Reviews for Cowboy Capitalism: European Myths, American Reality

The average rating for Cowboy Capitalism: European Myths, American Reality based on 2 reviews is 4 stars.

Review # 1 was written on 2011-06-27 00:00:00 Jonus Russell European politicians, even the conservatives, are quick to insist that they have no desire to emulate the American system of capitalism (derogatively referred to as "cowboy capitalism"). To hear much of the American media tell it, the Europeans have it right. Gersemann, a US-based German journalist, methodically dismantles this myth. The US system is clearly economically superior, and Gersemann shows us why. Cowboy Capitalism is divided into three parts: Part I compares economic factors between the US and Europe (looking only at Germany, France, and Italy throughout), Part II addresses several prominent economic myths about America widely believed in Europe, and Part III addresses differences in equality. The myths about America dispelled in Part II are: living standards are declining, prosperity is for the most part debt-financed, poverty is on the rise, the jobs created are low-level service jobs, the middle class is only maintained by both spouses working, multiple jobs are needed to get by, unemployment is artificially held down by a very high incarceration rate, and the healthcare system is far inferior. Some of these myths are so wrong it's laughable (only 5% of Americans hold more than one job). Some are misplaced (yes, far more women work in the US than in Europe, but do we really want to push women out of the workplace?). Some are driven in part by European countries themselves (Europe, and the rest of the world, take advantage of the huge benefits of drugs financed almost entirely in America). A particularly pertinent example of a myth busted is that that American prosperity is debt financed and that we are swimming in debt. Savings rates provide a distorted measure'capital gains tax payments are subtracted but capital gains are not taken into account. The amount of debt relative to disposable income rose'but so did wealth relative to disposable income and at a higher rate. Interest rates have dropped considerable over the past few decades, allowing more debt to be carried at a given carrying cost; true to form, debt service grew only very slowly. The share of household income spent on necessities has steadily dropped as well. Delinquency rates on consumer installment debt and default rates on mortgages have been falling (this is one area where I would very much like to see updated numbers'I doubt that trend has continued). The news is not entirely rosy for Americans, but as Gersemann takes pains to point out, that economic growth can be expected to slow over the coming years is not the same as saying it is unsustainable at its current absolute level, as some might have you believe. The most persistent criticism of "American conditions" is of its income inequality. It is an easy target. A politician cannot be for income inequality any more than he can be against motherhood or parks. But Gersemann shows that income inequality is not as bad as it seems. The highest earners in America finance a much higher proportion of the national budget. Transfers in the US are much more likely to go to the truly needy than in Europe. Wages are held down by imports from third-world countries (spreading prosperity to those countries). The vast majority of the super-rich in the US earned, not inherited, their wealth. Technology has created large-scale "tournament" economics in the entertainment industry (including professional sports). The entrepreneurial activities of many of the super-rich have dramatically improved the standard of living for virtually everyone. The college premium in America continues to rise (and is much greater than in Europe). One of the biggest factors is the experience premium'technological progress has made an experienced worker more valuable than at any time in history. Older workers make much more than younger workers, but those younger workers can expect their incomes to rise dramatically as they gain experience. I think each of these, if not outright a positive, can be labeled as a neutral factor or a byproduct of a greater good. Even the exponential growth in executive compensation, which Gersemann is critical of, is in my mind properly considered a cost of doing business (or agency cost, in economic terms), not any kind of injustice. In fact, Europe suffers from a number of more important types of inequality. Long-term unemployment is far more common. Publicly-financed higher education in Germany effects a redistribution of income from working class Germans to the middle and upper class Germans that dominate its higher education system. Europeans are much more likely than Americans to answer that success is determined by forces outside of their control. I have a pretty good grasp of a lot of the theory behind the results Gersemann deals with, but it was nice to see the numbers. The endless regurgitation of numbers already shown in included graphs can make for a tedious read, but it allows the reader to draw his or her own conclusions. Gersemann is meticulously fair; he gives both counterarguments and alternative explanations. He is obviously not an ideologue, and his viewpoint is probably closer to an American mainstream democrat or neo-liberal than libertarian or conservative. Gersemann may be preaching to the choir for many Americans, but I would highly recommend this book for the skeptic open to arguments rooted in empirical evidence. Cowboy Capitalism was published in the US in 2004. Since, both the US and Europe have experienced a serious recession. Does this call into question Gersemann's findings? We should certainly look at home ownership in American in a new light. Awareness is growing than at student loans have reached dangerous levels in America. But the situation in Europe is far worse. The debt crises in several European countries are perhaps the result of trying to adopt a continental system without already having the kind of large, mature economic France and Germany have long had. Reform is desperately needed, but Europeans seem no more open to reform today than they were in 2004. Perhaps the greatest aid Americans could provide Europeans is the gift of this book. Cowboy Capitalism was originally written as a German book comparing Germany and the US. Gersemann revised it, adding data on Italy and France, for release in American. The result is a comparison of the US-system and the "continental"-system. It is very valuable, but I think a comparison including some of the most economically aggressive Eastern European countries and the United Kingdom would have been enlightening. A comparison with the UK would be particularly instructive, as the UK has by far the most "American" economy in Europe.

Review # 2 was written on 2012-06-16 00:00:00 Gavin Clarke Excellent and essential for understanding labor situation then and now.