Sunday, February 10, 2008

Lies, damn lies, and statistics: European standards of living and poverty

I grow increasingly tired of people holding up Europe as the bright shining example of effective social programs.

Sure, we've got lots of problems here, but Europe--and the term depends on which nations you arbitrarily decide to include in the term Europe--is still struggling with immense and widespread problems of poverty and unequal income distribution that five decades or more of the welfare state, and nearly two decades since the fall of the Soviet Union have not been able to eradicate.

Polska, a Polish business site, takes its analysis of Gross Domestic Product per Capita one step further than those recent sensationalist reports about Great Britain's GDP (primarily on the strength of the fluctuation of the Pound) having slipped ahead of the US:

In 2005, the Gross National Income per capita (GNI, Polish: PNB) in Poland, according to the data of the World Bank, amounted to around 7 thousand USD. According to this criterion, Poland is much poorer than Germany or France, where, according to the same source, GNI in 2005 reached 34 thousand USD - but still richer that Turkey (4.750 USD) or Russia (4.460 USD).

But the standard of life depends also on the purchasing power of the money earned. As prices on the Polish market are, in most cases, lower than in the Western Europe, the GNI or the GDP (the difference between these two indices is small) not has to be modified with the purchasing power parity, to give a better understanding of the standard of life in Poland as compared to other European countries. Such a correction reveals that the standard of life in Poland is 49% of the EU average (see Table 7.1)

While I haven't been able to find these figures so calculated for 2006 or 2007, what's interesting is that a European standard of living is very much a geographically relative term.

Using the UE 25 rating as 100; here's how it breaks down (with Japan and the US thrown in for comparison):

Luxemburg = 251.7
Norway = 171.6
USA = 149.3
Ireland = 138.1
Iceland = 130
Switzerland = 127.5
Netherlands = 126.7
Austria = 123.6
Denmark = 121.4
Belgium = 118.2
UK = 115
Sweden = 114.5
Finland = 110
Germany = 110
Japan = 109.7
France = 109.7
Italy = 101.3
UE25 = 100
UE15 = 108.3
Eurozone = 106.6
Spain = 98.2
Cyprus = 89.9
Greece = 83.6
Slovenia = 71.4
Czech Republic = 74.2
Malta = 73.7
Portugal = 72.5
Hungary = 62.3
Estonia = 59.6
Lithuania = 51.5
Poland = 49
Latvia = 48.3
Croatia = 47.9
Bulgaria = 33.9
Romania = 33.1
Turkey = 27.4

These figures are quite volatile, by the way. The following countries actually showed declining purchasing power in 2005: Belgium, Denmark, France, Italy, Finland, Sweden, UK, and Turkey.

So there are really two Europes today: the West (composed of Norway, Ireland, Iceland, Switzerland, the Netherlands, Austria, Denmark, Belgium, UK, Sweden, Finland, Germany, France, Italy, and Spain) and the Rest (Cyprus, Greece, Slovenia, Czech Republic, Malta, Portugal, Hungary, Estonia, Lithuania, Poland, Latvia, Croatia, Bulgaria, Romania, and Turkey).

Yet even this doesn't scratch the surface. Despite the fantasies of American Liberals and Progressives, poverty remains a serious if not intractable problem in both Europes.

A little known fact: the two industrialized European nations with the highest poverty rates are the UK and Germany.

Here's what an OECD study discovered about Great Britain:

The country with the highest poverty rates—both static and over a six-year period—is the UK, followed by the US and Canada. Before benefit payments, 55 percent of the population of the UK fell below the poverty line at least once in a six-year period. After benefits the figure is just under 40 percent.

And as for Germany, here's an abstract of a recent major study on Library Index:

Although Germany is one of the largest economies in the world and was extraordinarily successful in recovering from the economic, infrastructural, and social disasters wrought by World War II and the Nazi Party's control, the country fell into economic stagnation in the early 2000s. By early 2005 the unemployment rate was the highest it had been since the 1930s, according to BBC News Online ("German Jobless Rate at New Record," March 1, 2005). In December 2005 the unemployment rate had dropped, from 12.6% to 11.2%, before rising again to 12.2% in February 2006. The country's weak economy caused not only joblessness but, increasingly, outright poverty, especially among families with children.

In September 2005 Sabine Dobel reported on ("Going without in Wealthy Germany") that more and more Germans—the poor, the elderly, children, and the disabled—are suffering from malnutrition as a result of unemployment and cutbacks in government aid. Incidences of middle-class people removing food from dumpsters for their own consumption are on the rise in German cities, according to Dobel. Perhaps most alarming are reports that as many as 20% to 30% of people admitted to hospitals in Germany are malnourished, particularly sick children....

As of March 2006, 16% of Germans lived below the nation's poverty line. Deutsche Welle reported in February 2006 ("Germany Serious about Minimum Wage," February 24, 2006) that two million poor Germans have full-time jobs. As of 2006 Germany did not have a minimum wage law—an issue that has stirred up a heated debate across the country. Other European Union countries have a minimum wage, but the idea instituting one in Germany has the nation split: many union leaders are calling for a high minimum wage, while others argue that this would result in the loss of more jobs.

