Prediction time: who's going the be better off in 10 years time?

[Monsterzuma]

I'd be curious to hear good arguments of why the EU could outperform the US in the coming decade, I honestly can't think of any.

Arguably, the combined public debt-to-GDP ratio and consolidated budget deficits of the EU are considerably better than the public debt-to-GDP ratio and budget deficit of the US. That's one of the few arguments I can think of. Maybe that means that IF Europe moves to being in a fiscal union it could be in a decent position. But until that happens it's an esoteric and useless variable.

Another thing I can think of is that in a peak oil scenario, Europe could relatively easily cope by lifting it's taxes on gasoline consumption, whereas the US would have to enable subsidies to get the same effect. The latter is probably harder to sell politically. Europe currently already has a much more fuel efficient car fleet than the US.

Alternatively one could argue that the US has a lot of relative gains still to make by making it's car fleet more fuel efficient, whereas Europe is already close to the optimum.

 

[luiz]

And the US has a lot of unexplored energy potential in form of oil shale, which would become increasingly viable as oil peaks. And the US is generally less dependant on imported oil (while it's still quite dependent).

But yeah, if the EU moves into a full-blown fiscal union in the coming decade it could perhaps be in more solid footing, but I doubt that.

 

[Kraznaya]

Does Turkey count as being in Europe?

 

[Winner]

And the US has a lot of unexplored energy potential in form of oil shale, which would become increasingly viable as oil peaks. And the US is generally less dependant on imported oil (while it's still quite dependent).

"Drill baby drill" has been thoroughly debunked. It does next to nothing to keep oil prices down, while the profits go to the already ultra-rich and environmental costs are socialized. Oil sands exploitation is a massive ecological disaster waiting to happen, and shale gas extraction has already caused great deal of damage in parts of the US. Which is why in the EU it's very close to being banned altogether; people aren't that fond of having the ground under their feet pumped full of toxic chemicals, you see.

Resource shortages aren't an acute problem for Europe, especially with a huge and reasonably reliant supplier next door - Russia/former USSR countries.

Demographics - I didn't say Europe doesn't have a youth unemployment problem. What I said was to react to the popular misconception that growing population is always good. I explained that if your economy cannot keep up with population growth, or just barely does, then long term unemployment is hard to push down. I would also note that the general hostility of right-wing America to invest into things such as education and healthcare ("what business is that of the staaaate?") isn't helping the US to deal with the changing circumstances. Manufacturing jobs are disappearing, crappy jobs in services don't lead anywhere and well-paid jobs require good education and qualification, which aren't easy or cheap to get.

Does Turkey count as being in Europe?

No.

 

[luiz]

"Drill baby drill" has been thoroughly debunked. It does next to nothing to keep oil prices down, while the profits go to the already ultra-rich and environmental costs are socialized. Oil sands exploitation is a massive ecological disaster waiting to happen, and shale gas extraction has already caused great deal of damage in parts of the US. Which is why in the EU it's very close to being banned altogether; people aren't that fond of having the ground under their feet pumped full of toxic chemicals, you see.

I find the notion that drilling more does nothing keep oil price down pretty laughable. Drilling a little bit more will have no effect, so an individual oil well or even oil field will have no measurable effect. But it's freaking obvious that the price of oil is a function of the amount of oil being drilled (along with other variables like demand and speculation), so drilling more does keep oil price down. What would happen if all the world stopped drilling, huh?

The US is one of the biggest oil producers in the world, so their production has a massive effect on oil prices. Not only that, but each gallon the US produce is one less gallon it imports. Imagine how their already monstrous trade deficit would look like if they had to import all the oil they use.

If new technologies are developed that allow oil shale to be extracted at competitive prices (and that day is near), the economic impact will be very substantial.

Resource shortages aren't an acute problem for Europe, especially with a huge and reasonably reliant supplier next door - Russia/former USSR countries.

The former USSR is still outside of the EU meaning rising raw material prices result in larger trade deficits for the EU. OTOH, they can very well have the opposite effect on the US, one of the major producer of raw materials.

Demographics - I didn't say Europe doesn't have a youth unemployment problem. What I said was to react to the popular misconception that growing population is always good. I explained that if your economy cannot keep up with population growth, or just barely does, then long term unemployment is hard to push down. I would also note that the general hostility of right-wing America to invest into things such as education and healthcare ("what business is that of the staaaate?") isn't helping the US to deal with the changing circumstances. Manufacturing jobs are disappearing, crappy jobs in services don't lead anywhere and well-paid jobs require good education and qualification, which aren't easy or cheap to get.

That's why, while both have a considerable unemployment problem, the one of the EU seems worse to me. Even with a basically stagnant population many countries in the EU face massive unemployment. And the extremely rigid labor laws make employment respond very slowly and weakly to economic recovery, when it does come.

As I said, I expect both the US and EU to have a very tough next decade, but pretty much all problems seem worse on the EU, especially when you remember that two of the biggest countries in the block are Italy and Spain.

 

[Mise]

America, without a doubt.

EDIT: It's actually kind of a difficult question, because there will be so much variation in both places. Things in Greece, Spain or Ireland can't get much worse than they are now, though.

