europe is set up for the bourgeois -
including, perhaps, many readers of this magazine - is the
very fact that it is also set up for people who make $50,000
or below. Since it's set up for these people too, the
bourgeois - me, maybe you - get the political cover to have
it set up for them. What the people-in-the-unions get,
people-from-the- good-schools also get. (And indeed, in
Europe people-in-the- unions are often people-from-the-good-
schools.) They get the six weeks of vacation each year and
the pension like a golden parachute. And the higher up we
are in terms of income, the more valuable these things are.
In America, they don't tell us: Social democracy, or
socialism, or whatever Europe has, pays off biggest for
people in the upper middle class, those just below the top.
Public and private wealth.

Public and private wealth

Take Zurich and Chicago. One looks good and the other,
broken down. If America has such a famously high GDP per
capita and Chicago is one of America's crown jewels, maybe
there is something wrong with using GDP per capita as an
index of social well-being. It's not that the numbers "lie"
in any crude way, but past a certain point, maybe these
numbers mislead us as to where we're better off. For to look
at the numbers, who would guess that Zurich looks gloriously
like Zurich all over, and that Chicago looks glorious in
Lincoln Park, dumpy west of Pulaski Avenue, and gulag-like
by 26th and California? But forget the look of the place.
It's also the way of life.

The numbers say, on paper, I have a better way of life in
Chicago. But are these numbers right? It may be that, past a
certain level, an increase in GDP per capita pushes my
living standard down. I don't mean this in a spiritual sense
- I mean it in a cold, neutral, out-of-pocket sense.
Example: If I make more by working longer, I might
subcontract out more of my life and incur other "costs,"
like losing a trip to Zurich, which may be of far more value
than the extra income. Or another example: If I get a raise,
I might be worse off. I might widen the gap in income with
others around me. Who cares? Well, by doing this, I might be
spreading poverty, which, like everything, is relative. I
might make my public space more of a hellhole than before.

People at the libertarian Cato Institute love to scoff: "Oh,
our poor in America are so well off in GDP per capita." Go
ahead. Argue. I'll let you win. But I dare the Cato types,
when the argument is over, to go outside and walk around
some Chicago neighborhoods.

In other words, the further ahead we get, the more our
standard of living drops. Let's say, as a European, I work
1,500 hours a year. Now, let's put me at 1,800 or even 2,300
hours, like many Americans. While I've moved to higher GDP
per capita, I don't have:

* Six weeks off.

* A perfect cup of coffee to sip at some place other than
the office.

* A city to inhale like a bank of violets.

In 2005, the real hourly wage for production workers in
America was approximately 8 percent lower than it was in
1973, while our national output (productivity) per hour is
55 percent higher. So it's dubious whether most Americans
have gained even a penny in purchasing power since 1989. And
even skewed by all this U.S-type inequality, we understate
what Europeans at the "middling" level are able to get for
free, i.e., publicly provided goods like education,
healthcare, cities like banks of violets. Even apart from
the grotesque U.S. social inequality, the net purchasing
power disparity after we toss in the public goods is not so
great.

Or maybe I mean this: Europe has a kind of invisible GDP,
which we don't know how to count. The ambitious European who
might want to work 2,300 hours may be the luckiest to escape
his or her fate under the U.S. model. When that person has
700 more hours a year, to learn an extra language, to go to
Sri Lanka, or just to read, it's that high achiever who may
be best off under the European model.

It's no accident that the social democracies - Sweden,
France and Germany, who kept on paying high wages - now have
more industry than the United States or the UK. During the
'70s, '80s and '90s, the Anglo-Americans, the neoliberals,
The Economist crowd, and the press generally, would taunt
the social democrats in Europe: "You'd better break the
unions." That's the way to save your industry.

Indeed, that's what the United States and the UK did: They
smashed the unions, in the belief that they had to compete
on cost. The result? They quickly ended up wrecking their
industrial base. But Germany, Sweden and France ignored the
advice of the Anglo-Americans, the Financial Times elite,
the banking industry: Contrary to what they were told to do,
they did not wreck their unions.

And it was the high labor cost that pushed those countries
into making higher "value-added" things. Where is Germany
competitive? It's in high-end, precision machinery, made by
people with the highest skills. It's in engineering
services. People look at Germany and say, "What about the
German unemployment?" But no one in the United States ever
says, "What about the German labor shortages?"

Even in 2008, precisely because of "globalization," Germany
had a serious shortage of people able to fill high-skill,
high- paying jobs, especially engineers. In the United
States, engineers complain they can't find work; many of
them just end up in sales. In the union-free, lower-cost
United States, we don't create the kind of jobs engineers
can do. Germany's problem? It has too many such jobs. It's
our whole globalization thesis turned upside down.

That leads to a seeming paradox: Higher labor costs can make
a country more, not less, competitive. In many ways, the
United States and the UK got out of manufacturing because
their labor costs were too low. I have spent my life
watching plants close in Milwaukee and Waukegan, where
skilled labor was paid $26 an hour, only to reopen in
Georgia and North Carolina, where it was paid $8 an hour.
While still fighting over severance two years later, we get
the news: The company is bankrupt. The products it makes so
cheaply are now crap.

