It sounds as if brows all over Europe are being furrowed, heads are being shaken and hands being heavily wrung. What to do? What to do?
Via Instapundit:
Europe’s apparently doomed attempt to overtake the US as the world’s leading economy by 2010 will today be laid bare in a strongly worded critique by the European Commission.
The Commission’s spring report, the focal point of the March European Union economic summit, sets out in stark terms the reasons for the widening economic gap between Europe and the US.
It cites Europe’s low investment, low productivity, weak public finances and low employment rates as among the many reasons for its sluggish performance.
Mama Mia, Ai Caramba, Gott in Himmel and Merde! Does this mean that the European ‘social model’ is not working?
The Professor himself points the way:
Hmm. Bloated public sectors, high taxes, excessive regulation, and inflexible hiring rules probably have something to do with it.
Well, yes. They do have something to do with it. In fact, they have everything to do with it. But just because this is slap-in-the-face obvious, it would be unwise to assume any public (or even private) recognition of this obviousness in the halls of European power. For, all this dovetails very satisfactorily with an article, via Stephen Pollard, which illustrates the excrutiating difficulties faced by political rulers in trying to institute reforms in circumstances of long-term petrification:
Make no mistake: Tony Bair’s proposal for university “top-up” fees, Silvio Berlusconi’s nip-and-tuck pension reform, Gerhard Schroeder’s welfare and tax cuts, and Jean-Pierre Raffarin’s reforms to tax and labor market policies are all, to varying degrees, departures from the social market consensus that has dominated European politics for much of the postwar period. It’s progress. Possibly, they are the thin edge of the wedge, if we’re being optimistic.
But if we’re honest, we’ll admit that as reforms go, these are mostly wimp-outs. What is really remarkable here is not that they are happening at all, but rather how ultimately skimpy they are.
In short, the reformation of long-cherished (but failing) economic models is simply too agonising for politicians to even contemplate let alone execute. From an electoral point of view they may consider it safer to leave the ship floundering and rely on future generations to try to salvage something from the wreckage. Utter madness of course but don’t bet against them making exactly those calculations.
Despite that fact that there does appear to be something approaching a consensus on the nature of the disease, that is no guarantee that there will anything like a similar consenses on the course of treatment required. Given their track record the decision-makers could just as easily apply altogether different remedies. Low investment? We need more public spending. Low productivity? We need more workplace regulations. Weak public finances? The answer is higher taxes. Low employment rates? More labour laws.
Sweet-tasting medicine, yes, but the harsh kind rarely wins elections over there.
David,
you could be right. But the test is surely do the eurounionists want the Europe Union to succeed more than they want social markets? I think some of them given the choice of either/or, will go for one way and the others will go the opposite. Most Eurosceptics across Europe are not free-marketeers, they are opponents of globalisation, in favour of local welfare state arrangements and advocates of more statism that the Eurocrats.
Without these people, the Danish and Swedish referenda on the Euro could never have been won by our side.
So on the left, EU or socialism is beginning to be the choice that is being made. This cannot fail to provide some opportunities for liberty, even if it is only because the left will spend more time squabbling.
“Dig up, stupid!”
Is there ever a time when a Simpsons quote is not relevant?
Not really progress of any sort.
The core problem is the motivation of the policies, which is to improve the standing of the EU as an entity in some abstract league-tables and to modify the lives of the people in order that the state be better/stronger/richer as a state. A little trimming of policies here or there for pragmatic reasons hasn’t altered that.
US politicians are prey to the same poisonous fallacy of international competition. But at least the US has constitutional principles that undermine it. Given the EU is founded on a Hegelian conception of the law as means of guiding and perfecting society, we have a bigger problem.
Until the principles of government start to change towards a position where the purpose of the state is to allow the people to be able to pursue their own individually chosen goals regardless of state mandate, no real progress is likely. But don’t hold your breath. Remember the USSR lasted more than 70 years.
And this on the same day as anti-reform protests in France.
The words “hell” and “handcart” come to mind.
Ah, you can always rely on the European Commission to brighten up a boring day with saying something stupid. “World’s leading economy by 2010…”… hah hah hah.
