Non-Entrepreneurial Europeans

Edmund S. Phelps, 2006 Nobel Prize Laureate in economics, takes a stab at explaining Europe’s lagging economic performance in this editorial in the Wall Street Journal.

He has some interesting things to say, albeit in bone-dry prose. He doesn’t blame European social transfer payments for the lackluster performance (let us leave to one side, for the moment, how this performance is measured, and whether it’s really all that lackluster). Rather, it’s the mentality:

The values that might impact dynamism are of special interest here. Relatively few in the Big Three [France, Germany, Italy] report that they want jobs offering opportunities for achievement (42% in France and 54% in Italy, versus an average of 73% in Canada and the U.S.); chances for initiative in the job (38% in France and 47% in Italy, as against an average of 53% in Canada and the U.S.), and even interesting work (59% in France and Italy, versus an average of 71.5% in Canada and the U.K). Relatively few are keen on taking responsibility, or freedom (57% in Germany and 58% in France as against 61% in the U.S. and 65% in Canada), and relatively few are happy about taking orders (Italy 1.03, of a possible 3.0, and Germany 1.13, as against 1.34 in Canada and 1.47 in the U.S.).

***

The weakness of these values on the Continent is not the only impediment to a revival of dynamism there. There is the solidarist aim of protecting the "social partners"–communities and regions, business owners, organized labor and the professions–from disruptive market forces. There is also the consensualist aim of blocking business initiatives that lack the consent of the "stakeholders"–those, such as employees, customers and rival companies, thought to have a stake besides the owners. There is an intellectual current elevating community and society over individual engagement and personal growth, which springs from antimaterialist and egalitarian strains in Western culture. There is also the "scientism" that holds that state-directed research is the key to higher productivity. Equally, there is the tradition of hierarchical organization in Continental countries. Lastly, there a strain of anti-commercialism. "A German would rather say he had inherited his fortune than say he made it himself," the economist Hans-Werner Sinn once remarked to me.

***

It may be that the Continentals finding, over the 19th and early 20th century, that there was little opportunity or reward to exercise freedom and responsibility, learned not to care much about those values. Similarly, it may be that Americans, having assimilated large doses of freedom and initiative for generations, take those things for granted. That appears to be what Tocqueville thought: "The greater involvement of Americans in governing themselves, their relatively broad education and their wider equality of opportunity all encourage the emergence of the ‘man of action’ with the ‘skill’ to ‘grasp the chance of the moment.’"

I don’t know where Phelps is coming from ideologically, but — as you can see by his prose — he is an academic economist, not a polemicist. Therefore, I wouldn’t call this Europe-bashing, despite the categorization.

Further, his theory is confirmed by my daily observation. There is a fundamental value difference in Europe. Especially in France. I remember being surprised to read that 76% of young French people wanted to get a job working for the government. In a highly centralized country with a strong state tradition, I could well imagine this number being perhaps 30-40%, but 76% struck me as completely off the scale. Numbers like this show a radically different value orientation than prevails in North America, where working as a clerk in a large government bureacracy is mocked as the epitome of dull, bureaucratic routine.

In Germany, there is less stress on government employment (although it’s still generally viewed as prestigious). The governing mentality is that people want to get a job — any job — as long as it’s secure. "The less work I have to do, the better," dozens of people have said to me. They don’t see this as laziness; the less time they have to spend in whatever job it is they do, the more time they have for their private life and their vacations, which are the real hub of their existence. They may not put any as many extra hours as a gung-ho American would into their their daily job of filing insurance documents in a local branch office, but they take much more care about what they eat, what they wear, and how carefully they maintain their family ties and friendships.

Of course, there are exceptions. I have met plenty of proud-to-be-hard-working, enterprising Germans as well. They’re the ones complaining non-stop about their passive, dependent countrymen, and the thousand-tentacled bureacracy that’s "strangling this country." A recent bright-yellow cover of Manager Magazin said it all: "The War Against Independent Entrepreneurs." One can also spot these people in the departure lounges of airports, waiting for flights that will take them, once and for all, to North America or Britain.

What should we do about this? I would say: nothing. Vive la différence. If you define a successful society as one that maximizes opportunities for the accumulation of private wealth, as the Wall Street Journal surely does, then you might as well fly to America tomorrow. Europeans define a successful society differently, and will always do so. The only time the difference in economic performance (once again, according to certain indicators) becomes a problem is when Europeans look across the Atlantic — or across the English Channel — with envy, rather than healthy curiosity.

