Quite a few commentators on my recent posts regarding Zinsmeister have seen them as essentially quibbles about statistics which are irrelevant since ‘everyone knows’ Europe is in terminal decline. This is an example of one of the favorite themes of ‘pop’ economics: ‘declinism’, and its opposite, triumphalism. The basic idea is to select statistics on which a given country is performing badly (or well) and extrapolate them to predict disaster (or triumph).

Typically triumphalism is displayed by supporters of the party in office, while declinists claim that otherwise inevitable disaster can be averted only if they are put in charge and their policies implemented.

I first tackled this kind of thing fifteen years ago, at which time it was regularly predicted that Australians would end up as the ‘poor white trash of Asia’ (the phrase is attributed to Lee Kuan Yew, but was used by many others. My comments in a paper I published in the Current Affairs Bulletin, entitled, ‘White trash of Asia?’, [1987, 64(2), 18–25.] could be repeated with marginal changes today

Indeed, by appropriate selection of time periods and criteria, any nation can be made to look good or bad. For example, it is currently fashionable to compare the “dynamic” US economy with the hidebound and over-regulated economies of Western Europe. Yet, only a few years ago the US was being compared unfavourably to these very countries. All that has happened in the interim is that the US has moved from a trough to a peak on the business cycle. Over the post-1973 period as a whole, the US has done slightly worse than most European economies.
It is quite straightforward even to make a country like Japan look bad. For example, Norton and Macdonald (1981) compare a number of countries on the basis of changes in rates of unemployment, inflation and growth since 1973. Their purpose is to compare Australia’s performance with that of other countries, but when their criterion is applied to changes in growth rates, Japan is the worst performer in the OECD.

Pessimism about the US came back into vogue after the stockmarket crash and the Bush I recession, before being replaced by even more vigorous tiumphalism from the early 1990s onwards. And of course it’s not necessary to massage the stats to make Japan look bad nowadays.

In the time I’ve been observing the debate a string of countries have been touted as ‘miracle economies’ and then lost their glow – New Zealand, Norway, Japan, Austria, the Netherlands, Britain, Sweden, Germany and the ‘Asian tigers’, to name but a few. And of course, the US comes into fashion with every boom and goes out of fashion with every recession. I’ve written a lot of articles in both newspapers and economic journalism making this point, but without making the slightest impact on the popularity of declinism and triumphalism. A few examples are here, here and here.

My basic point is that differences in economic performance between developed countries over the past thirty years have mostly been transitory. Sometimes one country looks good on one criterion, sometimes another. The more durable differences are in the way income is distributed in which productive capacity is allocated between public consumption, private consumption, leisure, household production and so on. There is for example a real social choice to be made between high levels of income security and opportunities to become very wealthy. Europe goes for more of the former and America for more of the latter. Similarly, Europeans have always preferred more leisure and this difference has grown in recent years.