The chart below shows stark differences between egalitarian Sweden and France, and the more unequal UK since 1970 in departures from a trend growth rate of 1.9% in real GDP per working age person, PPP.
In the above chart, a flat line is growth at the same rate as the USA for the 20th century, which was 1.9% for GDP per working age person on a purchasing power parity basis. The USA’s growth rate is taken as the trend rate of growth of the global technological frontier. A falling line in the above chart is growth in real GDP per working age person, PPP, at below this trend rate of 1.9%; a rising line is above trend rate growth for that year.
Sweden really had been the sick man of Europe until it turned its back on high taxing, welfare state socialism in the early 1990s.
France has been in a long decline so much so that the global financial crisis is hard to pick up in the acceleration in its long decline in the mid-1990s.
Britain did very well, both under the neoliberal horrors of Thatcherism and the betrayals by Tony Blair of a true Labour Party platform. The UK grew at above the trend annual growth to 1.9% for most of the period from the early 1980s to 2007.
Neither France or Sweden, despite their egalitarian economies, kept up with the US growth rate since 1970. Under the OECD’s hypothesis, if France and Sweden had been more unequal, their trend growth rates would have been even more appalling since 1970.
Despite supposedly having stingy welfare states, both New Zealand and Australia have a lot of sole parents who do not work at all. There is no separate breakdown of full-time and part-time work status in the USA. About 72% of sole parents in the USA either work full-time or part-time.
Unlike the USA, the German, Italian, British and French equilibrium unemployment rates all show fluctuations that reflect changes in their underlying economic circumstances and labour market reforms. The case of the British, the rise of the British disease and Thatchernomics. The case of German, its equilibrium unemployment rate rose after German unification and then fell after the labour market reforms of 2002 to 2005.
The French ruling class is as lazy as their transnational co-conspirators down under. French union membership is in serious decline albeit from a low base. An opportunity lost for the French ruling class. It has not lifted a finger to extract additional labour surplus from the downtrodden French proletariat now stripped of their only line of collective defence against capitalist exploitation.
Source: OECD Stat and Top Incomes Database.
The top 10% and top 1% in France are no better off than two generations ago despite the decline of French unions. The French Left must be most disappointed. No kicking in the rotten door of the permanent revolution anytime soon after the immiserised French proletariat rises up because it has nothing to lose but its chains. The 21st century version of the Marxist call to the barricades would be a proletariat stirred to revolution with nothing to lose but their suburban home, motorcar, IPad and air points
Source: OECD Stat and Top Incomes Database.
The Italian ruling class has had little success in bringing Italian unions down. The top 10% in Italy is earning no more now than back when the Red Brigades were gunning for them.
Source: OECD Stat and Top Incomes Database.
The top 1% in Italy is doing a little bit better than when the Red Brigade was gunning for them, but not much more. Unions don’t figure in explaining that small rise in Italian top 1% incomes over the last 40 years. Italian unions are pretty much a strong as they were 40 years ago in membership. Italian employment protection laws are pretty much as strong as they used to be too.
Source: OECD Stat and Top Incomes Database.
The Canadian ruling classes even more incompetent than their transnational co-conspirators over in Italy. There appears to have been next to no decline in union membership in Canada. The Canadian top 10% is not earning any more than back in the 60s.
Source: OECD Stat and Top Incomes Database.
The Canadian top 1% is doing a little bit better than 25 years ago also but not off the back of unions which are almost as strong as in the past. The Canadian Left will have to look for a different hypothesis than the ravages of the top 1%.
Note: The house price index series is an index constructed with nominal house price data. The real house price index is an index calculated by deflating the nominal house price series with a country’s personal consumption expenditure deflator.
As the British labour market and long-term unemployment was starting to get something like that in the USA, the USA started to have unemployment it was more like the European labour markets in terms of the number of long-term unemployed. Nothing much happened in Germany and France.
There are large differences in unionisation rates between the three countries. France has always had low levels of unionisation which halved since the 1970s. Italy had a sharp boost in union membership in the number of unions in the 1960s and 70s. This may have been associated with increased urbanisation. Union membership rate stayed pretty high in Italy ever since with a small taper downwards. Germany had stable unionisation rates prior to German unification after which the numbers about halved up in a slow taper.
The Washington Centre for Equitable Growth did not check their inequality ratios they tweeted against trends in economic growth and economic policy since 1970, which I have reproduced in figure 1. Germany is not included in figure 1 because German data on growth is thrown askew by German unification.
Figure 1: Real GDP per British, French and Swede aged 15-64, 2014 US$ (converted to 2014 price level with updated 2011 PPPs), 1.9 per cent detrended, 1970-2013
Figure 1 shows that France has been in a long-term decline since the late 1970s despite the blessings of a more equal society than the USA as championed by the Washington Centre for Equitable Growth. In figure 1, a flat line is growth in real GDP per working age person, PPP, at the same rate as the USA for the 20th century, which was 1.9% per year. A falling line in figure 1 indicates growth of less than 1.9% while a rising line indicates growth in real GDP per working age person, PPP, in excess of 1.9%. In figure 1, France hardly ever grew at the trend rate of growth for the USA of 1.9% per year and was frequently well below that rate.
The rapid growth of the state in the late 1960s and 1970s led to a large decline in Sweden’s relative economic performance. In 1975, Sweden was the 4th richest industrialised country in terms of GDP per head. By 1993, it had fallen to 14th.
That regime change reversed a long economic decline since 1970 under the egalitarian policies of the Swedish Social Democratic Party. Under the Swedish Social Democratic Party, Sweden was almost always growing at less than the trend rate of growth of the USA, which was 1.9%. That position reversed only when there was a turn away from big government and high taxes.
Figure 1 tells a similar story for the British economy: a long economic decline in the 1970s when Britain was the sick man of Europe. Under Thatchernomics, Europe had a long economic boom for 20 years or more – see figure 1.
In the 1970s, under the high taxes of the Heath, Callaghan and Wilson administrations, as figure 1 shows, Britain was the sick man of Europe. With the election of the Thatcher Government, Britain soon grew at better than the US trend growth rate for nearly 20 years through few exceptions.
Graph of the Day: The UK has among the lowest total tax rates on businesses in the G7 http://t.co/l6mMhN9yLD— CPS Think Tank (@CPSThinkTank) August 04, 2015
Why Evolution is True is a blog written by Jerry Coyne, centered on evolution and biology but also dealing with diverse topics like politics, culture, and cats.
In Hume’s spirit, I will attempt to serve as an ambassador from my world of economics, and help in “finding topics of conversation fit for the entertainment of rational creatures.”
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