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European Myths, European Realities

Following centuries of bold explorations in science, navigation and engineering, Continental Europe in the 20 th century launched major social innovations. New economic policies and institutions were invented in the belief that a more rationally and humanely organized economy would deliver higher productivity and wages, greater job satisfaction, lower unemployment, wider participation, and milder slumps. This has resulted in a market economy that retains private ownership, but that looks very different from other market economies, such as America's.

The characteristic Continental economy is loosely organized along the corporatist lines that emerged during Europe's inter-war years (1919-1939). A tripartite system of big, closely held corporations, big industrial unions and government mediate conflicts and block changes through barriers to entry, control over licenses and standards, sway over big banks, golden shares and, in some countries, state ownership of key enterprises.

Inter-war corporatism undermined labor unions, even outlawing strikes. Nowadays it empowers unions through concertazione , co-determination, and an unqualified right to strike. But while this safeguards against business abuse and "externalities" that cause environmental damage, it also yields a more politicized and regimented economy than America's atomistic, decentralized capitalist structures do.

Economic and social policies are another distinctive feature, especially in Western Europe, where massive social insurance and assistance programs are seen as fostering sturdier, more resilient human capital. Or consider this cultural difference: American children typically leave home at 18, some earlier; Continental offspring expect support for as long as desired. Europeans see this as healthy. Americans, with their ethos of self-help, initiative, ambition, and competition, think it breeds risk-averse Peter Pans unwilling to strike out on their own.