The minimum wage issue is part of a larger controversy across the country regarding the government's proposed labor and social welfare reforms, known as Hartz IV. These reforms would increase the workweek from its traditional thirty-five hours with no pay increase. In addition, Germany's generous unemployment benefits would be strictly limited, and the power of labor unions would be curtailed. Proponents of the reforms argue that the long history of Germany's brand of capitalism—characterized by an extremely high level of social welfare programs—is over, and government guidance of economic markets must give way to an entirely free market system. Opponents of the reforms believe they will only increase the country's rapidly rising poverty rate.

Child poverty in Germany is an especially serious issue.

AgeTime Europe also finds a hidden problem--even among the most prosperous European nations--of the elderly in poverty:

In the early years of the 21st century, about 13 million elderly people are at risk of poverty in the 25 EU Member States, amounting to as many as one-in-six of all 74 million elderly people living in EU. Cyprus, Ireland, Spain, Portugal, Greece and the United Kingdom are identified as the countries with the highest poverty risk for the elderly population. The new Member States are largely countries with the lowest risk of elderly poverty. In terms of absolute numbers, the largest numbers of elderly at risk of being in poverty are found in five large member countries: the United Kingdom, Germany, Spain, Italy and France. About 9.8 million poor live in these five countries: thus about three out of four elderly at risk of being poor live in these five countries.

There is another hidden form of poverty in the richest countries of Western Europe--that of migrant laborers. The "guest workers" who do the dirty jobs in Europe (sometimes unprotected by minimum wage laws and rarely covered at all by the beneficent health care benefits reserved for their own citizens) live in a hazy shadow world that European politicians never want to discuss.

According to Innovations Report:

Migrants from outside the European Union are occasionally exposed to a multiple times higher risk of poverty than the “indigenous” population, according to the widely used Laeken indicator of poverty (with a threshold of 60% of national median income). EU and non-EU migrants constitute two rather distinct groups in most countries in terms of their exposure to poverty.

A potential cause for social tension, however, is relative disadvantage: in other words, the difference between poverty rates of migrants on the one hand, and of the indigenous population on the other. In the worse case, the situation of migrants is disadvantageous both in absolute and relative terms, characterised by both high poverty rates and relatively higher poverty rates than the “indigenous” population. Such countries include Belgium, France, Luxembourg, Finland and Sweden.

I'm still looking (so far, in vain) for the statistics that will tell me about total poverty in Western Europe, because almost all of the statistics leave out migrants.

Here's the point: our Progressive friends love to tell us about the benefits of the European model of social democracy. But they also love to cherry pick their data, and ignore such items as generally unreported migrant poverty, huge regional variations in wealth, poverty among the elderly in the wealthiest nations, the lack of a minimum wage in the heart of Europe, and growing concerns about childhood poverty there.

The "welfare-state capitalist" nations of Western Europe that we are so often advised to emulate have developed their own set of poverty-related problems that are as intractable as our own.


Brian said...

I lived in London for five years.

During that time, my standard of living took a HUGE drop from where it had been when I lived in the USA.

As a middle-class Londoner, here are the "unnecessary luxuries" that I did without -- along with most other Britons:

1) A car when I wanted to drive it. Gas is about $10 a gallon in the UK, and car taxes are so high that the average Briton struggles to afford an automobile and has to instead turn to overpriced and unreliable train services.

2) A clothes dryer. Most Britons cannot afford the requisite taxes and extremely high energy costs to run a dryer -- so they wash their clothes and then hang them up on "drying racks" in their flats.

3) Air conditioning. Almost nowhere in the UK -- including in some of the more prestigious office buildings -- can you find a cooled climate. As a result, executives, employees, and everyone else sweats and suffers.

4) Affordable electronics. Britons often take trips to the USA to buy electronics -- for about half the price that the same piece of equipment costs in Britain.

5) Affordable television. The UK charges a "TV license" fee of about $260 per year for the "privilege" of watching television on the airwaves that here in the US is free of charge.

6) Living freely. British "councils" (local governments) charge a tax known as "council tax." This per-head tax is effectively a tax on breathing and must be paid by every resident. The tax was about $500 per month.

7) Decent health care. The dental system is so bad that I used to combine dentist trips with trips back to Philadelphia when I visited home. The socialized NHS system has truly amazing wait-times to see a Primary Care Physician, and the private medical system has been so heavily taxed that only the wealthiest residents can afford to "jump the queue" and see a private medical professional.

I could go on and on and on, but I won't. One of the funnier things that I bring up to people who keep demanding that the US be more like Europe is that Europe -- including the English-speaking UK -- has a very generous immigration policy.

People with college degrees and useful skills can easily get a work permit in the UK (or a residency permit) through the HSMP/Tier 1 visa program and move over to get their utopian society. Yet very few ever do. They should -- it would give them a new appreciation for what we have in this country.

hube said...

