January 29, 2015
Steven Rattner doesn’t like people focusing on stimulus as a path to help Europe grow because it is “simplistic.” Instead he wants Europe to focus on reducing business regulation, protections for workers, and taxes for the wealthy.
Interestingly, he presents zero evidence that these changes will boost the continent’s growth, in contrast to the now vast amount of evidence (e.g. here, here, and here) that stimulus will increase growth. On their face, many assertions seem outright wrong. For example, according to the OECD’s assessment, employment protection for workers in Germany are the second strongest in Europe, yet it has an unemployment rate of 5.1 percent. This suggests that labor market protections are not the biggest problem stunting growth.
Rattner also warns about Europe and even Germany losing “competitiveness.” It is not clear what meaning he assigns to that word, but Germany has a trade surplus of more than 6.0 percent of GDP, in contrast to a deficit of 2.4 percent of GDP in the United States.
In some cases, his complaints not only lack evidence, but they defy logic. It is not efficient to allow companies to dismiss workers at will. Long-term employees make substantial commitments and sacrifices to develop firm specific skills. It will often be difficult for them to find new employment if they lose their job in their late forties or fifties. Dismissing these workers imposes costs on them and the government in the form of unemployment benefits and other transfer payments. That might be good for the businesses who can chalk up higher profits, but it is bad for the economy and society.
In short, this piece tells us that Rattner wants Europe to be more pro-business at the expense of the rest of society. He doesn’t have any real argument as to why anyone who is not rich should support his position, although I suppose it is not simplistic.
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