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>The thing that really hurt the Eurozone was the 2011 - 2013 recession that the US did not experience.

This is true, but understated in a crucial manner. By global standards, the greatest enduring strength of the US economy has been its ability to recover from downturns. More than anything else, that has pulled it ahead of competitors time and time again. When the early '80s financial crisis hit Japan with a lost decade, Volcker (PBUH) pulled the US out of the doldrums and back into a growth phase within three years. When the Asian financial crisis hit at the same time as the dotcom bust, the US recovered more efficiently than the erstwhile "Asian tigers". When the 2007 financial crisis went worldwide, aggressive measures by the Fed and a willingness to risk inflation restored growth faster than in Europe. When COVID hit, economies around the world dived, but even with political divisions running at their highest since 1876, the US again restored growth more quickly than almost anywhere else — now growing at competitive rates with China.

There are a variety of theories about this, but one iniquitous postulate I've heard is that the US makes it a lot easier for companies to do layoffs — not a happy proposition for those directly affected, but what could be worse for an economy than having thousands of people working on something that just isn't working? Many worker protections — for health, safety and family — have become more popular with economists recently, but when the subject of being able to fire people comes up, there is still a sort of grim understanding transmitted in whispers: paying someone who isn't making progress makes us all worse off in the long run.

Of course we can also trace the roots of some profound social malaise — including the collapse of whole cities — to the cutthroat nature of employment in America; there is no free lunch.

I'm not sure about your 'iniquitous postulate'. If such a correlation existed, you would expect all countries with weak employee protection to enjoy economic growth that is better than their peers. That doesn't seem to be true. If you look at the employment protections of the UK[0], and compare them to the US[1], they seem fairly similar. And yet, the UK has very low worker productivity, worst-in-class economic growth, etc.

The problem with taking general economic lessons from the US is that the US is in a unique, and uniquely advantageous economic position.

They aren't that similar. US has at-will employment, it's very straightforward. In the UK that's only true for a short period, then Euro-style worker protections start kicking in.

That depends on the kind of contract you have.

Comparing different legal systems and different practical implementations of those systems is hard - but I think the basic claim, that there's a inverse correlation between employee's rights and economic growth, isn't visible within the EU or elsewhere.

The UK is a good example because they have aggressively reduced the safeguards for workers (between 2014-2017 it was essentially a state with no safeguards if you could not afford the employment tribunal process), and is also an example of consistent poor economic growth.

I'm confused, isn't an employee tribunal free? Or do you mean it wasn't between 2014-2017 and has become free since?

It wasn't free between 2014-2017. They changed the law to make it cost about a thousand bucks, then the highest court struck the change down as unlawful.

It's silly to claim British companies were flouting employment law on a massive scale just a few years ago. That wasn't the case, especially as even pre-2017 legal costs were awarded to the winner and you can get a year's wages as winnings.

There's a big gap between the US and UK in this regard. The UK has and enforces the concept of an unfair dismissal as distinct from being fired due to discrimination. The US has the latter but not the former. In the UK you can't lay someone off if it would be unfair or if your dismissal process was unreasonable, where unreasonable can mean purely bureaucratic reasons like not following your own dismissal checklists.

In addition British employment tribunals are very worker friendly, resulting in frequent bizarre outcomes [1] like:

- "A worker who was absent for 808 shifts over a 20-year career – costing the firm an estimated £95,850 in sick pay – has won tribunal claims of unfair dismissal against his former employer." (employee won because employer didn't follow their own absence management procedures).

- "An office manager was discriminated against after she was told she was not allowed to work remotely from her son’s hospital bedside", deemed unfair because the boss "gave her views no credit" and "had a closed mind".

- "Worker unfairly dismissed for complaining about boss on Facebook, tribunal rules"

- An NHS worker who resigned won an unfair dismissal claim, because her workers had played a practical joke on her at one point and didn't like it when she complained.

- A lecturer accused of sending “aggressive” messages to colleagues was awarded £15,000 for unfair dismissal after an employment tribunal ruled there had not been a proper investigation into the allegations made against him, whilst also concluding that he had indeed sent aggressive messages.

