Posted on 02/19/2003 10:26:45 AM PST by aculeus
The EU will remain politically impotent - my greater concern is that it will lose the economic game too.
The Treasury has just produced a report about what has gone wrong with the European economy. It argued that "the creation of a stronger, more resilient and more dynamic Europe" was particularly urgent at a time of "global economic and political uncertainty". Among the specific things it criticised were continental levels of unemployment, EU competition policy and the failure to create a single market for services. Its big message, though, was that Europe was failing to make any headway towards the Lisbon summit plan to try and catch up with the US over the next decade.
It is of course embarrassing for European politicians to have to admit that the US is opening up an increasing economic lead over the EU, for among other effects, it means that Europe will become less important in world politics as well as world economics. But if European voters do not want to catch up with the US, does that matter? Europe self-evidently is unable to speak with a single voice on global political matters; and it is a military pygmy. So should it worry about falling further behind in economic terms?
The argument that is right to prefer a quiet and comfortable life has been well made by Adair Turner, the former director general of the CBI, in a lecture at the LSE earlier this month. His argument is that if you allow for shorter hours worked, European productivity is not much below that of the US. GDP per head in the EU is lower, but that is largely because we choose to take more leisure. And our take-home pay is further reduced relative to the US because we pay for more of our services through the tax system rather than paying for them directly. (The UK, as usual, is somewhere in between the continental and the US models.)
"Europe" argues Adair Turner, "is making social choices which are rational and natural for human beings in mature, already rich, and peaceful societies." His main doubt is whether the world can be peaceful enough to sustain these choices – he hopes and believes it can be, but he acknowledges that this is debatable. His is a powerful argument which cuts to the very core of the clash between Europe and America, at the moment over the Middle East. But the division is not just about what should be done about Iraq. It is about what sort of society we want to live in.
Many of us would find it pretty tough to have to work in the US. Having only two weeks holiday a year would not go down too well. It would not be much fun to have to worry about the adequacy of one's medical insurance. And while it might be harder to find a job in much of continental Europe than in the States, at least when people lose their jobs in Europe (and for that matter the UK) there is usually a better cushion to tide them over than there would be in most US states.
But is the European model sustainable? Adair Turner has two caveats. One follows from Europe's ageing society: the implications for pensions and so on, the other is that point about global power.
It seems to me that the power game is already lost. It is very hard to see any set of circumstances where Europe collectively will be able to exert much military or even political power in the world over the next generation. In another quarter century, when the US population is expected to pass the EU one, the imbalance of power will become even wider. For the time being, the larger European nations can individually have some modest influence – Tony Blair really does have more influence over the US than most Britons would give him credit for – but the EU as a body is and will remain impotent. If we have not yet learnt that harsh lesson we soon will.
My greater concern is that Europe will lose the economic game too – its model is simply not sustainable. There are two broad reasons for believing that. One is the ageing point made by Adair Turner; the other, the implications of labour mobility – particularly of the highly-skilled – for high-tax, high-benefit societies.
The implications of ageing on the European social welfare model, where the current generation of working people pay the benefits of the current generation of retirees, have been so widely recognised that there is a danger of "pension fatigue" overtaking electorates. The core problem is that welfare systems that were developed at a time when there were more than four workers for every pensioner cannot function when there are fewer than two. (In the case of Spain and Italy, there will actually be fewer workers than pensioners when the present 20-somethings retire.)
But that is a known problem. Europe has not done much about it, but at least people are aware of the problem. Europe is much less aware of the problem created by the increased mobility of the highly-skilled – and the increased demand for such skills.
We are aware of this phenomenon in Britain, particularly in the South-east, which has become a magnet for ambitious young Europeans. London is also an attractive market for young Americans, Australians and Canadians. By contrast the professional job pool in most continental cities is filled by nationals. If you talk to continental business executives, they will often acknowledge that they can rarely recruit senior staff from the UK or the US.
At the moment there is no crisis. Germany finds itself short of skilled people, particularly in IT, which is pretty astounding given the high level of unemployment generally. And there are complaints from top managers that their best people want to go to London or New York. Italy, too, is losing a lot of young professionals who cannot find jobs locally. But the exodus of talent is manageable for now.
The danger is that the exodus will become so serious that the tax base will be eroded. So movement of labour will compound the adverse effect of an ageing society. The best young will leave – even if it means putting up with only two weeks holiday in the US or London public transport – and there will be even fewer workers to pay the swelling pension bill.
Europeans can reasonably choose to cede the active role in world policing to the US. They can reasonably chose to have greater leisure and lower take-home pay. Equally, they can chose to pay high taxes and get in return high benefits.
The danger is that the consequences of these choices are not being made fully clear. At a political level, it is not being made clear to Europeans (except brutally by Donald Rumsfeld) that the sole superpower will not pay much attention to what they think. At an economic level it is not made clear that the present levels of pensions cannot be sustained. Most important of all, it is not being made clear to young people that their living standards – if they stay in Europe – will almost inevitably be lower than that of their parents.
