South By North Strategies, Ltd.

Mark Thoma wonders if the greater insecurity faced by American workers enables more dynamic levels of economic growth, at least relative to European countries.

What about the other promised benefit of a general free market approach to managing the economy, a better ability to withstand and respond to shocks? Has the U.S. fared better than European countries during the Great Recession?
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The U.S. did better than some European countries during the crisis, but worse than others. For example, harmonized unemployment rates from either the Bureau of Labor Statistics or from Eurostat show that the U.S. unemployment rate increased more than most European rates at the onset of the crisis, and that right now the U.S. unemployment rate is higher than in Germany, the Netherlands, Austria, Belgium, Denmark, Finland, and Sweden. But at the same time, the U.S. unemployment rate is quite a bit lower than in Greece, Spain, Ireland, and Portugal, a bit lower than in Italy, and very similar to the U.K.
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With such a mixed outcome, it’s difficult to support the claim that the free market approach that began in the 1970s has lived up to the promise of a more dynamic, flexible, faster growing economy. And the case is even harder to make when the fact that the deregulation of the economy that helped to produce the housing bubble is factored in.