“‘Decadence,’ with its connotations of self-indulgence and decline, is not too strong a word for the response we have seen to economic success, especially in much of Europe, over the past few decades,” Jim Glassman writes in the latest Commentary.
The article notes:
Prosperity, it seems, can bring sloth, which in turn disrupts the virtuous cycle, though not immediately. There is a period, which I believe we are in right now, where the disruption is not apparent, where it can be obscured through government monetary and fiscal manipulation. But eventually, a simple rule will prevail: you can’t live well if you don’t work.
It is hardly surprising that work produces well-being, and if work diminishes, then well-being, even in the most advanced economy, will slow down, stop, or shift into reverse gear. “Decadence,” with its connotations of self-indulgence and decline, is not too strong a word for the response we have seen to economic success, especially in much of Europe, over the past few decades.
What this means is that prosperity can kill, well, prosperity. Citizens quit working because they have everything they want, and then the economy goes into decline.
An interesting point in Jim’s piece is that U.S. citizens haven’t yet succumbed to the prosperity temptation-we as individuals are still far more productive the Europeans. Nobel Prize laureate Edward Prescott, an economist at the Federal Reserve Bank of Minneapolis, wrote a paper entitled ed “Why Do Americans Work So Much More than Europeans?” Prescott discovered that the average output of a U.S. citizen is stunningly higher than that of a European counterpart. Why? Because Americans spend more time on the job.
“In other words, Americans don’t work any more efficiently than Germans; we just work a lot more,” Glassman summarizes. Even Mississippi, the poorest state in the U.S., has a higher GDP per capita than Italians. So why are those Europeans such bums? It may not be sheer laziness. Glassman explains:
In his paper, Prescott fingered the culprit: high taxes. “The surprising finding,” he wrote, “is that this marginal tax rate [difference between Europe and the U.S.] accounts for the predominance of differences at points in time and the large change in relative labor supply over time.” Taxation rates on the next euro of income became so high that people were discouraged from working-especially with the enticements of early retirement.
But this explanation is incomplete. Why are taxes so high in Europe? Certainly not to maintain a strong defense but rather to pour money into a welfare state that provides lavish support to retirees, perennial students, and others who aren’t working. In other words, Europeans have chosen to have workers support non-workers in their leisure.
If this makes you afraid for our future in the United States, you aren’t alone.