Thursday, August 24, 2006

One bit of rhetoric that comes up in a number of discussions, publications, and articles is the belief that America is more "Capitalist" than other (Western) nations. This assumption is nearly universal, pointed to as the reason for America's faster rates of GDP growth compared to other developed countries, and also impacts our perception of other nations. However, I would like to put the idea out there that America's economy is not much more capitalistic and "free-market" than Europe's. If we assume the Heritage Foundation's Index of Economic Freedom is a reasonable indicator of how free-market a nation is, then we see that at least one large European country (Britain) is more free-market than the US, and several small ones (Ireland, Iceland, Luxembourg, Estonia, Denmark) are as well. A number of economies that are occassionally demonized for being over-regulatory are also close to the US on this scale (such as Germany, Sweden, and the Netherlands). And if we can accept that government interference can be localized to specific areas of the economy (such as healthcare) without making the economy less "free-market" as a whole, then we may realize that the US is not the fortress of free enterprise it is made out to be.
I am not trying to say that the US is less capitalistic than other nations. Its rhetoric is among the most pro-market of any country. Its populace is generally individualistic and pro-market, and it has been one of the most stalwart supporters of neoliberal economic policies throughout the world. In a number of industries, there is a lot less government regulation in the US than in Europe, and a lot more innovation. Nevertheless, the widespread conception that America is far more free market than its European counterparts false. This begs the questions of why this opinion exists and how it is perpetuated in the face of economic reality.
Now, the first of these questions--why this opinion exists--is largely a historical one, and will not be treated in much detail here. I claim that it goes back to the centuries-old conception that contrasts the individualistic, materialistic, and culturally primitive Americans with the historically grounded, intellectual, cultured Europeans. We can see this contrast even before DeToqueville, and it has played an important part in the trans-Atlantic dialogue ever since. This comparisson is happily accepted by all sides, both those who idealize American culture and those who romanticize Europe. In any case, I find the question of how this perspective is perpetuated to be more interesting. And my initial hypothesis is that it is perpetuated by a focus on certain areas of economic activity--healthcare, welfare, and taxation. In all these areas, Europe's main economies are generally considered to be more anti-market than the US. And it is because the debate over these government programs combines references to Europe, market forces, and capitalism in general that the US has come to see itself as a capitalist nation and its european counterparts as "liberal democracies".


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