The idea that this is a country that's "aggressively reduced safeguards for workers" will seem blinkered to the Americans on this site, who can be fired with zero notice and for any reason at all, with recourse only available if it can be proven to be sexism/racism/union organizing/etc. Winning huge awards because you weren't allowed to work remotely hardly exists there.

[1] https://www.peoplemanagement.co.uk/article/1747159/worker-ab...

> It's silly to claim British companies were flouting employment law on a massive scale j

1. I wasn't claiming that.

2. It's not silly at all. British companies were and are flouting employment laws[0].

3. If the plural of anecdote is not annecdata, what's the plural of a cherry picked, unsourced, and likely misrepresented court ruling? Fiction?

[0]: https://www.economist.com/britain/2018/06/14/british-employe...

Due to some recent mishaps in the UK's foreign policy, it probably isn't a great index comparison for economic growth in the 2010s. However, prior to 2016, it was a high performer among European nations.

>If you look at the employment protections of the UK[0], and compare them to the US[1]

I think you meant to include citations at the bottom, but I don't see them.

https://www.oecd.org/els/emp/United%20States.pdf https://www.oecd.org/els/emp/United%20Kingdom.pdf here, sorry.

A lot of that ability to pull out of recessions is due to a central bank that can lower rates more than other countries without risking inflation. I suspect this is due to the USD’s status as world reserve currency, if we print too much there’s a whole global market for dollars. If we inflate a little bit, we take not just from our own citizen savers but from governments and citizens all over the world. It’s like we get to tax the whole planet and spend at home.

Those other countries do not have a world reserve currency. Them adjusting monetary policy is not big enough to contribute to something like the arab spring, their imports aren't in essence subsidized by their nation peers, etc.

> By my own anecdotal estimation

Well here is an actual study that found the poorest 20% of Americans consumed more goods and services than the average people from affluent countries. Including Europe.

https://www.justfacts.com/news_poorest_americans_richer_than...

This matches my anecdotal observations of everything being smaller in Europe, people owning less, and energy being so expensive.

Consumption is a terrible proxy for quality of life.

It's also terribly USAian of you.

don't you know CONSUM = HAPPY ?

Pollution is good. Consume more. Money before anything else. Buy more junk. L

Btw, we need budget for more They Live glasses to distribute freely

It's got what plants crave.

Not really. Europeans aren't some superior noble ascetics. People want to consume, and their demand exceeds their ability in practically all situations. So USians are getting more of what they want while most Europeans would jump at the ability to do the same. For the record, I am European myself

>Not really. Europeans aren't some superior noble ascetics.

Indeed. In my town center, on the weekends, the streets are full of Teslas, luxury cars and SUVs of the well off people from the suburbs with nice houses, coming to the city for shopping and indulgence in various forms of consumerism and showing off (mostly inherited) wealth.

Europeans are just poorer and more unequally wealthy than Americans, with fewer people owing most of the wealth, not more righteous.

> Europeans are just poorer and more unequally wealthy than Americans, with fewer people owing most of the wealth, not more righteous.

Europeans are poorer but the US generally has higher inequality, whether you look at Gini, IHDI or mean versus median wealth. Especially the wealth comparison is jarring for the US (about 6:1, most of Europe is at 2:1 or 3:1).

https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...

Wealth inequality is higher in the richer EU countries than it is in the US, so is upwards mobility. You Wikipedia link does not disprove that.

Sources?

The data I've seen says the exact opposite.

Edit: Also my link has the Gini inequality index as the last column, where the US is literally sandwiched between Congo and Algeria, towards the bottom...

https://archive.is/Gg6k8

Also, in the GINI table on the wiki page, Netherlands and Sweden have more wealth inequality than the US.

Also, I find the GINI formula quite flawed as it puts India as being more equal than many EU states which I find hard to believe.

To me wealth inequality is how much of the country's wealth the top % own versus the bottom %, and at least in Germany and Austria it's pretty bad.

