Fresh Paper: Four Economic Issues Of Concern to Environmentalists

[Leigh Meyers <leighcmeyers@xxxxxxxxx>]

Four Economic Issues That
Environmentalists Should Care About
BY MARK WEISBROT

Paper presented at the SierraSummit 2005, September 8-11, 2005, San Francisco

Mark Weisbrot is Co-Director of the Center for Economic and Policy Research. Luis E. Sandoval
and Dan Beeton provided valuable research assistance. Dean Baker provided helpful comments.
Center for Economic and Policy Research
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Suite 400
Washington, DC 20009
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www.cepr.net

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1. The American versus the European Model
Hardly a week goes by without articles in the major international newspapers â
including the New York Times, Washington Post, Financial Times, and the Wall Street
Journal â about Europeâs frustrating efforts at economic âreform.â The articles
are about different events in the news, but their underlying (and often stated)
assumptions are pretty consistent: the high-income European Union (EU)
countries1 are in need of serious structural reforms in order to increase economic
growth, raise living standards, build a more dynamic, competitive economy, and
deal with the problems of an aging population (more on the last point below).

The general agreement among policy-makers on these assumptions is so strong
that even when the voters repeatedly reject the proposed reforms â as they have
in Germany, or more recently in the French and Dutch votes against the European
constitution â it is assumed that they are just trying to hold on to a way of life
that is impossible in a âglobal economy.â The attitude of their leaders and the
international press is that they simply have to be âeducatedâ to accept the new
reality. So strong is this consensus among Europeâs elite that the German Social
Democratic Party is committing what looks like political suicide, having called
early elections for this month after failing to convince either the public or its own
shrinking political base of the need to âreformâ the German welfare state.

The press and pundits in the United States couldnât agree more, and so there is a
âTransAtlantic Consensusâ that Europe needs to become more like the United
States: more âlabor market flexibility,â including increased latitude of employers
to fire employees,2 less regulation of business, lower payroll taxes, reduced public
pension, unemployment compensation, and other payments, lower wages and
benefits attached to employment, and a reduced influence of unions.

As it turns out, the bulk of the economic evidence does not support the underlying
assumptions of the TransAtlantic Consensus. For example, according to the
most obvious market-based measure, the EU economy is more internationally
competitive than that of the United States: Europe has a trade surplus, while the
United States is running a huge, unsustainable trade deficit of 6 percent of GDP.

http://www.cepr.net/publications/econ_enviro_2005_09_12.pdf