16 thoughts on “Non-Entrepreneurial Europeans

  1. That a large number of continental Europeans would define or value “success” differently than Americans or Brits is a point well made here. The crucial point is that in the age of globalisation we’re living in, there really is no escaping the prevalence of the Anglo-Saxon model anymore. While we’re still lamenting about “Raubtier” capitalism and the alleged decline of social assets, the world has long switched to shareholders-first mode and as a young person that wants to pursue his or her goals, you don’t have much of a choice to follow along, unless you’re willing to accept to lower your standard of living significantly.

  2. You’ve got to attribute it to the efficiencies of technology that the few remaining people that are doing actual work and are not sustaining a life on inheritances, goverment jobs, welfare, pensions, Post & Bahn, university teaching positions or other ways of sucking the money out of society can support the majority rest that are having a royal laugh at their expense. Most importantly, you’ve got to attribute it to the workers’ sheer endless gullibility that most of them are probably even fully paying their taxes.

  3. >but they take much more care about what they eat, what they wear,
    >and how carefully they maintain their family ties and friendships.

    On the assumption that European divorce rates or other measurable indicators of happiness (ugh, birth rates?) don’t surpass what the US has to offer, the alleged extra time we devote to family and friends seem not to be well spent. I checked Adrian White’s global projection of subjective well-being: about half of West European countries surpass the USA by rather small margins, while the other, more populous half is below; particularly the supposedly bon-vivants France, Italy and Spain and other southerners seem to quite suck, comparatively. The map gives a better overview.

    >One can also spot these people in the departure lounges of airports,
    >waiting for flights that will take them, once and for all, to North America or Britain.
    >What should we do about this? I would say: nothing. Vive la différence

    …which amounts to: good riddance to busy bodies, while the rest delves into the swimming pool. Why should we care about the growing unterschicht and the corresponding phenomena like ethnic ghettoes, so far believed to be an American specialty? Sixty years ago the majority of European countries were firmly in the grip of fascism, as the impoverished constituency so wished. Getting poorer seems not to have a comforting effect, even if poverty is relative and German Hartz IV recipients could afford a condo in Malawi.

    What really p…es me off is not the amiable penchant to look on the bright side of life whenever possible, but the lack of action to ensure that we don’t chew on the life’s gristle, eventually. Neither before WWI nor WWII did the Europeans a too good job at minding their business reasonably well, though the signs were telling, like e.g. the extreme left and right beginning to cater to the same audience. I’m not amused to find the folks at stoertebecker.net chiming in to Attac’s anti-globalisation issues, while the Chavez-wannabe Lafontaine baites fremdarbeiter first, to expound on the commonalities between the left and political Islam later, as he unsavourily cherishes votes wherever they come from. The NPD flags for Ahmadinejad, while both the Guardian and the PDS are eager to tell us about the emancipatory merits of oriental headgear. Thus, I do mind when we tell the enterprising to bugger off, even if some are a tad too proud-and-hard-working.

  4. Hmm…..

    I often have problems with editorials in some British or American economic newspapers / magazines. For example “The Economist” or the “Wall Street Journal”. 🙂
    They do tend to be somewhat one sided in their praise for the “Anglo-Saxon” economic model while hammering “stagnant” continental Europe.

    And while I do agree that there are problems in Germany (especially lots of regulations even for small businesses) this editorial confirms my opinion.

    For example:
    “Productivity in the Continental Big Three–Germany, France and Italy–stopped gaining ground on the U.S. in the early 1990s, then lost ground as a result of recent slowdowns and the U.S. speed-up.”

    “Productivity” is differently measured in the USA than in Germany for example. As the “Financial Times” mentioned when “productivity growth” in Europe was suddenly actually a bit higher than in the USA. 🙂

    The US productivity miracle was in part created, not by finding new facts about the US economy, but by reclassifying software expenditure as investment and adopting aggressive assumptions about falling computer prices.

