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Home Publications Blogs Beat the Press Steven Pearlstein Doesn't Like the European Welfare States

Steven Pearlstein Doesn't Like the European Welfare States

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Sunday, 21 October 2012 09:29

That is what readers of his column will conclude when they see him saying:

"Europe is a different story. The bubble years allowed much of Europe to avoid making the kind of structural changes necessary to put its social welfare system on a sustainable fiscal path and reform its labor and product markets. The euro crisis — which is both a banking crisis and a sovereign debt crisis — has forced Europeans to begin addressing those issues. But the noisy process will take years to complete, if for no other reason than it requires Europeans to accept, at least in the short run, a lower standard of living."

Of course this is completely wrong. The countries with the well developed welfare states, Germany, Denmark, Sweden, the Netherlands are doing fine. The countries that are in crisis, Spain, Greece, Portugal, Ireland, have the least developed welfare states among the older EU countries. Also, there is nothing about the crisis that requires Europe on the whole to have a lower standard of living. In fact, the best resolution of the crisis involves Germans seeing higher wages and a higher standard of living. While this may imply a modest relative decline in the standard of living of the crisis countries (imports from Germany would cost more), it would lead a greatly improved standard of living from current levels.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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