> To me wealth inequality is how much of the country's wealth the top % own versus the bottom %

That's exactly what the GINI formula is, though. (Pedantry: the formula can be applied to any measurement, be it income or wealth or blueberries. We'll assume wealth.)

The reason some of those numbers look weird to you is that the most common form of wealth is house ownership. In Germany, Benelux and Scandinavia house ownership is quite low, while in Southern and Eastern Europe it is extremely high.

Who is better off? Someone who inherited a home, or purchased it relatively easily, but earns a weak salary? Or someone who must rent because he cannot afford a house, but earns a much higher salary and has more disposable income?

>Or someone who must rent because he cannot afford a house, but earns a much higher salary and has more disposable income?

Poverty is relative. What use is it earning a high salary than someone from a poorer country if you can't afford to live in your richer country?

No, I mean after expenses, rent/mortgage (if applicable) included.

To simplify it to the absolute extreme:

- A earns 100 and pays 25 in mortgage, or even 0 if he inherited

- B earns 300 and pays 100 in rent, but a mortgage would cost him 250, or perhaps he can't get one at all

What does it even mean to ask "who is better off" here?

On a daily basis, B obviously lives better, that part is simple at least. (I personally moved from A-like to B-like quite recently.)

Now when it comes to long-term financial plans, A has a massive illiquid asset, while B has a smaller stream of liquid assets. A is more protected against financial catastrophes - he won't end up homeless, and can keep going with a minimal salary - however B does not have any assets tying him down, so he can more result move to a more prosperous area if needed. And so on.

But you look at a wealth map and it'll just tell you that A is "richer"; or you look at an income map and it'll just tell you that B is "richer".

Do you have anything to backing this statement? It sounds really false to me. Around me people are not into consumerism at all and are making an effort to not buy, buy second hand when needed, repair and maintain what they own based on environmental impact concerns, not economical. The current energy costs has had an impact but people were behaving this way before that.

I recently went to Australia and I hung out with some relatives. I noticed there, all the cool kids are into this, very few young people buy new cloths and everyone is kind of socially aware and second hand / vintage but good quality clothes are fashionable. Same for things like second hand "fixie" bikes etc.

It was kind of cool actually.

> Europeans aren't some superior noble ascetics. People want to consume

How much you can consume is also linked to how much space you have to use and store stuff. In 2015, 40% of the american households had three or more TV sets. I don't know anyone who owns three TVs here in Europe.

I'm not saying Europeans don't consume.

I'm saying no one except USians would say "I consume more than you, therefore my quality of life is higher".

> 20% of Americans consumed more goods and services than the average people from affluent countries

I wonder how much of those are things like "credit protection fees", "check printing fees", CC anual fees (of multiple CCs) or just paying hundreds of dollars for a medical consultation even after copay, etc

> everything being smaller in Europe, people owning less

Your car does not need to be a d*ck measuring contest, and public transport usually works

those fees go somewhere though. of course apparently almost all of that goes into the pockets of the upper 10%, and they then spend it on PACs, country club memberships, golf carts, boats, etc.

but then even those go somewhere, and apparently almost all of that goes back to the US economy through underpaid semi-legal wages. (and then some of that goes back to countries where the undocumented immigrants' are from, and then that goes to pay for plane tickets, so more people can try their luck in the US.)

circle of life!

This is an odd set of numbers. Italy is higher than Norway; Portugal is higher than Denmark. It suggests that whatever they are measuring is not very intuitive.

Maybe that says more about the availability of consumer credit though?

> Here's a better comparison.

The moment I saw the article headline, I knew the comments would be full of people running defence with fuzzy claims of qualitative wellbeing.

"Yes, our economy may objectively be underperforming, but look at the Life Quality Index, invented at the University of Copenhagen, which divides the number of UNESCO sites in a country by the number of different pension schemes...

The hard truth is - less prosperity means less money for nurses, less money for teachers, less money for infrastructure. Worse health outcomes, worse educational outcomes, worse transport and logistics. A decreasing quality of life. Less prospects for children. Increasing emigration.

