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July 01, 2005
Friedman on the French & German Socialist Museums
Okay, I bash the guy most of the time when he's writing on Iraq, but he's pretty clear-headed on what works economically:
There is a huge debate roiling in Europe today over which economic model to follow: the Franco-German shorter-workweek-six-weeks'-vacation-never-fire-anyone-but-high-unemployment social model or the less protected but more innovative, high-employment Anglo-Saxon model preferred by Britain, Ireland and Eastern Europe. It is obvious to me that the Irish-British model is the way of the future, and the only question is when Germany and France will face reality: either they become Ireland or they become museums. That is their real choice over the next few years - it's either the leprechaun way or the Louvre.
Yep. I posted a list of the top 30 countries in GDP per capita over at Brainster's the other day. The USA ranks #2 (behind tiny Luxembourg), and is over $11,000 higher than France and Germany. Ireland is a little over $3,000 or 10% higher than those countries; 15 years ago they were probably more than 25% behind. As I have commented over at Brainster's many times, Ireland has gone from one of the poorest countries in Western Europe to one of the richest in the course of a single generation.
Harry Kraemer Jr., the former C.E.O. of Baxter International, a medical equipment maker that has made several investments in Ireland, explained that "the energy level, the work ethic, the tax optimization and the flexibility of the labor supply" all made Ireland infinitely more attractive to invest in than France or Germany, where it was enormously costly to let go even one worker. The Irish, he added, had the self-confidence that if they kept their labor laws flexible some jobs would go, but new jobs would keep coming - and that is exactly what has happened.
Ireland is "playing offense," Mr. Kraemer said, while Germany and France are "playing defense," and the more they try to protect every old job, the fewer new ones they attract.
It's not just the cost of firing workers, however. It's also the cost of hiring workers. When you look at how much employers pay in payroll taxes it's over 100% of the employee's salary in France; something less than 40% in Ireland. If you have people in both countries, which would you rather give raises to?
Terrific article, although it will undoubtedly be greeted with much wailing and gnashing of teeth on the left. Friedman does toss them one bone:
And by the way, because of all the tax revenue and employment the global companies are generating in Ireland, Dublin has been able to increase spending on health care, schools and infrastructure. "You can only do this if you have the income to do it," Deputy Prime Minister Mary Harney said. "You can't have social inclusion without economic success. ... This is how you create the real social Europe."
But of course, it won't sell to those who see class warfare as the means for the Democrats to get back to being electable.
Posted by pat at July 1, 2005 01:34 AM
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