Will Obama Learn from Europe?

Presidential candidate Barack Obama will soon visit several countries in Europe.  What will he see, and more importantly, what will he learn?

Democratic activists and European intellectuals are ecstatic about
Barack Obama’s trip to Europe. Europeans see a man they hope will win
the presidency.
U.S. Democratic activists see their nominee gaining the experience of a
continent whose policies — more pacifist, statist and secular than
America’s — they would prefer to emulate. Both sets of people hope Mr.
Obama will be influenced by what he sees and emerge a man whose message
of change will be informed by stereotypical European aspirations and
experiences.

However what he sees may not be what many of his constituents expect.

But the Europe Mr. Obama will visit is quite different from the one
Americans often hear about. Over the last decade, much of Europe has
very quietly embraced market-based reforms that either draw inspiration
from American successes or — on issues like retirement security — are
even more market-oriented than many U.S. Republicans support.  What’s more, these changes have been adopted and implemented by parties left and right.

Such as?

The cutting of corporate income- tax rates is an excellent example of
European market-friendly bipartisanship. Germany’s right-left coalition
of Christian and Social Democrats implemented a large rate cut earlier
this year, reducing the top marginal corporate rate to about 30% from
39%. Spain’s Socialist and Britain’s Labor governments have followed
suit, reducing their countries’ top corporate rates.

These traditionally left-of-center parties understand that in a
globalized economy, wealth and investment are mobile, flowing to those
countries that provide hospitable investment climates. As part of a
European Union where center-right governments in Greece, Denmark,
Ireland and Eastern Europe have dramatically reduced corporate tax
rates, they understand that they cannot help workers if they drive away
the capital that employs and pays them.

Uh oh… that flies right in the face of a core Obama philosophy.  We’ve often discussed this capital/tax-driven flight of knowledge in the past.  But this may not be the only eye-opener for Mr. Obama.

Many European countries are also ahead of America when
it comes to pension reform. Mr. Obama’s main solution to the looming
Social Security bankruptcy is to raise taxes on the well-off. To date,
he has eschewed other solutions such as raising the retirement age or
creating private Social Security accounts. But European center-left
parties have no such reservations.

Take Sweden, for example. In the 1990s, a series of
center-right and Social Democratic governments reached agreement on
wide ranging pension reforms that include a private account option not
too different than the one proposed by President George W. Bush.

Now that’s something you don’t see too often… Sweden and George Bush agreeing on policy.  But egads it’s true.  Basically the change in Europe reflects a recognition of reality.

This new European consensus is founded, like all political
calculations, partly on conviction and partly on necessity. European
center-left politicians have slowly come to respect the power of
markets. Much like the so-called "Rubin Democrats," they recognize that
the energy and innovation of market actors can better produce wealth
than more traditional social democratic economic theory.  European center-left approval of market reforms is also rooted in
economic and political necessity. Even social democratic countries
benefit from a global economy and hence must compete in it.

Will Mr. Obama learn from what he sees and modify his policy proposals?  On one hand he is raising the ire of the left-wing fringe of his party by already moving to the center on many issues, but on the other he has set some policies in stone without having set foot in the gemba of Iraq an Afghanistan.  I guess time will tell.