Europe devotes a disproportionate amount to social spending compared to the US, so it remains competitive despite its shrinking economy, but this won't continue forever. Eventually, Europe's economy will become so relatively small, that even its outsized social spending will begin to be dwarfed by the spending of US states. It's been the case for some time that Portuguese professionals are leaving to go drive trucks in the US, and now doctors in the UK are getting poached en masse by Australian states. How long until German engineers can have a better life working as taxi drivers in China?

I like Europe and I wish it would right course, but there is an aggressive myopia on this continent when it comes to how quickly the rest of the world is moving past them, and how very bad that will be for Europe in the mid-to-long term. Europe's slide into irrelevance will be a net loss for us all, but most of all for the quality of life of Europeans themselves.

> For example in some parts of Spain the wealth tax is high enough that it would be impossible to live off investments as the safe withdrawal rate is so low that you would need millions to fund a modest income.

What are the numbers there? I heard of the wealth tax above €3 million, but is there more?

The €3 million one is a new "temporary" tax since this year from the central goverment. "Impuesto al patrimonio" has existed for long and it depends on where in Spain you live. It's not applied in the region of Madrid, and the it kicks from a net worth of €400k in Aragón. In all regions your main residence is exempted.

For a net worth of €4m, you'll pay €60k in Aragón to €22k in Vizcaya to €0 in Madrid.

So like 1.5%? With US&International based investment returns that means like 40% more money is needed above what's normally required, or say 23 years instead of 19 years of investing.

So that hurts the whole FI/RE thing, but doesn't sound like it would be the primary blocker.

See https://news.ycombinator.com/item?id=36777125 for a breakdown of what it would look like with an example portfolio in Valencia. The tax differs by region and is highly progressive. For a 2M portfolio in Valencia it ends up cutting 0.7% off your safe withdrawal rate after exemptions if you split it between a married couple. It makes it harder to retire early, but don't forget about additional US costs like health insurance, vehicle, etc.

I think it's definitely less common in Europe, but I did want to mention that there are European FIRE communities.

See this one for Spain: https://www.reddit.com/r/SpainFIRE/ or Bogleheads Spain: https://bogleheads.es

The wealth tax also makes FIRE harder, but there are exemptions that make it more manageable.

Here is information about the wealth tax in Valencia: https://atv.gva.es/es/ipatrimoni

Let's use a married couple in Valencia with 2M euro in index funds as an example.

They get 500K allowance each to subtract from their taxable base. Subtracting the 1M total exemption for the couple, their taxable base would be 1M euro for the purposes of the wealth tax. On the remaining 1M, they'd pay 10,595.71 for the first 668,499.75, and 1.12% on the remaining 331,500.25, for an additional 3,712.80. This puts their total yearly wealth tax at 14,308.51, or about 0.7% of their total 2M portfolio.

Generally, 4% is seen as a safe withdrawal rate for a properly managed portfolio for a 30 year retirement. Subtracting 0.7%, that'd give them a 3.3% safe withdrawal rate on their 2M portfolio, which gives them after-wealth-tax money of 66K to play with. Let's say half of what you're pulling each year is taxable for capital gains. With a 20% capital gains tax, that ends up being about 60K. This is a pretty good income for Valencia.

Estimated cost of living for a family of 4 there is about 28K: https://www.numbeo.com/cost-of-living/in/Valencia

That gives them another 32K after tax for travel, luxuries, etc. Not to mention, you also get an exemption of 300K (individual) for your primary residence. There are also some other limits on the tax like it not being able to exceed 60% of your total income.

In the US, with a withdrawal rate of 4% on the 2M and no wealth tax, you'd get 80K. After 15% capital gains on half of what you're pulling each year, 74K. Subtract $1400/month or ~$16K for good health insurance for a family of 4 and it's a basic tie, not accounting if you have to actually hit a deductible. In Spain you will just get free public healthcare if you're a citizen.

It's definitely harder to build that level of wealth because of salaries there, but I don't think it's fair to say that it's completely impossible to FIRE there.