 

[innonimatu]

The ironic thing is that young Europeans are having as much or more difficulty finding jobs themselves. The entire economical system of Europe is entrenched and rusting, and I would be sincerely surprised if we had universal underemployment in 10-20 years' time.

Someone notices it! It's amazing how the talk about a demographic crisis keeps being repeated when we also keep hitting new heights of youth unemployment!

The only crisis we have is one of organization. And it's nether small nor easy to solve.

Winner, the unemployment problem is actually considerably worse in much of the EU than in the US. Also, the less flexible labor market makes it harder for employment to pick up even after the crisis is over (think France or Spain, two major EU countries).

Less flexible labour market?! do you have any idea of the prevalence of temporary contracts in EU countries recently? Especially in Spain? In fact there is a strong correlation between that and unemployment levels...

 

[Cutlass]

Drilling in the US has no real effect on prices because we cannot add production faster than OPEC can idle production to manage prices, or global demand increases. And the US oil industry is non-competitive due to mergers. So no drilling is really of short term benefit to consumers.

 

[luiz]

Drilling in the US has no real effect on prices because we cannot add production faster than OPEC can idle production to manage prices, or global demand increases. And the US oil industry is non-competitive due to mergers. So no drilling is really of short term benefit to consumers.

The US is the third biggest oil producer in the world, so any significant fluctuation of American production can have an impact on global prices, not to mention on the US trade deficit.

 

[luiz]

Less flexible labour market?! do you have any idea of the prevalence of temporary contracts in EU countries recently? Especially in Spain? In fact there is a strong correlation between that and unemployment levels...

Hiring and firing is far simpler and cheaper in the US than in most EU countries. Of course, the EU is not a monolith and some nations have fairly flexible labor markets. Others are not flexible at all. In France, for instance, firing people is virtually illegal.

 

[Cutlass]

The US is the third biggest oil producer in the world, so any significant fluctuation of American production can have an impact on global prices, not to mention on the US trade deficit.

Except that it hasn't.

 

[luiz]

Except that it hasn't.

That's not a good way to make an argument. Other factors (Chinese demand, speculation, etc.) might keep driving prices up even when production increases, but that doesn't mean, at all, that increased production is innocuous.

As I said, even if you discount the effect on prices (and you can't), each extra gallon the US produces is one less gallon it imports, and you do have a monstrous trade deficit. Surely you can't dispute this.

 

[Cutlass]

That's not a good way to make an argument. Other factors (Chinese demand, speculation, etc.) might keep driving prices up even when production increases, but that doesn't mean, at all, that increased production is innocuous.

As I said, even if you discount the effect on prices (and you can't), each extra gallon the US produces is one less gallon it imports, and you do have a monstrous trade deficit. Surely you can't dispute this.

Trade balance is definitely a factor. But for the other, the reason I use the shorthand of my previous post is that just because a theory says something, even though the real world is not in compliance with the theory, does not mean that we are required to assume that the theory is correct.

We have had strong growth in domestic US supply, primarily through improvements in technology making previously uneconomic oil and gas deposits commercially viable. And yet there was a huge surge in oil prices. And that was at a time when US refineries were at a relatively low utilization capacity.

Clearly supply alone is not driving prices at the pump.

Studies have shown Wall St speculation is adding about $0.50/gallon to the retail price. But further than that, you have to understand that oil is not a free market on the global scale. It is heavily concentrated in few producers who can, and routinely do, manipulate the market for their own interests. And so the point is that there is no foreseeable change in US domestic production that can be expected to have other than trivial price effects. And the why of that is very simple. Saudi Arabia and some of the other OPEC producers can make themselves better off by managing production quantities to offset US production improvements. And because they can, and because it is a profit maximizing strategy both in the short and the long run, that is what they do.

But even Saudi Arabia isn't able to fully manipulate prices. In 2008 when prices were spiking SA could not sell all the oil it was willing to produce to push the prices down. And that is because the refinery level of the business is oligarchically controlled as well.

So saying drill baby drill, and expecting that to have any significant effect on near or even medium term prices is not going to work.

Further, you have to remember that oil is somewhat price elastic. While supply is managed to keep prices in a range, if price falls demand rises. And so that offsets the advantages of drilling.

So really nearly the entire benefit to the US is in terms of the trade deficit. There are some jobs, but oil production doesn't employ really large numbers of people. So drilling isn't "bad" for the US, but it is also not more than a fairly minor "good" for the country.

 

[innonimatu]

The US doesn't have significant questions about sovereignty. Our currency is stable. Our educational system, which gets poopooed, is really not substantially worse than a lot of other countries, and our universities are far better. I think that problems in Europe will obviously hurt things in the states, but our bigger problems are more likely to be corrected in the short term.

But the US has a bit of of an imperial overstretch problem already. Military expenses as a fraction of state expenses are pretty high compared to european countries. And government debt is high, even though the US can finance it by, basically, lending to itself. Expecting other countries to keep absorbing american debt will probably lead to disappointment very soon, as all countries start having debt problems.