I concur with Brian. It's been a while since I was in Europe, but I definitely recall thinking -- wondering, actually -- how these countries were "as developed" as ours when all of the amenities we take for granted in the US were largely unknown there. I thought about some of Brian's items, too, especially the clothes dryer. The host family I stayed with for a time dried our clothes -- no lie -- with a single light bulb. So, as a result, we frequently had to wear damp clothes.

Anonymous said...

I live in London, and before that I lived in New York and San Francisco for over four years in all. I have also lived in the US on previous occasions. Most of my life I have lived in Sweden, so in all I have a good idea of different aspects of both Europe and the US and the differences. I can't say that any aspect of the US society in terms of standards of living or societal organization impressed me much, though.

1) Health care. My wife has an eye condition and had to visit an opthalmologist at Stanford University Medical Center (one of the top-level medical centers in the US). The equipment looked as if it was from the Soviet Union circa mid-70s, and they still used photographic film. The equipment they use in Sweden is state of the art - and treatment is free, whereas it cost an arm and a leg to visit the Stanford doctor. Strike one.

2) Dental care. I was unfortunate enough to develop a tooth ache which required me to have a series of visits to two different dentists in the US for a root canal treatment. They did such a botched job that the Swedish dentists had to remove the tooth entirely (whilst commenting on the total incompetence of the dentists who had done the root canal). Incidentally, dental care in Sweden is not government sponsored (except by a nominal amount, $20 or so per treatment), yet the highly professional service I received in Sweden cost me far less than it would have in the US. Oh yes, they still use photographic X-ray film in the US. Odd, since that was replaced over ten years ago by digital X-ray machines in Sweden. Strike two.

3) Living conditions. I lived in two different locations in Manhattan and in a pretty upscale area too. In both, the apartments had cockroaches, followed in the second one by mice (which had the benefit of eating the cockroaches, so one problem less I suppose). Granted that cockroaches may not thrive as well in colder Sweden or the UK, but mice? I grew up in a 18th century mansion in the countryside which had mice, but modern apartment buildings (that is, any building built after 1900) in Sweden simply do NOT have mice. That's like something you read about in horror stories from the depression. The big surprise, however, was hearing from just about everyone I knew - some of whom were incredibly wealthy and lived in truly amazing modern apartments - had vermin problems, even in new buildings. Apparently basic building construction and maintenance is not a common skill in New York - from my experience of other parts of the US, I have little confidence in this being an exception. Strike three.

Three strikes and you're out... but let's keep going:

4) Primitive banking. In Sweden, I could do everything online in minutes - including transferring money from one bank to another, paying bills, paying bills abroad, you name it, with a very high security based on private encoding devices. In the US, transferring money from one bank to another takes days to weeks, even in the same city, and checks are everywhere (no-one has been using checks in Sweden since the 1980s). (Admittedly, UK banking is only marginally more modern than in the US.) Strike four.

5) Primitive telecommunications. For crying out loud, what's the problem here? In Scandinavia, there is cell phone reception essentially everywhere - including remote forests as empty as Alaska. Sweden is bigger than California, so that's not a trivial accomplishment. Even in the UK, cell phone reception is good practically everywhere. In New York, reception was awful, patchy and intermittent; in California, it was non-existent in much of the Bay area. Note that this really has nothing to do with government investing - cell phone companies in Europe are no more subsidized than their American counterparts. I suppose it's just an issue of competence. Strike five.

Add to these basic issues the appaling public transport (the NY subway is appalling - dirty, underfunded, primitive, noisy, and either too hot or freezing - and it is among the best in the US), the heart-wrenching sight of homeless people sleeping over air vents covering themselves with cardboard, in the dead of winter, the useless television programming (except for PBS, other than the interminable pledge weeks), and, to add insult to injury, the surprisingly high taxes - about as high as I paid in Sweden or pay here in the UK - for which I got nothing other than the joy of knowing I helped fund the invasion of Iraq. Oh, and about health care: do check out the statistics: the US spends twice as much on health care per capita than Sweden or the UK, yet life expectancy in the US is on par with Cuba (a communist dictatorship, remember), several years below Sweden (and Germany and even the UK). Good healthcare? I think not.

Yeah, electronics is cheaper in the US - but mostly because the dollar is at an all-time low (and because US-based companies charge twice the amount for the same product). But so what? Electronics are cheap in Singapore too, and in China, or Taiwan. I don't want to live in either of those places.

Car taxes may be higher in the UK, but they're a pittance compared with US car insurance.

And why on earth would you need air conditioning in a country where even in the dead of summer it rarely gets above 25 deg (that's mid-70s F)?

The television you get for your license fee here is of good to outstanding quality. And unlike the PBS, it is not marred by a single-minded US focus.

So you see, there are many good, rational reasons why Europe is held up as the standard to aspire to by the more intelligent and informed of your fellow Americans.


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