    Not to mention an OECD statistic.
    “Gross Domestic Product per Hour Worked, in OECD countries, national currency”
    (For some reason, when I want to add another link to my comment, my comment vanishes. So no more direct links. Although I did save the links. 🙂 )

    France: 2005 – 40.1 Euros
    Germany: 2005 – 38.2 Euros
    UK: 2005 – 22.3 British Pounds
    USA: 2005 – 42.9 US Dollars

    If I were to use todays 2007 exchange rates (unfair I admit) than I´d get:

    France: 2005 – 40.1 Euros
    Germany: 2005 – 38.2 Euros
    UK: 2005 – 33.5 Euros
    USA: 2005 – 32.8 Euros

    (I´m not sure about the US “numbers”. But according to the “London School of Economics and Political Science” there is a real productivity gap between the UK and Germany /France. So French and German workers are a lot more productive per hour than British workers. Hardly the sign of people more unhappy with their working conditions than British workers?)

    Unemployment rates are generally far higher than those in the U.S., U.K., Canada and Ireland.

    In the EU, the definition of unemployment follows the ILO guidelines. Meaning that:

    Unemployed persons are all persons 15 to 74 years of age who were not employed during the reference week, had actively sought work during the past four weeks and were ready to begin working immediately or within two weeks. Figures show the actual number of persons unemployed in thousands.

    Unemployment rate is the share of unemployed persons in the total number of active persons in the labour market. Active persons are those who are either employed or unemployed. Unemployment expressed in a rate of the total active population.

    And while the USA uses a similar definition, consider the different “unemployment benefit systems” in the USA and Germany. As I understand it, the time limits on unemployment benefit in the USA are much stricter than in Germany. So it makes sense that unemployed Germans might be more inclined to claim to look “actively for work” than discouraged unemployed Americans.
    (That said, the unemployment rate in Germany probably is higher than in the USA. I´m just saying that the difference might not be as big as sometimes reported.)

    And labor force participation rates have been lower for decades.

    OECD
    Labour force participation rate for persons aged 15-64:
    Germany: 1994 – 70.5% 2005 – 73.8%
    USA: 1994 – 76.7% 2005 – 75.4%
    From more than 6% in 1994 to less than 2% in 2005…
    A sure sign for decline in Europe!
    (The US number only includes persons aged 16-64 by the way.)

    And all these words were just spent looking at the second paragraph of this editorial. 🙂
    I didn´t even mention the trade surplus of Germany compared to the trade deficit of the USA. Or the fact that the housing boom (with the resulting construction and financing boom) did a lot to boost the US economy in the last few years. Or the fact that a lot of Americans did use their rising “wealth” (allegedly higher worth of their house) as an ATM. Borrowing money secured by the allegedly higher price of their home.

    So, in summary.
    Yes, there are real problems in Germany. And yes, it is somewhat easier in the USA to start a business.
    But if a guy starts an editorial with using questionable numbers, I call b*llsh*t. 🙂
    Not to mention that we don´t know anything about that University of Michigan “values surveys”. How do we know that German and American workers mean the same thing when talking about “job opportunities” or “interesting work”?

    After all…
    CBC news, Feb 14, 2005
    “Toyota to build 100,000 vehicles per year in Woodstock, Ont., starting 2008”

    Several U.S. states were reportedly prepared to offer more than double that amount of subsidy. But Fedchun said much of that extra money would have been eaten away by higher training costs than are necessary for the Woodstock project.

    He said Nissan and Honda have encountered difficulties getting new plants up to full production in recent years in Mississippi and Alabama due to an untrained – and often illiterate – workforce. In Alabama, trainers had to use “pictorials” to teach some illiterate workers how to use high-tech plant equipment.

  5. ‘”Toyota to build 100,000 vehicles per year in Woodstock, Ont., starting 2008″‘

    I have seen this before, and this makes a lot of sense in the current business environment. The Canadian dollar has been historically weak against the US dollar and this makes Canadian labor a bargain in North America. The other part of it is that Canada has national health insurance which is cheaper than providing the private health plans demanded by US unions.

    I’ve seen this happen in IT consultancy, with big consultantcies (i.e. Accenture) setting up recruiting offices in Canadian cities to hire cheap Canadian IT graduates at a fraction of US pay levels, then shipping them to the US to work on per diem on large projects. These workers are nominally based in Canada but the reality is usually otherwise.

    Auto companies typically don’t pay bottom rung pay rates and usually expect a fairly literate or skilled workforce in return. Availability of skilled and/or literate people can be limited in states like Arkansas, Mississippi, South Carolina, and Alabama because auto plants have previously set up there and skimmed off many of the better prepared workers. Parts of Canada offer fresh recruiting fields for auto transplants.

  6. Don,

    I have seen this before, and this makes a lot of sense in the current business environment. The Canadian dollar has been historically weak against the US dollar and this makes Canadian labor a bargain in North America.

