Try explaining this to your average elite European and you will figure out why Europe isn't going anywhere.

Of course, if you do try to explain this to an average elite European, before you can compare European and US unemployment rates, the European will already have swamped you in cries of social justice. Cries purportedly showing how evil those GDP-growing and job-creating Americans are - particularly if they're named Bush.

Of course they're really evil, all those jobs, all that wealth (with which people can get educated, diseases cured, progress attained). If only America had more social justice instead! Then it could be just as stagnating and depressing as Europe.

I agree with you Jack. It's almost like the debate could be boiled down to ...

American: Where would you rather be working?
European: Where would you rather be unemployed?

I agree with this point in general, but one of the real failures of the financial system over the past decade or two has been the failure to enforce rules that ensure transparency of financial results to investors, ex. enron, mutual fnd scandals, etc. This strikes at the heart of the American systems ability to identify and weed out failure. From the discrepancies between corporate reported profits and government data on profits we can infer that the misreporting of results is widespread. And the very light penalities on corporate misdeeds means that executives still have lots of incentive to obfuscate results. Therefore, people, like Drezener and myself, who think the ability to weed out failures is critical to future growth, should spend lots of time promoting more funding for the SEC, strucural measures to promote independence of the agency, and excoriating politicians like Bush who have not made substantial effort to promote transparency.

CalDem, if you believe what you're saying, then don't you think that the real scandal is not Enron and the mutual fund scandals, but presumably all the other companies that are getting away with it? The existence of the Enron scandal itself is not evidence of inability to "identify and weed out failure." Perhaps it was detected "too late," but hindsight is always clearer. Evidence is things like your second point-- that discrepancies in earnings may mean that other companies are out there.

At the same time, one has to balance the ill effects of additional funding for the SEC, increased enforcement, etc. Those actions do have real costs to the economy as well. If one requires an investigation every time a company has worse performance than its executives claimed it would, then there will be a lot of investigations of innocent companies and executives, and it will certainly hurt the dynamism of the economy. The SEC can't possibly evaluate the business plan of every company in the economy fully, either. So any solution is guaranteed to be imperfect.

Every other grocery salesclerk in greater Boston seems to be a gray-haired fiftyish man that looks like an engineer.

Some recovery.

John,
that's right, I see Enron as a symptom of a broader disease. Thinking about the level of enforcement, clearly the correct level is not zero, right? Also, it probably is quite difficult to detect these frauds beforehand and perhaps would add an undesirable element of government altering business plans, though I think we can do a better job. Therefore that means for the frauds we do detect we really have to have all the enforcement and prosecution resources to go after all the clear frauds that surface. SEC doesn't have close to enough resources to do this, nor clear enough statutes to go after people who clearly were wrong. Therefore a big increase in the SEC budget is warranted.

As a long time reader of the Economist, let me say that this quote is somewhat out of context for the main line of Economist commentary. Yes, they are praising the overall power of American capitalism. However, they have had many disagreements with specific and recent US economic policies.

There is lots wrong with American capitalism today that we shouldn't skim over. The Economist has editorialized about the problems of executive pay and board accountability, about the standards of accountants, and there is the ever present shadow of the continuing endemic scandals on Wall Street affecting hundreds of mutual funds used by small and large investors alike. Things are pretty bad. The SEC is almost wholly ineffectual. Corruption and illegal trades are rampant- the FBI just busted 47 people in the Forex currency trading world recently, and even they said it was just the tip of the iceberg.

One of the great unheralded stories of the decade has been the Bush Admin has been falling down completely on the job of regulating and enforcing the laws on the marketplace. Here we see marketplace idealism and absolutism shown for the naivete about human nature that it is - markets work efficiently only *with* adequate regulation and enforcement. Failure merely leads to corruption which the marketplace competition does not weed out. It was not the marketplace that exposed Putnam and Strong's wrong doing in the mutual fund world, it was Eliot Spitzer.

Yea, scandals starting with the CA energy boondoggle, moving through Enron and the never ending implosions, moving through mutual fund scams, and now into currency trading...

Well, let's just say it's not seen as being a strong vote of confidence in the effectiveness our regulation apparatus.

A point of editing, it is recorded that by late-2002, wordsmiths around the planet had found the word "indeed" to have become tired, hackneyed, and dang plum wore out.

Every other grocery salesclerk in greater Boston seems to be a gray-haired fiftyish man that looks like an engineer.

I'm inclined to think that this reflects more on the tendency of Boston engineers to disregard the market than on the state of recovery.

Here in Milwaukee, more of a Rust Belt town than Boston, the groceries are staffed mostly by people who look like housewives and students. I'm a fiftyish man with long hair just starting to gray at the temples, and am working a technical job with some engineering duties without an engineering degree.

