Europe’s Dismal Outlook

The economic and fiscal crisis in Europe looks worse every day as a growing number of international investors decide that nations such as Greece, Portugal, Italy, and Spain can’t be trusted. As a result, interest rates on government debt are hitting record levels.

Not surprisingly, Europe’s craven political class is refusing to reduce the burden of government, perhaps because many nations have reached the dangerous tipping point where the number of people riding in the wagon is greater than the number of people pulling the wagon.

But, as a friend of mine from Ireland explains, there’s no way to kick the can down the road. Here’s some of what Constantin Gurdgiev wrote for Canada’s Globe and Mail.

…the euro area as a whole is no longer an engine for real business creation, productive investment, entrepreneurship or competitive development. The euro area combines some of the world’s fastest aging economies with a decades-old ethos of entitlements-driven policy making. Telling a European that one has to earn her or his health-care benefits or social insurance or pension or access to amenities and infrastructure is equivalent to challenging a brick wall to be flexible and dynamic. Europe as a cultural, political and economic institution has evolved into a status quo preservationist society, where anything new is seen as a challenge to be resisted — i.e. regulated, restricted, taxed. All solutions put forward to date — especially the euro-bonds and top-up bonds proposed by the EU Commission this week, as well as the idea that the ECB should dramatically expand its sovereign debt buying programs — are amounting to a desperate search for another credit card to roll existing overdrafts into. In effect, the euro area is electing to get sober by getting more drunk and is doing this while walking along the precipice of the fiscal and growth cliff.

Constantin hits the nail on the head. You can’t solve the fiscal crisis without economic growth, but it’s virtually impossible to get robust economic performance with a bloated public sector and populations that have been infantilized by government dependency.

Yes, there are solutions to the mess in Europe. The obvious answer is to copy the Baltic nations and slash government spending.

Or governments can default, which would be disreputable, but at least they would then be cut off from credit markets, thus making it much harder for them to engage in debt-financed spending.

In a perverse way (sort of like watching a slow-motion train wreck), it will be interesting to see what happens in the next few months. The only thing we can say with certainty is that the United States should follow these five lessons so we don’t make the same mistakes.

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Australia’s Shameful Stifling of Free Speech and Political Dissent

I haven’t written much on the global-warming debate, other than to warn about how agenda-driven government funding is corrupting scientific inquiry and to mock nutjob extremists who assert climate change will cause catastrophes ranging from genocide to AIDS.

But I feel compelled to address the issue today because of a despicable move by the Australian government. In a step that one might expect from a thugocracy such as Russia or Argentina, Aussie politicians are criminalizing free speech, at least when it comes to businesses dealing with the burden of a new carbon tax.

Here are some excerpts from a column in Australia’s Daily Telegraph.

Now that the carbon tax has passed through federal parliament, the government’s clean-up brigade is getting into the swing by trying to erase any dissent against the jobs-destroying legislation. On cue comes the Australian Competition and Consumer Commission, which this week issued warnings to businesses that they will face whopping fines of up to $1.1m if they blame the carbon tax for price rises. …Businesses are not even allowed to throw special carbon tax sales promotions before the tax arrives on July 1. “Beat the Carbon Tax – Buy Now” or “Buy now before the carbon tax bites” are sales pitches that are verboten. Or at least, as the ACCC puts it, “you should be very cautious about making these types of claims”. There will be 23 carbon cops roaming the streets doing snap audits of businesses that “choose to link your price increases to a carbon price”. Instead, the ACCC suggests you tell customers you’ve raised prices because “the overall cost of running (your) business has increased”. …But no matter how Orwellian the tactics, no matter how many carbon cops are sent into hairdressing salons to interrogate barbers on the precise nature of their price rises, the truth remains: Australia has gone out on a limb, imposing a carbon tax that will send businesses to the wall, cause undue hardship to families, and tether Australians more tightly to government handouts. And soon, we will send billions of dollars overseas to buy useless pieces of paper called carbon credits. Investment bankers, lawyers and carbon traders will get rich, as will all the usual spivs and scam artists ready to stick a bucket under the government spigot raining taxpayer cash.

As is often the case when I read something this grotesque, I hope the author is wrong, or at least wildly exaggerating. I don’t hold politicians in high regard, but I like to think we haven’t reached a stage where they are using government coercion to stifle dissent.

I’m especially chagrined that this soft form of fascism is happening in one of my favorite nations.

By the way, as those of us in the northern hemisphere prepare for winter, we also should prepare for more protests instigated by Al Gore. And if you like global-warming humor, this Hitler parody is a classic.

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