Ah, good to see the spirit of crude Soviet propaganda alive and well…
Nikita Hrushchov said sometime in the 60’ies, in a speach at the UN (if I remember right) that the USSR was going to overtake the US in economic production and per capita income within 20 years.
Europe of course is not even in the race.
What the Yanks need to worry about is whether the CHINESE will overtake them in the next few years.
It isn’t impossible. They’ll be doing all our manufacturing and tech support certainly. Many more things will follow.
Which just goes to illustrate my point. What Yanks need to worry about is maintaining (and recovering) their own freedoms, and not collectively participating in some “race”.
I favour of the free market because it is free, not because it is in some sense “efficient”. Were freedom the route to relative poverty, I’d still choose freedom, I think.
We’re lucky that it doesn’t currently appear to be necessary to be poor to be free–rather the opposite–but “advanced” governments have been finding ways to penalise financially those who don’t cooperate with supervision for a while now, so sooner or later the individious choice will be pressed on many middle-class individuals.
To paraphrase a prison tribunal:
We are deeply disappointed in the findings of the European Commission, and will continue to pursue our chosen course until it is successful.
Yours,
M. Chirac
As an American who emigrated from Taiwan, I’m not all that worry about China. It’s system is FAR FAR more corrupt than anything EU has on book. Its 4 giant State own banks just got infusion of foreign reserve by the government to shore it up in anticipation of foreign IPO (to attract foreign investors dumb enough to trust these accounting methods). And this is just the beganning of the problem.
BigFire is correct.
GDP/capita: China $800, US $30000.
There you are!
(In EU it’s about $ 20000).
Blair, your paraphrase reminds me of an old definition of insanity: Continually repeating the same behavior, while expecting a different result.
The core problem is stupidity.
In France nearly 20% voted for Le Pen at the last presidential elections.
In France there are countless Communist mayors (and they are still getting elected even after the Communist Party laid off people due to a lack of funds – in their manifesto they said that they’d make it illegal to lay people off).
In France people are receiving more on the dole than a job will pay, and the dole offices encourage people to ‘not look too hard at the moment’.
In France you have to ask the local prefecture’s permission to work on a Sunday.
In France you can’t have a sale anytime you want due to unfair competition.
In France the SNCF went on strike : to get more days each year to strike.
Things won’t get better for a long time, unless there are several major company backruptcies(?) that break the backs of the CGT and their union brothers and sisters.
At the moment, I cannot see that happening.
Hmm.
Chinese banking system. Funny you should mention that. 🙂
Personally I think the banks are going to IPO in order to attract investment from domestic sources. I’d be extremely surprised if anyone outside of China actually bought into this for investment purposes. Perhaps some companies would as quid pro quo in order to complete deals or to garner business but a person would have to be a complete fool to think this would be a good investment.
Which of course means that anyone with an investment account in America will lap this stuff right up. :/ sigh.
When I read up on the Chinese banking system I was completely appalled. This system is so far into the red that there’s no hope in sight. The conservative estimate is that the banking system is holding onto nearly $1.5 trillion dollars in unrecoverable loans to government owned or operated businesses. When the style of business is to have a customer dictate to the bank that they must make the loan andwhat terms the loan will be, that’s definitely a road to disaster.
The basics are this. Generals in the PLA and bureaucrats in the government make a great deal of money as owners or operators of various companies. Additionally relatives will also have their own businesses. So such companies, that are losing money or who are mismanged to such an extent that they are non-competitive, can simply go to the government run bank and demand a loan. Their powerful relative then orders the bank to make the loan, the loan is made, the money is disbursed and that’s the last anyone hears of it.
For the last couple decades this system has done nothing but suck all of the savings of the average Chinese worker who has sought financial stability by hording money in their savings accounts. If, and when, those workers demand their money en masse is when those banks will completely fold and a potential for revolution will happen. Even soldiers save their money into those banks. So it’s not even a regional issue but a national one. So there’s no real way of dealing with it by moving soldiers from one area to deal with problems in another.
That it’s still going on is what also amazes me.
