America's failed model for the world

By Steven Hill

Europeans are shaking their heads over their American friends again. Whether talking to people in the street, in the cafés or to journalists or political leaders, everyone here asks me the same question: Has America lost its mind? Town halls filled with angry citizens, shouting at their elected leaders, some of them armed with guns and threatening signs? Besides the media spectacle of these neo-1776 revolutionaries, what is doubly perplexing to Europeans is the focus of the protests: healthcare.

What's strange to a European is that everyone here already has healthcare. The place that Donald Rumsdfeld once sneeringly called "old Europe" long ago solved this dilemma, producing quality healthcare for a fraction of the price that Americans pay. Many Europeans are astonished when they find out that 47 million Americans – larger than the populations of most European nations – don't have any healthcare at all except a hospital emergency room.

Contrary to stereotype, most of Europe doesn't use single payer, with France, Germany and others having evolved a "third way" that combines individual choice with private, nonprofit insurance companies and Medicare-like cost controls. Even countries like Croatia, Hungary and Slovenia, with per capita incomes only a fraction of that in the United States, have healthcare for all their people. Europeans simply don't understand how a wealthy United States could remain the last advanced nation that does not have universal healthcare.

Lounging one evening in one of Budapest's elegant thermal baths larger than an Olympic swimming pool, with Europeans of all ages and nationalities soaking their limbs in relaxed leisure, I was treated to a dose of the common wisdom that is taking hold here. Introducing myself as an American evinced a swift reaction from one sweating sauna companion:

"I don't understand you Americans. You blow billions on a useless war in Afghanistan and Iraq, and billions more to bail out banks that nearly bankrupted the world economy, but you don't ensure healthcare for your own people. Even Obama can't make a difference. It's as if your democracy doesn't work anymore."

He was Austrian but spoke in a near-perfect English that was as good grammatically as that spoken by some of my relatives.

And his reaction was typical. As Europeans watch the United States flailing about over something as basic as healthcare, they are reminded once again of the impotent US response following Hurricane Katrina. TV images of stranded, poor, black people in New Orleans have been melded to those of this new healthcare insurgency with pitch forks, leaving an indelible impression. The last remaining superpower is not looking so super anymore, whether in Iraq, Afghanistan, healthcare, the economy – not anywhere.

The global economic collapse, largely blamed on out-of-control Wall Street capitalism, is stinging here as well, though in most regions Europe has not suffered as much as America has. In my informal polling of small business and shop owners, they said the downtown had hurt, but only a little bit. Since the crisis, Europe has employed clever strategies – some of them since copied by the Obama administration, such as the popular "cash for clunkers" auto rebate programme – that have prevented it from suffering the doubling of unemployment that the US is enduring.

Indeed, Europe, once looked down upon by American pundits as the land of double-digit unemployment, currently has lower unemployment than the United States. Contrary to Europe's reputation as having a sick, sclerotic economy, its per capita economic growth rate actually was slightly higher than America's in the 10 years leading up to the economic crisis.

Still, a number of people fear that the worst is yet to come. And so Europeans appear both angry and perplexed by America's deregulated capitalism run amok, which has further served to undermine the American brand. As one Slovenian acquaintance, a representative of a consortium of small businesses said to me: "The US used to lecture us in Europe about just about everything, but what does America have to teach now? Maybe America should learn something from Europe."

Indeed, with Germany and France becoming the first major western economies to emerge from recession into positive growth, perhaps the US should learn something from our transatlantic cousins. But what might we learn?

Here's a clue, say some Europeans. German chancellor Angela Merkel once was asked by then-British prime minister Tony Blair what the secret was of her country's economic success, which includes being the world's largest exporter nation and running substantial trade surpluses. She famously replied: "Mr Blair, we still make things."

Werner Abelshauser, an economic historian at the University of Bielefeld in Germany, says the European way of running the economy "is fundamentally about firms that emphasise high-quality products and long-term relationships between suppliers and customers". Company managers set long-term policies, while market pressures for short-term profits are held in check. Gunter Verheugen, vice-president of the European Commission, echoed the virtues of Europe's strong, competitive industrial base, succinctly stating Europe's recipe for success: "Don't try to be cheaper. Try to be better."

But in the United States, for decades under the sway of the Reagan revolution's economic philosophy, which favoured corporate finance over manufacturing, the economy has seen a stark decline in manufacturing. Since the second world war, the financial sector in the United States has tripled in size as a percentage of the overall economy and of corporate profits. That increase accelerated during the eight years of the Bush administration, even as the US lost 5.5 million manufacturing jobs.

European capitalism for the most part didn't succumb to the financialisation that swept the United States in the 1980s, and which paved the way for the speculative bubbles that have now caused economic collapses in both 2001 and in 2008 (with notable exceptions in Britain, Spain and Ireland, similarly plagued by a collapsed housing bubble).

So from the other side of the pond, the city on the hill is looking pretty average these days. America is still a leader, but not the leader. That's a post-post-cold war concept that the world is still getting used to, and that Americans don't want to admit. But the evidence is everywhere, and especially obvious when you step outside the American bubble.

As one Viennese politician told me: "If the American model no longer is the blueprint for the world, what comes next?" Some Europeans think they have the answer, and much of the world is paying attention, even if most Americans still are not.

http://www.guardian.co.uk/commentisfree/cifamerica/2009/sep/15/europe-us-healthcare-economy