Who’s afraid of Cowboy Capitalism?

If one follows economic statistics moderately closely, there is little that is surprising in German reporter Olaf Gersemann’s book Cowboy Capitalism: European Myths, American Reality. Alas, there is a huge amount of ignorance, wilful and otherwise, and obfustication parading as mainstream commentary about. And it is certainly useful to have such a variety of statistical indicators in one place.

This is an update of a previous book by Gersemann comparing the US and Germany, with the comparison here being extended to the US vis-a-vis Germany, France and Italy, the major economies of ‘Rhineland capitalism’ since 1973. Gersemann is happy to concede problems with the American model of ‘cowboy capitalism’ – lack of health insurance for millions, continuing poverty of single mothers and their kids, dysfunctional public school system, ridiculously high management salaries. But, he writes:

these phenomena are not, for the most part at least, the price Americans pay for freewheeling, dynamic cowboy capitalism. They could all be solved or ameliorated without the United States’ moving more than an iota toward European comfy capitalism (p.206).

Gersemann’s point is that, on a very, very large range of economic and social indicators, the US has persistently outperformed the ‘comfy capitalism’ Europeans and this is a result of deliberate choices on both sides. These choices are, in part, because of a network of myths about the US which are very widespread in Europe. His aim is, by piling indicator on indicator, to demolish said myths and to get Europeans to think more intelligently, and in a more informed fashion, about the different choices and their consequences.

What I found most moving was his demolition of European complacency over the comparative labour market performance. He makes it absolutely clear that, particularly in terms of opportunities for the disadvantaged, the US labour market outperforms the Rhineland economies to a degree which is scandalous.

What I found most striking was his (related) examination of different attitudes to government safety nets. In the US, poorer folk are less enamoured and the wealthier more enamoured of government safety nets. Gersemann suggests this may follow from poorer Americans having a rational grasp of their high levels of opportunities to recover from problems and the richer having an equally rational grasp of their possibilities for downward mobility. Conversely, in Rhineland Europe, poorer folk are more enamoured of safety nets than the richer. Gersemann suggests this may follow from poorer Europeans having a rational grasp of their very real dangers of economic exclusion and richer Europeans having a rational grasp of their insulation from nasty eventualities. (Since poorer voters outnumber richer voters, Europe engages in more redistribution and the US less.) In keeping with this, the US’s redistributive activity is far more targeted on the disadvantaged than is the case in the Rhineland economies (pp 196ff).

Well-written and accessible, Cowboy Capitalism is an excellent compilation of reality.