    Actually if you look at the last few years, the US Dollar got weaker against the Canadian Dollar. From US dollar 1 = Can dollar 1.6 five years ago to US dollar 1 = Can dollar 1.16 today. At least if the 5 year overview from Yahoo is to be believed. 🙂
    That´s a loss of roughly 28%.
    (Pretty much comparable to the roughly 33% loss of the US dollar against the Euro in the last 5 years.)
    Is that really a weak currency?

    The other part of it is that Canada has national health insurance which is cheaper than providing the private health plans demanded by US unions.

    That´s certainly true. And interestingly enough the American car companies in Canada actually support it. While American car companies in the USA so far are quiet on that question. Don´t want to disturb the personal responsibility in the USA, I´d guess.

    However my main point for mentioning it was that University of Michigan “values surveys”. To say the truth, it was “snark” more or less.

    With a core of a serious question though.
    In Germany we do have near universal job education for workers (apprentices, yourneymen etc.). So unskilled or illiterate workers in a car plant are probably not a regular occurrence to say it politely. Honda and Nissan on the other side complain about unskilled or illiterate workers in their existing US plants. I´m simply wondering – given these facts (and cultural differences too) – if the “values survey” really measured the same “values”.

    If German workers are really the way Phelps described them (don´t want to take responsibility, don´t like to take orders etc.) , I fail to see how Germany could have been that successful these past decades. Not to mention the no. 1 exporting country in the world these past few years.

    But simply, the basis for Phelps “cultural” article are his economic numbers in the first paragraphs. And as I mentioned in my comment below, some of these numbers seem to be suspect. If an economist can´t get his “hard” numbers right before he ventures into “cultural attitudes” then I´m starting to get suspicious of his whole article.

    I mean, just look at this quote:
    It may be that the Continentals finding, over the 19th and early 20th century, that there was little opportunity or reward to exercise freedom and responsibility, learned not to care much about those values.

    Did Phelps even wonder how companies like Siemens, Mercedes, BMW , Krupp, BASF or SAP in Germany came into existence given his sweeping declarations? Allegedly examining continental European attitudes from the 19th century till today?

    Or why Great Britain “invented” the “Made in Germany” label (Merchandise Marks Act 1887)?

    Did he even entertain the thought that “old” German companies lost their worldwide patents and innovation rights two times after two lost world wars to their “Anglo-Saxon” competitors?

    Mind you, I´m not saying anything here about the wars itself. Just pointing out that German companies did loose a lot of their property rights twice in the last 100 years. And yet, a lot of them still exist, they´re still profitable. Hardly a case of companies not attuned to a worldwide market. And hardly a case of workers totally apathetic. 🙂

  7. And Don,

    Availability of skilled and/or literate people can be limited in states like Arkansas, Mississippi, South Carolina, and Alabama because auto plants have previously set up there and skimmed off many of the better prepared workers.

    You do realize that this is pretty pathetic for a first world country? Not to mention the no. 1 power of the planet?

    I mean you´re claiming that auto plants in that states have “skimmed off” the “better prepared workers” in terms of skill and/or literacy. You´re essentially saying that if Nissan and Honda have problems even with some of the “better prepared workers” (having to use “pictorials”), the rest of the workers in these states are even worse prepared?

    I would expect a statement like that from India or China. I´m surprised to hear it from the USA?

  8. “You do realize that this is pretty pathetic for a first world country? Not to mention the no. 1 power of the planet?”

    Thanks ever so much for your kind criticism. Well-meant I’m sure. Surely no schaudenfreud here? Well – perhaps there was after all.

    Does Germany have no depressed areas? The East, it is thriving?

    When was the last time you heard of a Japanese auto company weighing whether to build a large plant in (say) Rostock? Or in the Auvergne (France)? The next time will be the first, correct? If the Japanese built another European plant it would be in Poland or Hungary or somewhere, correct?

    So before deriding those po’ illiterate Southron’s who lost out to Canada, do try to recall that at least they were in the bidding. They were considered – which is more than any German city can claim….

  9. @Detlef,

    If German workers are really the way Phelps described them (don´t want to take responsibility, don´t like to take orders etc.) , I fail to see how Germany could have been that successful these past decades. Not to mention the no. 1 exporting country in the world these past few years.

