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| Europe |
| The European Disease |
| 2005-06-03 |
| No one knows for sure to what extent economic anxiety influenced the decisive "Non!" by French and Dutch voters against the new European Union Constitution this week. But one thing is certain: the French and much of the rest of the European Union have much to be economically anxious about. The French unemployment rate has hovered around 10% for nearly a decade, and almost half of the jobless have been out of work for at least a year. If the U.S. had an unemployment rate as high as France, there would be about six million more non-working Americans -- the equivalent of placing every worker in Michigan on the jobless rolls. Our point here isn't to engage in gratuitous French-bashing. The truth is that the economic anemia afflicting France has become the standard bill of health to varying degrees in virtually all of the nations of Old Europe, particularly Germany and Italy. Once upon a time the intellectual elites in Europe and the U.S. trumpeted the economic accomplishments of European social welfare state policies. Today the conclusion is nearly inescapable that this economic model simply doesn't work to create jobs, wealth or dynamism. Table entries referenced below: US: unemployment rate = 5.6%; economic growth rate = 3.7% EU: unemployment rate = 8.7%; economic growth rate = 1.5% As the nearby table shows, the U.S. has substantially outperformed Old Europe in wealth and job creation. The economic growth rate of the European Union nations since 2003 has limped along at about half that of the U.S. In the 1980s and '90s the U.S. created about 40 million new jobs; Western Europe created some 10 million, well over half of which were in the public sector. If this divergence in economic performance continues for 40 years, the American worker will be roughly twice as wealthy as his European counterpart. The Europeans have created a vast constellation of domestic policy interventions that are cloaked in the seductive rhetoric of compassion, fairness and cultural sophistication. These policies include highly generous welfare benefits for the unemployed; state ownership and/or subsidy of key industries (such as Airbus); rules that make it difficult to hire and fire workers; prohibitions against closing down plants; heavy protections of labor unions against competitive forces; mandatory worker benefit packages that include health insurance, child care allowances, paid parental leave, four to six weeks of vacation; shortened work weeks; and, alas, high taxes on business and labor to pay for these lavish benefits. In sum, European nations penalize work and subsidize non-work, and no surprise, they have gotten a lot of the latter and far too little of the former. By contrast, the U.S. model -- allegedly cruel and "laissez-faire" -- has done much better both by economic growth and worker opportunity. The frustrating irony is that, at the very moment in history when Europe's model is in disrepute, many U.S. politicians still want to emulate it. In Congress today there is some bill to provide virtually every social welfare benefit that Europe now offers. And the Congressional Budget Office predicts that if America's federal entitlement programs are not reined in, by 2030 government's share of the U.S. economy will close in on 50% of GDP, or even more than Europe's share today. The good news is that at least Washington has begun to debate how to reform these programs. Which brings us back to the future of the EU. We have consistently supported European integration, especially the liberalizing and efficient force of the euro. But most of the economic maladies that face France and Germany today are incidental to whether the EU itself gains or loses power in the months and years ahead. In many ways the European Union has always been the right answer to the wrong question. The common market was originally established with economic goals in mind, to reduce trade barriers (which has been a good thing), followed years later by a single, stable currency (another good thing). But the Brussels bureaucracy has to this day purposely ignored the Continent's central ailments: high tax rates, bloated welfare benefits, and industrial policies that pick winners and losers, usually the latter. Those topics are essentially taboo in Brussels, which has pursued an economic "harmonization" strategy in part to inhibit the benign impact of tax cutting and tax competition among member countries by creating a de facto multi-state cartel. The nations that have prospered the most in recent years -- Ireland in the 1990s, now the nations of Central Europe -- are those that have resisted the harmonizing orders. Europe is now paying a high price for this failed experiment with welfare state socialism. Today's populist revolt against economic integration in France and Germany suggests that these nations remain mysteriously impervious to the need for change. A bigger mystery is why some American politicians are so intent on repeating Europe's mistakes. |
| Posted by:too true |
| #4 Add to this Germany will probably elect their first female leader in 1000 years in September... I think the Howard Beale* effect is finally slapping some folks in Europe upside the head.... * I'M MAD AS HELL AND I'M NOT GOING TO TAKE IT ANYMORE... |
| Posted by: BigEd 2005-06-03 12:44 |
| #3 To the floods of Islamic immigrants entering europe, the social welfare lifestyle must be lavish compared to tribal lif in Warizistan or Lahore. Why work when you have never in your wildest dreams had so much money? Social welfare robs people not only of their dignity and independence, but also of their initiative. |
| Posted by: bigjim-ky 2005-06-03 11:47 |
| #2 Tom Friedman has his limits but this quote is pretty good: "[The French No vote] is interesting because French voters are trying to preserve a 35-hour work week in a world where Indian engineers are ready to work a 35-hour day. Good luck." |
| Posted by: Matt 2005-06-03 11:34 |
| #1 It's the same mystery as why anyone would vote for an air-head like Kerry or a bloated corrupt politician like Ted Kennedy. |
| Posted by: 2b 2005-06-03 11:25 |