Since the Reagan era and the end of the Cold War, presidents from both parties have collaborated with European nations to promote free-market-oriented policies. But this cooperative mentality has since waned. The United States, as well as many nations in the European Union, prioritized unsustainable spending that masked deeper structural flaws that have led to the crises countries face today.
The Organisation for Economic Co-operation and Development, or OECD, is the ideal platform for re-engagement between America and Europe. Originated in 1948 as a part of the Marshall Plan, the organization's legacy includes a determining role in the formation of a European free-trade area and expanding its membership to include South American countries.
A potential remedy for the misguided policies on both sides of the Atlantic would be for U.S. congressmen to play a more active role in the parliamentary leg of the OECD. In recent years, they have opted not to participate. In at least three high-level parliamentary seminars, there have been no U.S. congressmen or senators present.
This is a shame. Together with ideologically sympathetic lawmakers from such nations as Germany, the United Kingdom and Sweden, U.S. congressmen could sway the parliamentary leg of the OECD in favor of a European emphasis on market economics. In this division, experts present research on economic reforms, and the parliamentarians from the OECD member states meet for seminars and discussions in which best practices are studied. The United States Congress forfeits an influential policy instrument when no delegates are dispatched to represent its interests and present its best ideas.
Both Sweden and Germany are examples of countries that have combined sustainable public finance policies with a high degree of economic freedom, competitiveness, growth and current account surpluses. In Sweden's case, our current success comes from a combination of measures. Prudent deregulation freed businesses from stifling restrictions. Tax reform included new work incentivizes, closed special-interest loopholes and set a lower corporate tax rate. What's more, it all was accomplished with only modest reductions in social welfare programs. In the case of Sweden, a moderate tack that merged conservative and liberal priorities yielded success.
Another area for potential economic growth will also demand greater American engagement: a free-trade agreement between the U.S. and Europe. Currently, top officials on both sides of the Atlantic are laying the groundwork for negotiations in 2013. In order to demonstrate a commitment to talks, as well as to gain leverage in negotiations, the U.S. should reinvigorate its presence in the policymaking wing of the OECD.
Some of the European members of the OECD, like France, are wavering in their support of market economics. With an unreformed labor market, continued support of the EU's heavy farm subsidies and hints of nationalizing industries, France and its ilk are pursuing measures that are antithetical to a European recovery. Although efforts to maintain the eurozone and spur a global recovery seem to have stalled, the abandonment of free-market principles is not the answer.
The parliamentary leg of the OECD provides a good platform for U.S. congressmen to influence European economic policy, but the relationship must be symbiotic. The congressmen attending OECD parliamentary meetings could bring some valuable knowledge back to the U.S. as well. By learning from each other, the present crises could become learning experiences for implementing economic reforms that were too politically difficult during prosperous times.
Perhaps solutions have eluded policymakers because, although they have the best intentions, they will never fully realize the dire consequences forecast by economists. The youth of today will be left to pay for the unsustainable spending of politicians who now rule them. And beyond material impacts, world leaders risk moral bankruptcy if the next generation is left to pay for mistakes it did not make. The OECD is the crucible to deliver solutions, but only if the U.S. re-engages in the institution it created.
Göran Pettersson is a member of Sweden's Parliament and serves on its finance committee. David Will, who interns for Petersson, is a student at Princeton University, president of the Princeton College Republicans and a columnist for the Daily Princetonian.