Dispatch March 2008

The End of the American Exception

Economically speaking, America could soon be more European than Europe

If you look at other aspects of the American economic exception, you see something similar: Transatlantic differences have narrowed already, and the trend is more of the same. Consider regulation of business and finance. Few seem to question that the weight of regulation is less in the United States. In one area, anyway, this is true: Worker protections are weaker in America than in Western Europe, where employers are far less free to fire at will; and the floor that the minimum wage puts under incomes is lower here than there. But think about product-safety regulation, or environmental regulation. Think about the FDA. In many areas, America regulates its businesses at least as tightly as Europe.

In the 1980s, the Reagan administration did make a serious attempt to deregulate parts of the economy. Particular industries, notably banking and the airlines, were transformed. In other cases, such as the utilities, it was not so much a case of deregulating as replacing one scheme of regulation with another. But these were exceptions to an ongoing trend of regulatory accretion, and in some cases, accretion is putting it mildly. On regulation of corporate governance, Democrats are still calling for stricter rules—and given some of the recent abuses, not without reason. Yet, since Sarbanes Oxley, American financial and corporate regulation has been probably the most stringent and complex in the world. Personally, and I speak admittedly as a resident of the District of Columbia, I find the encompassing multi-jurisdictional tyranny of inspectors, officers, auditors, and issuers of licenses—petty bureaucracy in all its teeming proliferation—more oppressive in the United States than in Britain, something I never expected to say.

The unions are weaker here, it is said. To be sure, they have fewer members as a proportion of the workforce than in Britain, or (even more so) continental Europe. This is something else, of course, that the Democrats say they want to fix. Their proposed card-check legislation is expressly intended to slow and reverse the decline in union membership. This is a goal which few European governments would any longer think to embrace. In Britain it would be regarded as crazy, partly because Britain's unions, at the zenith of their power in the 1970s, before Margaret Thatcher, were keen to confront not just employers but elected governments as well.

Qualitatively, if not quantitatively, American unions remind me of the old-fashioned British kind. They seem anachronistically angry and assertive. Reform education? Impossible: the teachers' unions will not hear of it. Barack Obama is called brave merely for uttering the words "merit pay" in their presence. See what America's unions have done to the auto industry. The Writers' Guild just shut Hollywood down for several months. I cannot think of a British union that any longer has that kind of muscle, or would think of exerting it if it did. In much of the rest of Europe, unions have become a quietly co-operative part of management more than militant champions of workers' rights.

It would be wrong to say that the European idea has "won." Attitudes, it seems to me, remain an ocean apart: America still salutes effort, ambition, self-reliance, and success in a way that is utterly unEuropean. And in recent years, remember, the distance between America and Europe has narrowed from both sides. Europe's governments have tried hard to cut taxes, spending, and regulation. They have had only modest success, it is true; nonetheless, there has been movement toward "American-style capitalism", as it is still called. In the United States, the movement has been the other way—and with Democrats expecting, plausibly, to add the presidency to their control of Congress next year, there is more to come.

Could the lines even cross? Could America ever become more European than Europe? It seems unlikely, but not unthinkable. The Democrats, taken at their word (which would be rash), seem to be proposing exactly that. Elements, at least, of the programs outlined by Barack Obama and Hillary Clinton during their nomination contest are significantly to the left of where Britain's Labour Party, post-Thatcher, post-Blair, now stands. (Think about that.) But let us suppose, less adventurously, that American capitalism and Europe's social market merely continue to approach each other in the center. For good or ill, the era of the American economic exception is coming to an end.

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