This is not football.
If only Europe had more Walmarts!!!!
How about outsourcing epidemic? How about stifling the creative classes?
US is becoming the “slow group” with its emphasis on military (bad investment of capital) and mercantilist economy of borrowing money from countries to buy their goods.
Christianity is hurting the US economy!!! Heard it here first.
“US is becoming the “slow group” with its emphasis on military (bad investment of capital) and mercantilist economy of borrowing money from countries to buy their goods.”
Slow group? Compared to who? Military spending is 4% of GDP. Hardly a big drag especially when you consider all the high tech innovation that military spending creates.
Better look up the definition of mercantilism because it certainly doesn’t apply to the US.
The biggest US problems are social security, medicare and public education. In other words the state sector. But fortunately for the US it’s state sector is about half the size as the EU state sector.
China’s not the only problem. Taiwan and SK up to their eyeballs in debt. We’re nowhere near what they’re at per person.
WSJ front-page article on Tuesday.
cheney_usa:
US is becoming the “slow group” with its emphasis on military (bad investment of capital) and mercantilist economy of borrowing money from countries to buy their goods.
Is this paleo-libertarian sentiment, or something cribbed from Emmanuel Todd?
Christianity is hurting the US economy!!
Please demonstrate the connection between this statement and the one I quoted before. I’m curious to see your line of reasoning and your understanding of Christianity.
Regarding cheney_usa… please people, do you not know a troll when you see one? Do not feed the trolls.
The EU has its structural problems, the US has a federal debt burden that is gargantuan, Chinese banks are insolvent (but not, as someone commented, the ones that are IPOing), India’s state sector is burdensome etc
Problems everywhere, but which countries have growth prospects? Not the EU – with Ireland and the UK together with some of the newer entrants excepted. US, China, India and Brazil are the major engines of economic growth for the future. Maybe Japan and Socialist Europe will reform soon.. but I’d rather bet on the high growth prospect economies.
Which is more important to the Eurocrats, maintaining power/control or overtaking the US economically?
I view the ‘overtaking the US ..’ as sort of a carrot on a stick that it’s controllers (the Eurocrats) use as a reason, among many, to collect more and more power and control. As long as the Eurocrats are in control and the ‘little people’ don’t revolt, the Eurocrats are happy.
Why should the Eurocrats change anything? As conditions in Euroland get worse and worse, they have a built in scape goat … the US!!
The cure for the economic malaise is not very palatable. The Eurocrats are too comfortable in their positions of power to suggest any real remedies.
The Eurocrats won’t suffer due to any economic problems anyway. It’s only the ‘little people’ that will suffer. Why should the Eurocrats risk their jobs suggesting economic solutions nobody appears ready to hear?
I’ve often thought the Eurocrats will hold onto power until they are forced to yield. I’m imagining some sort of cvil war. (I hope I’m wrong.)
I STILL can’t fathom why folks in the UK would want to have anything to do with this.
Chris:
“I STILL can’t fathom why folks in the UK would want to have anything to do with this. ”
“Folks” in the UK don’t want to have anything to do with it.
It’s our ruling elite that are all for it.
“I’ve often thought the Eurocrats will hold onto power until they are forced to yield. I’m imagining some sort of cvil war. (I hope I’m wrong.)”
I believe long before civil war will erupt the EU will disband. Using the US as a scapegoat won’t work when it comes to issues such as breaking government deficit rules and other internal disagreements.
Also, the new members from eastern Europe will have much higher growth rates than western Europe. As the easterners close the standard of living gap the westerners will feel that it is at their expense. The EU will be blamed and it’s most ardent supporters, France and Germany, will lead the charge to disband.
If only my country(Singapore) was bigger… hell, we’ll even take New Zealand’s size if available. Then most of our limitations would be GONE.
How is it possible to build a sound economical base when the members dont even trust one another. Finally Britain has demonstrated it`s strength of character by resiting the joining of the european monitary policies. My congratulations on their stand. Any intelligent person will tell you that as long as the U.S. buck is the means by which international trade is conducted, any other currency will never be able to replace it.