The German model

In the United States, our elite, scoffing, says that there
is just not enough labor-market flexibility in a country
like Germany to allow it to adapt to globalization as we do.
But it's precisely because of our flexibility that we can't
compete. What the laws manage to do in Germany is to keep
people together and to hold onto their skills in groups. Co-
determination and works councils - in other words, worker
control - keep people in groups, rubbing elbows with each
other, and all this rubbing of elbows helps build up human
capital.

Indeed, for some economists this is now a fashionable idea.
Think of all the buzz about the "knowledge" economy, which,
in the world of academic economists, is an inquiry into how
knowledge drives economic growth. David Warsh in his 2006
book, Knowledge and the Wealth of Nations, introduces us to
economists trying to untangle the connections between the
kind of knowledge that comes from groups and economic
growth.

German worker control contributes to a group interaction
that over time not only builds up but also protects a
certain amount of human capital, especially in engineering
and quality control. This kind of knowledge is not just
individual but group knowledge. It's the kind of group
knowledge that our efficient, "flexible" labor markets so
readily break up and disperse. It's our flexible labor
markets that make it so hard for the United States and the
UK to compete. We spend vastly more on basic research than
the Germans do - U.S. companies are unrivaled. We spend far
more on higher education. But with our flexible labor
markets, we're unable to capitalize on this research and
education. Sometimes we try the Japanese model of work, but
we never try the German, because we don't want to cede any
real control to workers. Supposedly it's a great mystery why
Germans keep investing in manufacturing and even prospering,
despite the claims that the German education system is
broken (OK, it needs help) and they aren't spending enough
on research (OK, they aren't). But they're doing something
right. What is distinctive about Germany is the privileged
position the worker has within the firm.

And we must look to that privileged position of the worker
to explain how our own middle-class way of life can survive.
Putting more money into education is a waste of effort.
Putting more money into basic research is a waste of effort.
We already spend enough. In fact, we have every factor of
production going for us: We have more land, more labor, more
capital and higher levels of formal education. But with our
flexible labor markets, we cannot develop the human capital
or knowledge needed to wean ourselves away from turning out
crap. In global competition, the United States has almost
every comparative advantage over Germany, but the one great
comparative advantage Germany still has over us is that it
is a social democracy. Yes, I admit Germany has its
problems. But we're losing our middle class, and our
problems are even worse. 

The real knowledge economy.

The strangest thing I saw this year is a YouTube video, with
a hip-hop soundtrack, about a lot of German kids on strike.
These were IG Metall apprentices, and they weren't like the
kids in the cafés. (IG Metall is the largest metal workers'
union in Germany.) Instead they wore black, gray and white
car coats and were from obscure little German towns, but all
of them were marching, at night, both boys and girls,
striking against the big global companies for not delivering
on jobs. At about the same time as the strike, IG Metall
held a rock concert with Bob Geldof, which drew 50,000
people, mostly kids. Here's a shocking thing to a U.S. labor
lawyer like me: In 2008, youth membership in IG Metall -
kids under 27 who voluntarily pay union dues - climbed yet
again, this time by 6 percent. At last count, IG Metall had
more than 200,000 of these kids! As someone who ran for
Congress and found out why campaign staffs think it a waste
of time to bother with young people, I find that stunning.
Even the Financial Times, which always writes off labor, has
had to admit that in Germany, unions are resurging among
kids who are highly skilled.

Why are kids in Germany paying dues, voluntarily?

I think it's an American who can best explain why. It's not
Marx but John Dewey whose picture should be in the lobby of
the Willy Brandt Haus, the headquarters of the Social
Democratic Party. It's Dewey who believed that schools
should not just teach practical skills but explain why kids
have to be political, to be citizens and yes, to get into
labor movements to protect the skills they are acquiring.
One can say that union membership is a "tradition" in
certain industries. But that's just an opaque way of saying
that the kids get politicized both at home and at school as
they go through the Dual Track - Germany's specialized,
apprenticeship vocational schools.

The answer to the problems of our country is education, but
not the kind we're pursuing, i.e., jamming more kids into
college or even teaching practical skills; instead, it's
teaching them how, politically, to cut themselves a better
deal. As long as that's going on, it's impossible to write
off the European or, more specifically, the German model.

Just as the answer to the problems of democracy is usually
more democracy, so the answer to the problems of a social
democracy is usually more social democracy.

[This essay was adapted from Thomas Geoghegan's new book,
Were You Born on the Wrong Continent?: How the European
Model Can Help You Get a Life (The New Press).]

[Thomas Geoghegan is a Chicago-based labor lawyer. He is the
author of six books, including Whose Side Are You On?, The
Secret Lives of Citizens, The Law in Shambles and, most
recently, Were You Born on the Wrong Continent?]

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