Europe's Economic Dream...Time to Wake Up

For decades, Europe's recipe of capitalism with a heavy dollop of socialism allowed its people to enjoy what looked like a perfect balance between prosperity and security. Europeans made less money than Americans, but they enjoyed a quality of life that many on the other side of the Atlantic would find difficult to comprehend, with month long vacations in the summer, short work weeks, and guaranteed job security, health care and education.

Then came globalization, competition and the cruel demographic reality that an aging population simply cannot pay for the generous benefits of its cushy social net. Making matters worse, another unpleasant reality crashed the party: With high taxes, long vacations, and extremely liberal sick leave and unemployment compensation, European economies had started falling further and further behind the United States. One day, the workers would not be able to provide for the retirees, the unemployed, the students and the disabled.

That's when even leftist governments started rousting their people. In the early 1990s, Netherlands Prime Minister Wim Kok, a socialist, started cutting taxes to try to get the economy moving. Years later, Kok was selected to lead a committee in the European Union seeking ways to stoke the EU economies. The committee concluded that "the impact of the tax and benefit systems in many member states continues to provide serious disincentives for people to enter, remain and progress in work."

Europe vowed to change all that. The vaunted Lisbon Declaration of 2000 declared that the EU would become "the most competitive and dynamic knowledge-based economy in the world, capable of sustainable growth," with "more and better jobs."

Easier said than done. Much.

When the French government tried to change the rules that kept youth unemployment stubbornly high - making it possible, in other words, to fire young workers in the first two years of employment - the streets exploded in riots. The government gave in, but the battle is far from over. And when it's done, as mentioned, economic Europe will be closer to the American model.

"That is not a good thing," said Edgar Lamaker, 41, a music producer in Amsterdam. "But," he conceded, "it's unstoppable." Like many Europeans, Lamaker sees much not to like in the American model. He believes society should help the weak: "There should be protection for people who get ill or who have less." Still, he thought the French riots were absurd. Individuals should take responsibility for their own lives, he said.

The idea of living in a Europe that is becoming like America - where millions have no health insurance, where students enter the workforce under the punishing weight of student loans - is thoroughly unacceptable to many here. The solution, one 32-year-old psychologist told me, is finding the right balance.

The search for balance will focus on two areas: the role of government and the quality of life. Labor unions in the Netherlands and other parts of Europe have accepted lower wages in exchange for longer vacations. The American lifestyle, in which long weekends often masquerade as vacations, brings a look of horror to the faces of Europeans. It sounds a little too much like slavery to people who say they simply could not survive without a full month on the beach or in the countryside. Most people here enjoy five weeks of vacation a year, in addition to several weeks of sick leave. But permanent disability became so severely abused that it got to be something of a national joke. And, if you should happen to lose your job, a year's worth of unemployment benefits all but ensure that you will take a few months off before you begin looking for another position.

That is hardly unique to the Netherlands, where politicians have been pushing for change for more than a decade. In Sweden, the average worker takes 85 days off each year. You'd think that in France, the 35-hour workweek would make vacations less urgent - and yet, almost nobody works in August.

It's a good time to take a picture of today's Europe, because this picture is going to change.

"European socialism is dying," Lamaker said, a little wistfully.

. . . Europe does not want to become America. The consensus, however, is that America has a better formula for economic growth. Europe will move toward the U.S. model as a sailor navigates toward the North Star: with no desire to get all the way there.