> When Jaimie Galbraith is good, he can be very good. Here is an example,
> explaining European unemployment as a result of inequality rather than
> social democracy. After explaining the close association between
> inequality and unemployment, he goes on:
>
>
> 97: "The European economy is no longer a collection of separated
> national systems. Spain, Germany, and France are not independent,
> mutually isolated national economies. There are no barriers to trade or
> capital flow, in fact, no formal barriers to the movement of labor
> throughout Europe. There is now a single currency unit across most of
> the region. The integration of the European economy in practice -- from
> the standpoint of a large multinational corporate employer, for instance
> -- is nearly complete. From every analytical point of view, it is
> necessary to start thinking of Europe as a single unit. It is therefore
> necessary, from a statistical and practical point of view, to measure
> inequality and employment at the European, and not the national, level."
>
> 97: "When this is done, the notion of Europe and the United States at
> the opposite ends of an employment-equality spectrum disappears. Pay
> inequality within countries of Europe is relatively low, but
> inequalities between them are very high: much higher than across
> comparable distances in the United States. Adding the two components,
> the inequality within and the inequality between countries, one finds
> that overall inequalities of pay are actually higher in Europe than in
> the United States. Thus, the standard perception of a European/American
> counterpoint is simply incorrect. So far as pay is concerned, Europe now
> is both more unequal and less fully employed than the United States. It
> is, by the same token, less efficient, but not for the reasons usually
> given. Rather, the United States wins the efficiency contest -- not
> because it is less egalitarian but because it is more so than the
> ungainly ensemble of countries that now make up the European Union."
>
> Galbraith, James K. 2008. The Predator State: How Conservatives
> Abandoned the Free Market and Why Liberals Should Too (New York: Free
> Press).
>
>
OK, I don't have the book but this seems odd on several counts. First, there are still language barriers to movement of labor in Europe. Second, the famously high rates of unemployment in Europe in the 80's and 90's compared to the U.S. existed in countries that have lower inequality than the U.S. (France, e.g.) Third, the average rate of unemployment in Europe (not weighted, however) is lower than the U.S. right now, using the standard mix of countries comparable through the relevant periods.
And fourth, the unemployment stats for Europe which were evidence for the whole Eurosclerosis thesis ignored the between-country variation and ignored the several countries which had lower unemployment than the U.S. for all or part of the period. See for example Stephen Nickell's work on this. Lumping European countries together seems likely to lose us more information than it gains us. And sticking new EU members like Bulgaria and Romania in there further muddies the water, doesn't it? What am I missing?
Jenny Brown