February 8, 1997

The Anglo-Saxon Way of Life? Mais Non!

By JEAN-PAUL FITOUSSI

ARIS -- When Europeans and Americans take stock of one another from their respective sides of the Atlantic, the results are predictable: caricatures, prejudice and mutual misunderstandings.
Americans look at France and see the last refuge of socialism. The French look at the United States and see a place where people have the freedom to work -- for next to nothing. (This feature of the American economy is much admired by at least some people in France: company bosses.)
Both the United States and Britain have chosen to live with relatively high levels of employment and poverty. Continental Europeans, by contrast, have accepted high unemployment because they keep the protections of the welfare state. When Marc Blondel, the French union leader, asserted during the general strike last fall that French workers "will not live like the Anglo-Saxons," he rejected both more poverty and less regulation of the labor market.
Anglo-Saxons might be tempted to interpret his remark as suggesting a willingness to accept higher unemployment, as long as those who already have jobs and some security live well. After all, don't the Anglo-Saxon economies perform far better than those of the Continent, with their rigid systems of job and welfare protection?
Many Europeans, on the other hand, question a prosperity built on a growing number of working poor -- people who earn low wages and receive no benefits like health insurance -- and a declining standard of living for the middle class. Don't the social problems that result from poverty and economic inequality ultimately carry a cost?
Still, there is wide agreement that Europe's social programs are pushing it to the periphery of a world ruled by harsh new economic laws. The United States, with minimal unemployment benefits and job security, is seen as adaptable to changing global conditions -- enabling it to make solid economic gains.
These views, however, are largely superficial. Since the mid-1980's, employment in Europe has become less regulated. In France, most new jobs are temporary, and there are many legal ways to skirt the minimum wage. Unemployment insurance has been substantially reduced; half of the jobless receive no benefits.
As in the United States, European labor unions have lost much of their rank and file, and salaried workers have no real voice on major economic issues. Nor do they have much say about working conditions.
Yet the Anglo-Saxon and European social models differ in two important ways. One difference is macroeconomic intervention. European passivity -- the tendency to avoid using fiscal and monetary policy to encourage growth -- contrasts with a more activist American approach.
In the United States, for example, the Federal Reserve promoted growth through significant interest rate reductions in the early 90's. Interest rates were permitted to rise in Europe, despite the most severe recession since World War II. In France, macroeconomic policy is solely focused on keeping the franc strong relative to the German mark. To keep the franc from declining, the central bank increases interest rates, which typically leads to less business investment and greater unemployment.
Another difference is in the attitude toward inequalities of income and wealth. The dramatic increase in the income gap in the United States in the past 20 years has been justified by a philosophical debate over the very nature of the American social contract. Since the end of the 1960's, a substantial body of literature has defended inequality and argued against redistribution of wealth. But in Europe, there is a long intellectual tradition, going back to the 19th century, in the opposite direction.
Whatever their ethical objections to the Anglo-Saxon approach, critics must acknowledge that it results from choices made democratically. That is not the case in most of Europe, where politicians say they are powerless in the face of outside pressure, be it the demands of European integration or the world economy. That's not choice, it's submission. How much inequality a society should tolerate is not merely a matter of economic conditions. It is a political question to be answered through a democratic process.
Jean-Paul Fitoussi is a professor of political economy at the Institute of Political Studies of Paris. This article was translated from the French by Janet Higbie.

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