The Future of Europe: Reform or Decline [Paperback]

Alberto Alesina (Author), Francesco Giavazzi (Author)

Book Description

Publication Date: September 26, 2008

Unless Europe takes action soon, its further economic and political decline is almost inevitable, economists Alberto Alesina and Francesco Giavazzi write in this provocative book. Without comprehensive reform, continental Western Europe's overprotected, overregulated economies will continue to slow--and its political influence will become negligible. This doesn't mean that Italy, Germany, France, and other now-prosperous countries will become poor; their standard of living will remain comfortable. But they will become largely irrelevant on the world scene. In The Future of Europe, Alesina and Giavazzi (themselves Europeans) outline the steps that Europe must take to prevent its economic and political eclipse.Europe, the authors say, has much to learn from the market liberalism of America. Europeans work less and vacation more than Americans; they value job stability and security above all. Americans, Alesina and Giavazzi argue, work harder and longer and are more willing to endure the ups and downs of a market economy. Europeans prize their welfare states; Americans abhor government spending. America is a melting pot; European countries--witness the November 2005 unrest in France--have trouble absorbing their immigrant populations. If Europe is to arrest its decline, Alesina and Giavazzi warn, it needs to adopt something closer to the American free-market model for dealing with these issues.Alesina and Giavazzi's prescriptions for how Europe should handle worker productivity, labor market regulation, globalization, support for higher education and technology research, fiscal policy, and its multiethnic societies are sure to stir controversy, as will their eye-opening view of the European Union and the euro. But their wake-up call will ring loud and clear for anyone concerned about the future of Europe and the global economy.

Editorial Reviews

Review

"As the new Congress begins work, it should peruse a recently published book, The Future of Europe: Reform or Decline, by two Italian economists, Harvard's Alberto Alesina and Bocconi University's Francesco Giavazzi. They explain what went wrong in Europe in particular in France, Germany, Italy, and Spain and how Europe can continue as a major economic power." Diana Furchtgott-Roth New York Sun

"This book could have been a diatribe, but is saved from that by the intelligence of the authors' arguments and policy recommendations. A must read for those interested in the European economy." P. K. Kresl Choice

"This landmark volume offers a lucid account of the first decade of economic transition by some key actors and first-hand observers. We follow their hopes, achievements, and disappointments, and come to understand better the immense challenge of transition."--Charles Wyplosz, Professor of Economics, Graduate Institute of International Studies, Geneva

"Like all market-based economies, the transition countries are now subject to financial instability. This timely and important book uncovers the distinctive features of transition that give rise to financial crises in emerging market countries."--Charles Wyplosz, Professor of Economics, Graduate Institute of International Studies, Geneva

About the Author

Alberto Alesina is Nathaniel Ropes Professor of Political Economics at Harvard University. He is the coauthor (with Enrico Spolaore) of The Size of Nations (MIT Press, 2003).

Francesco Giavazzi is Professor of Economics at Bocconi University and Visiting Professor at MIT. He is the coauthor (with Alberto Giovannini) of Limiting Exchange Rate Flexibility: The European Monetary System (MIT Press, 1989).

Product Details

• Paperback: 200 pages
• Publisher: The MIT Press (September 26, 2008)
• Language: English
• ISBN-10: 0262512041
• ISBN-13: 978-0262512046
• Product Dimensions: 0.5 x 6 x 8.8 inches
• Shipping Weight: 10.4 ounces (View shipping rates and policies)
• Average Customer Review: 3.7 out of 5 stars  See all reviews (3 customer reviews)
• Amazon Best Sellers Rank: #1,253,331 in Books (See Top 100 in Books)

Most Helpful Customer Reviews

6 of 6 people found the following review helpful

3.0 out of 5 stars a decent exposition of the neoclassical arguments with some serious flaws July 2, 2009

By Augustas B.

Format:Hardcover

Before reading this book I had ambivalent expectations. On the one hand, I had read Alesina's "Fighting Poverty in the US and Europe" and found it pretty reasonably argued. On the other hand, the words on the back cover sounded like banal conventional wisdom; the favorable review by Niall Ferguson, whose economic reasoning with regard to many issues such as imperialism and fiscal policy has been rightly ridiculed by Krugman and others, did not promise much either.