Oldman,
You have a good point, but you can't just hang it on this administration. When the economy was strong the previous administration was happy to look the other way (and who's to say that wouldn't have been true with a R. administration). As for Spitzer, some of his work is good, a lot of it is grandstanding.

While I don't disagree with the attacks on Bush's attention (or lack thereof) to regulation, I think that this entire issue is largely separate from the political arena. Our economy is very vibrant, and that has little to do with a marginal difference in the tax rates or who is making speeches behind the Presidential seal. It has a lot more to do with the fundamental structure of our economy and our outlook to the role of the market in society.

Now regarding the difference between Europe and the US, could it be that they are just different models, without one being better than the other? I think it is foolish for us to mock the European social model. Europeans support it and don't want to change. Sure there is a comprimise in terms of unemployment levels and the ability of the economy to generate new jobs, but there are certain pluses to the European model. If I was in Europe I wouldn't have to be worrying about getting myself health insurance and I wouldn't have to think about how I was going to pay for school.

I am not advocating that we adopting the European model either. I think that within the broad spectrum of what we label capitalism there is room for if not a thousand flowers to bloom, at least several different ways of structuring the state and society's relationship to the market.

Finally, let me just get back to this issue of regulation. I think that a lack of regulation could seriously harm our financial system. And while I think the SEC could have done a better job the fact that Spitzer has had such an impact shows that there is enough redundency in the system that it is not on the verge of collapsing. And anyone who thinks there is not a place for regulation in a financial system can just put their head back in the sand because you clearly have no idea what you are talking about.

Whatever the failures of corporate governance, accounting, and reporting here in Vespucciland, the situation in much of the rest of the world is worse, even in Europe. While overpaying executives is not a European vice, trying to figure out the financials of even some of the more trusted firms is a frustrating exercise.

That some European countries own a substantial portion of their public corporations leads to idiotic decisions intended to benefit a government policy, such as low unemployment, over benefit to all shareholders. The Europeans have also had their share of corporate scandals.

As for Asian companies, who the heck knows what’s going on with the interlocking ownership interests, opaque organization, government involvement, and overvalued assets (primarily in Japan). There are some phenomenal companies that do seem to run a tight ship, but investors must be quite wary.

Finally, I want to point out that this post, with the exception of this sentence, eschews the use of “indeed.”

“But the real genius of American capitalism may not be its celebrated appetite for risk, but the brutal and uncompromising way in which it deals with the inevitable failures that follow”

We are also the first nation that embraced the concept of the New Adam. An American is given more than one chance to make it. Bankruptcy and other failures are perceived to be temporary. One may stumble but they are encouraged to get up and start again. This was the exact opposite of the reality of the Old European culture. Also, we placed much value on meritocracy. The Old Europeans were far more snobbish and essentially damned an individual if they were not born in the so-called proper family.

“A point of editing, it is recorded that by late-2002, wordsmiths around the planet had found the word "indeed" to have become tired, hackneyed, and dang plum wore out.”

Well, I guess that I’m indeed “tired, hackneyed, and dang plum wore out.” I also roast puppies and small children for dinner. Both go good with a full bodied chianti.

"Every other grocery salesclerk in greater Boston seems to be a gray-haired fiftyish man that looks like an engineer."

I don't know whether to laugh or cry after reading the statement above. It is so elitist, the Jon is such a snob, it's unbelievable.

In his experience grocery salesclerks are either mentally deficient teenagers with bad complexions, pretty young women with bright smiles, old hags with bleached blonde hair and rhinestone eyeglasses or middle-aged men without any hair at all?

In other words, people who work as grocery store clerks do so because of their innate inferiority and as such would have some tell tale mark upon their bodies so we can distinguish them from imposters who are really out-of-work engineers.

I just know that this guy is a knee jerk liberal who is oh so sensitive to the beautiful rainbow of multi-culturalism and diversity, but wouldn't want his sister to marry a lowly clerk.

This too is George Bush's fault. During the Clinton reign of terror, there were no engineers posing as clerks in greater Boston.

Well, the genius of american capitalism is obviously not to be found in the textile industry nor the steelindustry.

Mr. Scott,

You're absolutely right about not hanging it all on Bush. Clinton's admin while better, did fail to seriously support accounting standards improvements that would shortly later become glaring in multiple bankruptcy scandals. However, my real mistake was thinking that a law and order Republican administration would do better and not worse. Finally, regarding Spitzer he exposed the Mutual Fund Scandal which by dint of it being slightly difficult to understand has not recieved much mainstream press. The news is that up to 25% of all Mutual fund companies may have let insiders scam their customers by giving them preferential trading rights. That's allot of people and allot of money, and too many companies going on for too long for it to be some isolated incident. If Spitzer had done that and that alone in his entire life, he would have done much more than many men who hold public office. Grand-stander? Sure. Genuine public servant? That too. And how many people can one say that of nowadays? Not many.