Replying to this because I can't edit the comment anymore.

I overestimated the tax by a lot, I misread the chart and was adding the "Cuota" (sum of previous row taxes) from 1 row below what I should have.

They only pay 3,108.51 on the first 668,499.75. This puts the total tax at about half of my estimate, so only a ~0.35% drag on their 2M portfolio.

It's a very progressive tax, basically goes up 10X for really rich folks (>10M they take 3.5% of total wealth).

Very interesting comment. I've read it a few times.

> All of this is deep in the political psyche that wants to cut down the tall poppies.

What you call "cut down tall poppies" others call "correcting thousands of years of aristocracy-fuelled unfairness". European wealth has much older roots. In a few centuries, Americans will likely reach a similar political point.

Given actual vs perceived social mobility in the US compared to Europe, it could be argued that the US reached that point some time ago:

https://www.economist.com/graphic-detail/2018/02/14/american...

Sure, I am aware. And if you let the aristocracy go on for too long eventually they claim divine right.

It is possible that some European countries have over corrected though.

> And if you let the aristocracy go on for too long eventually they claim divine right.

Well, the US has become a bastion of neo-feudalism, so there's that.

Fancy term, but can you develop an argument to support it?

Do the laws apply equally to everyone regardless of wealth or do the rich achieve better results?

We don't even have to pick the extreme outliers where affluenca officially plays a role. Someone that can spend a million on lawyers in the US will get a better outcome.

I would say that certain managerial / bureaucratic classes also have sweeping criminal immunity. Sometimes based on legal resources, sometimes not.

Wood drastically underestimates the impact of social distinctions predicated upon wealth, especially inherited wealth.

How 'bout them apples?!

> What you call "cut down tall poppies" others call "correcting thousands of years of aristocracy-fuelled unfairness". European wealth has much older roots.

What does taxing _income_ of upper-middle class high-earners (who are probably coming somewhere from Eastern Europe and are not related to Habsburgs or something) have to do we dealing with _generational_ wealth of old-money families? In fact, descendants of well-off parents seem to do just fine. If anything they basically becoming landed gentry considering how unattainable housing has become.

OP directly mentioned wealth tax though.

also wealth generates income.

plus taxing income is easier, less transaction costs. (no need to sell the house to pay wealth tax.)

of course non of these invalidate your observation about landed gentry, absurd housing prices, etc.

> also wealth generates income.

So tax income types that tend to come from wealth instead. Compared with regular salary income that is heavily taxed in Europe those usually incur significantly lower tax rates (long-term capital gains tax, dividend tax, etc.).

> plus taxing income is easier, less transaction costs. (no need to sell the house to pay wealth tax.)

You are confused about how wealth taxes usually work. They are something you pay every year based on your total assets, not when you sell the assets (these are capital gains or property gains taxes).

> of course non of these invalidate your observation about landed gentry

Becoming a landed gentry is intentional end game of current asset owning classes in Europe. Let's take Sweden as a worst offender - locals sit on top of their multimillion+ property (that they either inherited with 0 inheritance tax or got with tax-deductible mortgage when prices were saner), don't pay any wealth taxes and would like immigrants to pay for their welfare state with crazy income taxes while simultaneously extracting exuberant rents from them indefinitely by making housing basically unobtainable through regular income. Mind you this isn't European-specific problem (prop 13 landed gentry says hello), but Europeans tend to have this annoying holier-then-thou attitude towards the US paired with complete lack of self-awareness.

Yes, agree. (Egregious case of favoring rich people https://en.wikipedia.org/wiki/Beckham_law ... move to Spain and you get full exemption on non-Spanish income for 5-6 years.)

No, I'm not completely, that's what I meant. That wealth tax can force people to sell.

Yep, sounds similar. Inheritance tax was also terminated in Hungary, and you can give unlimited value to your parents/kids tax free.

European old money is doing just fine. It's the middle class taxed to death on every additional 10 bucks yes still not rich enough for "tax optimization" that is being fucked over.