Comments on: The Left vs Right Economic Model (aka Europe vs United States model)

By: The Deregulation Era And Developing Countries at Hispanic Pundit

The Deregulation Era And Developing Countries at Hispanic Pundit — Fri, 29 Jul 2011 18:01:40 +0000

[...] there are various answers that could be given to such claims (see here, here, here and here for a few) but my favorite is to look at the ‘deregulation era’ from the [...]

By: J

Wed, 02 Feb 2011 21:00:53 +0000

That is exactly true. Along the lines of minimum wage, employers want to pay as low as possible. On an individual level though, people are willing to take a certain amount: high or low. I, being a white college student with loans, would be willing to to take a job that pays lower than minimum wage and have done so before. It’s called extra cash for entertainment spending. The savings that a business gets from that can make it so much easier to higher another employee, or to eventually raise wage based on performance. But if the wages a business offers are too low, the business WILL NOT get any employees because who would want to waste their time working for too little. This is how an unregulated wage market, in which individuals can work out their worth with companies, works. Many companies after a while may even feel that your value is more than current minimum wage laws because your good performance has equaled higher profits.

By: HispanicPundit

HispanicPundit — Wed, 02 Feb 2011 20:38:35 +0000

J, Great point. This is precisely what union supported liberal Democrats have in mind when they raise the minimum wage - its an attempt to steal the South's competitive pricing advantage. I blogged about that here. Here is a related quote:

To think of this another way, it is important to note that the minimum wage was first passed at the national level in 1938, around the time of the second wave of the great depression. If you were to look at the voting record of that legislation, one of the things you would discover is that the northern senators voted almost unanimously in favor of the minimum wage and the southern senators voted almost unanimously against the minimum wage. The reason for that is that wages were alot lower in the south, the south being the part of the country with the most ex-slaves. So the minimum wage was basically set at a level above southern wages but below northern wages. The minimum wage was set by the northerners as a way to keep jobs in the north by preventing businesses from moving to the south to take advantage of the lower wages. Who paid for this minimum wage? Unemployment during that time was almost all poor southern workers, primarily black southern workers, who were basically priced out of the labor market (the minimum wage was also used to price women out of the labor market, see here ).

By: J

Wed, 02 Feb 2011 20:06:19 +0000

The Europe Economic model has failed in an age of declining birth rates. If you look at any debt clock, the internal and external debt of Europe as a whole is several times greater than their GDP. They have failed to balance their books, and will never do so because Social Programs are not investments, but liabilities. The United States would be much better off to never copy their economic model. We may have the highest debt in the world, but compared to our GDP, its not unrepairable. Its like a rich man (USA) taking out a large loan vs a middle class (Europe) taking out the same loan? Assuming both keep their jobs, who has the better chance of paying it back?

Also Unions were a big topic. I live in Georgia, and in the past 5 years the South is slowly growing into automobile manufacturing. The unions in the North have screwed themselves out of jobs. Volkswagen is making a new plant in Chattanooga just 10 miles from where I live and West Point Georgia has the newest KIA plant. The pay is on par with the Cost of Living in the South. There will be no Unions (state agreements with the companies). In fact most individuals in the South frown down on Unions based on their actions up North (yes we can read). So, in the case of Unions, no union is better and its actually helping boost the general economies in the South because of the fact that companies like that mentality and are moving to Georgia and Alabama and Tennessee and South Carolina for production.

By: HispanicPundit

HispanicPundit — Tue, 01 Feb 2011 18:27:13 +0000

Very true – and other parts of Europe are more capitalist, or “American”, than people realize. These are, admittedly, broad strokes.

By: Darf Ferrara

Darf Ferrara — Tue, 01 Feb 2011 16:56:46 +0000

While I generally agree that less welfare and more immigration freedom is desirable (Brian Caplan has been discussing this lately), I don’t think it is entirely helpful to say that there are these “two” models, European and American. Lin Ostram has discussed how Sweden, even though it outwardly could appear to have something of a socialist appearance has a number of voluntary social institutions that have evolved outside of government that promote the welfare of their citizens. Swiss Cantons allow for a health care system that is much more robust than many others (while still far from perfect). It’s not that I disagree with anything you’re saying, I just don’t think that European and American style are descriptive enough.