    If you measure success by GDP (http://en.wikipedia.org/wiki/Gdp#Criticisms_and_limitations) and exports, the only thing that you need is willing, exploitable masses, such as the path China is currently going down. If you’re looking for that, you’ve come to exactly the right place. I disagree btw with Phelps that Germans don’t like to take orders, teh, it’s the fucking trademark of this country. They turn to their fucking newspapers (http://andrewhammel.typepad.com/german_joys/2007/02/confessions_of_.html#comment-60632580) to receive orders on what to think about each day, for chrissakes. Can you imagine a bunch of dimmer wits.

    The few brains that it takes to run the material mechanical-engineering economy that this place gets its life out of are correspondingly worshipped like Oceania worships Big Brother, or in case indigenous population fails to bring any forward, even imported from abroad, as the courting of foreign investors shows.

    Real People ™ measure success by quality of life, a concept that the German language doesn’t even have a word for (http://de.wikipedia.org/wiki/Spezial:Suche?search=Lebensqualit%C3%A4t&go=Artikel), or progress in science and knowledge (Germany’s contribution to that whole Internet-IT-computer-software-shebang that we are using right here is essentially zero, go figure), or the thriving of the arts, just look how all music here is pretty much American/British or imitations thereof.

  10. martin,

    just wanted to make sure I got your reasoning: there is no wikipedia entry for a word that gets six and a half million google hits, so the word doesn’t exist. Is that how it goes or did I miss something? Or does this follow the same logic as “religiously indoctrinated people have lower birth rates”? In which case: sure, you’re right, martin. Would love to hear more about your thoughts on the arts, too, seems like you’ve got some real insights to share. How about updating that blog of yours on a more regular basis?

  11. @James

    How about updating that blog of yours on a more regular basis?

    Hm, so you’re a regular visitor there? Seems like I struck a chord there somewhere, teehee.

    As for my excuse, I’m not in Germany that often anymore, thank God.

  12. Btw, “Lebensqualitaet” is an Anglizismus, a poor translation of an English word, just like dime-a-dozen German PC proletarians translate the command line as “Kommandozeile” (lit. commando line) or a software application as “Applikation” (lit. appliqué).

    The German word “Qualitaet” basically means “without defect”, as you’d expect a German car to be, whereas in English the “quality” in “quality of life” refers to something like “character”, but only in a positive sense, not like “Eigenschaft” which can be negative. Life in the countryside can be full of “defects” (no sushi parlors, eh) but still have certain qualities that city life doesn’t have.

    The complete failure of the German language to provide an apt translation for a concept so central to human subsistence is a defacto declaration of bankrupcty of a whole culture, isn’t it.

  13. Qualität is an English word??? Oh boy… Si tacuisses, philosophus manisses.

    For PISA victims without a “Kleines Latinum”:

    qualis = wie beschaffen
    qualitas = Beschaffenheit

    That’s why the German meaning of Qualität simply is Beschaffenheit or Güte. If you aren’t familiar with a “Fremdwort”, don’t use it…

  14. That Axel here is tempting me to snitch on that whole business with the Humanistisches Gymnasium. To the sane readers still following this here: It’s a last-ditch desperate attempt of the ruling classes to keep young minds from getting a grip on life by sequestering them until they have mastered, I kid you not, Latin and Ancient Greek. Hey, why not send your kids to Tranqulity Bay while you’re at it. Any accusations about rote learning and standardized testing that have been levied against the American school system look decidedly pale against such shenanigans. You should also hear the excuses with which the perpetrators fend off the proverbial kid that’s daring to point out that the Emperor is wearing no clothes: They make Dubya’s logic for a war against X or Y sound outright sensible.

    To Axel: Why don’t you put Plato aside for a second and go into a pub around the corner and ask the people ‘on the ground’ what their definition of the word “Qualitaet” is. Unless you’re afraid of that ominous thing that’s call real life. As for my comment: Obviously I didn’t say that “Qualitaet” was an Anglizismus, “Lebensqualitaet” is. But then you’re probably just trolling.

  15. … not to mention that the term “humanistisch” is a misnomer of Orwellian proportions. They dare to imply that whoever isn’t following their program is not human while in reality the Humanistische Gymnasium is as humane as the German Democratic Republic was democratic.

  16. America still remains more free, happier, healthier and better quality of living, lifestyle and peaceful than the rest combined. and yet, anyone can get a survey on the net saying one way or another (strange that none of these online surveys match, even remotely in criteria)

    good old fashioned jealousy, envy and insecurity keep miserable europeans still striving to be Americans.

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