Luckily, this book turned out to be decent. It presents mostly standard neoclassical arguments about the problems of Europe. The arguments about inefficient universities, overregulated product markets and so on are pretty pretty persuasively developed. Moreover, the authors make valuable qualifications - they do not suggest Europe should get rid of its generous social safety net; instead they say it could be delivered much more efficiently. Nordic countries, routinely disparaged by neoclassical economists as a nightmare, get credit for efficient judicial systems and labor market flexibility. Furthermore, postwar European industrial policy gets credit for high postwar growth (something many neoclassical economists try to deny), although the authors believe that its continuation is one of the reasons why European economies are sluggish. Basically, the strength of this book is a pretty nuanced exposition of traditional arguments about Europe's economic problems.

However, there are some parts that are not so persuasive or well argued. The authors' general admiration of the American financial system is laughable in the light of the current crisis. Their suggestion that European countries should have bigger military budgets since many technological innovations in the US come through military projects sounds like a joke.... Although it is true that many technologies came about this way, doing it through the military involves immense waste and handouts to private industry (Chalmers Johnson has recently provided some scathing coverage of the issue). As Alesina and Giavazzi seem to be concerned about crowding out in general, it is strange that this concern is forgotten when it comes to military spending. Finally, their assertion that Americans work more and make more is problematic, too, as is their meritocratic picture of compensation in the US. Up until recently about 40% of all profits in the US economy went to the financial sector (employing only about 10% of the population) which would imply it was the most productive industry. However, now we know that bloated compensation in the US financial sector had little to do with productivity. Furthermore, most Americans work more than Europeans because for the past three decades real wages have stagnated for everybody but the really well off and in order to keep consuming more most people had to work more.

This book is decent if one wants to read a coherent exposition of the neoclassical position. However, do not expect too much - there are quite a few silly arguments, too. Read more ›

1 of 1 people found the following review helpful

5.0 out of 5 stars A well written and documented policy book October 20, 2007

By Dr. Bojan Tunguz HALL OF FAMETOP 50 REVIEWERVINE™ VOICE

Format:Paperback

This book deals with several major policy problems that Europe and Europeans are facing today. The usual suspects include non-competitive research and universities, mishandling of the increasingly multiethnic societies, liberalization of markets, high price of the social state, rigid labor market, to name just a few. There seems to be an increasing amount of literature and critical articles dedicated to these issues, in a stark contrast to the inability of European politicians to get a firm grip on them. Even though this book claims that Europe should not necessarily adopt Anglo-Saxon social and economic model, it is hard to escape this conclusion when reading the actual comparisons with the UK, US and other "Anglo-Saxon" countries.

One big policy issue that is not being discussed here deals with the collapse of the European family and its roots in the dismantling of the Judeo-Christian religio-ethical tradition. A good place to start reading more about this is George Weigel's "The Cube And The Cathedral: Europe, America and Politics Without God"

Additional criticism of this book concerns its editing. There are numerous spelling and other mistakes, and several graphs and charts are not all that clear. Otherwise, it is a very readable and engaging book.

3 of 4 people found the following review helpful

3.0 out of 5 stars Interesting but not completely realistic March 16, 2008

By J. Lucio

Format:Hardcover

I read carefully Alesina's book. It is well written and it really gives Europe and Europeans something to think about. Basically, the authors defend that Europe should start doing things "The American Way", that is, work more, attract young researchers/scientists to universities and spend more in military programs.

Several of these ideas are valid and I believe the authors are completely right in their insights, namely, the absolute need to attract young scientists and researchers to european universities.

This being said, there are other issues, where it is unclear Europe could follow the approach the authors sugggested:

a) Banks - the authors defend European banking system should learn some lessons from the American Banks. The book was written in 2006, there is, before subprime crisis. To be honest, I don't think Europe should copy the US Banks model of management. And subprime crisis is right here to prove what I am saying;

b) Military spending: this is the most controversial aspect of Alesina's book. Military spendig is connected to one of the last barriers of sovereignity - military secrets, national defense system, industrial secrets. It is impossible to forget what could be the reaction inside Europe, if national governments started a big military program. Suppose, Germany would say: "we are going to start a giantic military program". I don't think UK or France would be at ease.

A possible solution: European programmes. But once again, this is easier to say than done. Europe is at peace only for 60 years. It is not exactly peaceful to agree on military spending/programmes.

All in all, it is an interesting book.... But some of the ideas, I am afraid can work really well in a Union such as the USA, but probably not in European Union. Read more ›