Economic freedom has been declining in the United States in recent decades. But it’s also been declining in Western Europe over the same period.
It’s almost as if politicians on both sides of the Atlantic are having a race to see who can do the most damage to prosperity.
Perhaps because they started with more statism, it appears that European politicians are winning. Which means that the European people are losing.
Two months ago, I wrote about the widening gulf between the United States and Europe and shared a chart about a growing wage gap between the U.S. and other major nations.
And that builds upon the two columns I wrote in 2023 (here and here) and the three columns I wrote in 2022 (here, here, and here), all of which show America out-performing Europe.
Today, let’s revisit the issue.
Here are some excerpts from a Washington Post column by Fareed Zakaria. Here’s his comparison of the U.S. and Europe.
In Europe, the talk is all about how Europe has been unable to keep up with the U.S. powerhouse. …In 2008, the United States and the euro-zone economies were roughly the same size. Today, the American economy is nearly twice the size of the euro zone. And it’s not just one measure.
Average European income is now 27 percent lower than in the United States, and average wages are 37 percent lower. …The U.S. economy towers above Europe’s these days. The United States’ technology companies dominate the continent. U.S. banks are far more profitable than European ones. U.S. energy production has created a boom in manufacturing which is luring many European companies to the United States. As one German CEO said to me. “America is an easier place to do business, has fewer regulations, and now has much lower energy costs. How do I rationally invest in Europe?” ……every year 300 billion euros is diverted to overseas markets to find superior investments, most of them in the United States.
I think it’s a gross overstatement for him to call the United States a powerhouse. After all, inflation-adjusted wages and household income numbers in America have been quite dismal.
But Zakaria is correct to say that Europe is in much worse shape.
Where he goes astray is in his proposed solution. He thinks more centralized power in Brussels (the headquarters of the European Union) is the key to faster growth.
The solution to Europe’s woes can be summarized in one line — a deeper, more united, more strategic Europe. But that solution means, inevitably, more power to the European Union.
This is completely backwards. Europe needs more federalism and jurisdictional competition, not more centralization and harmonization.
To be fair, there are plenty of good things about the European Union, particularly the goal of free trade among the member nations.
But the E.U. also is a major source of bad policy, such as carbon protectionism and tax harmonization.
The bottom line is that more power for Brussels means expanding the cost of supranational government in Europe while doing nothing to fix the primary problem of bad policy by national governments.
PS It all goes back to Bismarck.
Bribe the plebs with old age pensions and security from the welfare State paid for by their (and increasingly other people’s) children.
Churchill copied it in the UK with so-called “National Insurance”
And FDR copied it all in the 1930s.
At least in Australia we had a means test on the old age pension from 1910 or thereabouts and we have forced people to save via compulsory superannuation -though we still are very bad in allowing double dips.
All of it was ultimately built on demographic presumptions destroyed by the Pill.
My Mum years ago in the 60s said the Pill would be bigger than the atomic bomb. She had studied history at Sydney Uni in the 30s when Stephen Roberts was writing on the house that Hitler built.
Looking at the demographic decline of the Anglosphere and Europe she was dead right.
The age of mass European expansion since 1492 into new and old continents has reversed.
As Juvenal remarked “The Orontes now flows into the Tiber.”
Ancient cities like London, Paris and Berlin are now full of Arabs, Algerians and Turks.
The meek shall inherit the Eartb translates as the Earth will belong to those who have the courage to those who inherit it (thanks to their parents).
Retiring now from law past 75 and hope to have more time to follow economics!
What can we do to attack the OECD tax collector’s club? They are winning hands down. The EU and OECD are the terrible conjoined twins of bad economic and tax policy.
Cheers
Terry
Dear Dan
It comes down to basic economics.
There are three factors of production – land, labour and capital – of which there is only one which can’t rust away, slack off, stop breeding or emigrate.
Even the most stupid governments realise that capital has to have depreciation allowances and a high tax rate sends it offshore with a maximum 10% or less interest withholding tax.
So they pick on taxing labour to buggery (literally).
Modern Treasuries refuse to recognise that raising children is replacing labour as a factor of production – unlike Pitt the Younger who made provision for common labour to deduct the costs of its replacement in his original Act of 1798.
Modern Western Treasuries think labour can be created or imported free of charge. As ageing Western societies cease to have babies Treasury and other economists who used to think labour supply was exogenous (ha, ha – how stupid!) now have the equally stupid idea that labour can be imported for nothing – so Australia will end up as a Chinese or Indian province and the US will end up as part of Latin America.
While I would vote for the Raj over the new Chinese Empire, I really would prefer the Latins.
Years ago, visiting Deb’s Mum in her retirement village annually in Chicago, I said that the USA floats on a sea of Latin labour.
The Bible had it right – a large population is good for a King and “where there is no vision the people perish”.
Demography is destiny.
Kind regards
Terry
Terry Dwyer
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