The danger is that much of continental Europe will suddenly reach a tipping point, when taxes rise, deficits rise, unemployment rises, public services deteriorate, deflation takes hold – and the best of the young depart, leaving the old and the poor to cope as best they can.
Hmmm... as I understand the situation, at least in france, the "shorter hours" and "more leisure" are not really a choice, but they have been forced on the population in an attempt to boost the number of workers businesses have to employ. Their continually worstening unemployment problem both in france and germany, as well as many of the other EU countries is testament this is not the solution, but they continue to ignore the real problem: socialism.
Under French law no one can work more than 35 hours per week. That includes management.
I could be wrong, but maybe this is the reason we're kicking your Europeon asses all over the globe, and why your position on Iraq or much of anything else is of little concern to the current Administration in Washington.
I'm surprised they aren't looking at the "Chilian Model" as an answer, much as the GOP is trying to do on a limited scale. The successful results are right before their (and our) eyes.
No doubt the problem (there as well as here) is, it is so easy to demogogue. Plus, it takes power away from the politicians, and we certainly can't have that!
The alternative is financial collapse and societal chaos, which to socialist politicians is preferable to successful capitalist schemes. That means they get to play Savior again for at least another round.
"Europe" argues Adair Turner, "is making social choices which are rational and natural for human beings in mature, already rich, and peaceful societies."
He's right. But one additional adjective might be "protected" societies, that is, societies for whom defense outlays and efforts are being made by someone else. The author has split economics and military here for purposes of discussion, but the two are inextricably linked politically. The consequence of choosing social services and leisure over military spending and long hours is the concomitant loss of influence by people lucky enough to be in a position to make that choice (and live with the consequence), if I understand the implications of the author's case correctly. But that choice is not one made in a vacuum - the ability to make it depends not only on the proper apportionment of one's internal priorities, but on the willingness of the outside agency, by aligning its own priorities, to maintain the situation as a whole. What the author suspects is a difficulty of sustainability is, IMHO, more likely to fail from a change in that external condition (due to a change in priorities on the part of the U.S.) than from internal contradictions such as dwindling tax revenues and increased demand for social spending as a result of demographic change. In short, the consequence is that they're not entirely in charge of their own fate. The reward for the choice of fewer benefits and longer hours is more than simply political clout, it is the right to choose.
One other thing that particular alignment of priorities creates is a far more economically risk-averse environment. An elaborate social safety-net and high taxation, shorter hours, and a comfortable society are characteristically risk-averse. The demographic movement the author cites illustrates the consequence. Movement of a younger, more skilled, more aggressive population to more risk-tolerant areas (New York and London to use the author's examples) in pursuit of a higher expectation of economic return is as rational an alignment of priorities as the one cited for a more risk-averse, older, more comfortable population. But it has demonstrable benefits for the society that rewards it, which accounts for the increasing disparity in both production and in progress between the European and the U.S. models. The only sense in which this is sustainable would be Europe as a gigantic retirement community - not the happiest of models for a vibrant, dynamic society that expects to influence world affairs.
Eurotrash have always choosed dishonor to avoid war. but they always get war what they rightly deserve.
There seems to be no politician on that scene which can overcome the inertia or thrust of the Labor/Green/Socialist coalitions and turn things around.
It will take hard, hard events to do that. IMHO, it is questionable they can subsequently survive the coming upheavals as democratic societies to take proper action afterwards. Otherwise, they face more rounds of totalitarian and fascist regimes.
The "Social Security Trust Fund" is simply two sets of books. It looks like an asset on paper, but since it's invested in government bonds it is an equal-and-opposite liability as well; the bonds are simply an instrucition to take the money out of the Treasury.The only way out of this box is for the SSTF money to be invested in real assets such as stocks or mortgages on privately-owned assets.
Socialism is a system for seperating responsibility from authority.
And that is both injustice and bad management.
Some countries like Norway have negative debt, so they can loan money out to businesses. Too bad we're not there yet! I look at Social Security as a debt just like the regular nation debt which Americans are responsible for.
The unfortunately effect of this leisure, and lavish social welfare, is that it reduces the incentive to acheive.
Can you name *any* singificant contribution to culture, science, engineering, etc from a W. European nation in say the last 20-30-40 years?
Bill Whittle wrote a great essay called "Confidence" where he says:
The sun will contract to a white dwarf, the inner solar system nothing but black cinders, the outer planets shrunken and frozen corpses. Perhaps fifteen billion years from now, a time as far in the future as time goes into the past, there will be nothing here except a burnt-out and cold white dwarf.
But somewhere out there, somewhere, there will be four battered, unrecognizable hunks of aluminum and titanium and gold, spinning through deep space, their names recalling the spirit in which they were hurled into the abyss: Pioneer, and Voyager. And the day before the Universe dies, you’ll still be able to dimly make out the stripes and dotted square, and read the words in the ancient language, from a dead race in the far distant past, when the stars were young and alive: UNITED STATES OF AMERICA.
There are at least five nations on the earth that had the technical skill, not to mention the money, to do something as grand and noble – as immortal -- as this. Yet only one has done so. Why us? Why not them?
Confidence. That’s why.
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