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Archive for the ‘Europe’ Category

Defenders of civil liberties have won big victories against gun control in the United States.

The fight certainly isn’t over, to be sure, but most Americans have some degree of freedom to own guns, carry guns, and protect themselves with guns.

By contrast, the situation in Europe tends to be grim. Many nations strictly limit the freedom of people to keep and bear arms. As you might expect, the “sensible Swiss” are an exception, and nations such as Monaco, Austria, and the Nordics are semi-reasonable.

But it’s just about impossible to own a gun in countries such as the United Kingdom, France, Germany, and Italy. Even groups that are targeted by Islamic fanatics, such as Jews, aren’t allowed to defend themselves.

And that is good news for terrorists. They can plot murder and mayhem with considerable confidence that they won’t meet armed resistance until police show up (just as mass killers in the USA seek out gun-free zones for their evil attacks).

But that passive approach may be changing in some European nations.

According to a column in the Washington Post, the President of the Czech Republic believes an armed citizenry is a safe citizenry.

A couple of months ago, Czech President Milos Zeman made an unusual request: He urged citizens to arm themselves against a possible “super-Holocaust” carried out by Muslim terrorists.

The column notes that he’s almost certainly over-stating the risks.

…there are fewer than 4,000 Muslims in this country of 10 million people.

But some citizens decided it’s better to be safe than sorry.

…gun purchases spiked.

Now the government is seeking to make it easier for citizens to use those guns for self-defense.

…the country’s interior ministry is pushing a constitutional change that would let citizens use guns against terrorists. Proponents say this could save lives if an attack occurs and police are delayed or unable to make their way to the scene. …Parliament must approve the proposal.

The good news is that the Czech Republic already has fairly good laws. At least by European standards.

The Czech Republic already has some of the most lenient gun policies in Europe. It’s home to about 800,000 registered firearms and 300,000 people with gun licenses. Obtaining a weapon is relatively easy: Residents must be 21, pass a gun knowledge check and have no criminal record. By law, Czechs can use their weapons to protect their property or when in danger, although they need to prove they faced a real threat.

Hopefully there are lots of unregistered firearms as well.

Though I’m unsure what the Interior Ministry is proposing with regards to gun use against terrorists. Why would the law need to be changed if Czechs already are allowed to use weapons for self-defense?

In any event, the bad news is that the meddling bureaucrats in Brussels are trying to make it more difficult for law-abiding people to protect themselves.

…much of Europe…has long supported much more stringent gun-control measures.  In the wake of the 2015 terror attacks in Paris, France pushed the European Union to enact even tougher policies. The European Commission’s initial proposal called for a complete ban on the sale of weapons like Kalashnikovs or AR-15s that are intended primarily for military use. Ammunition magazines would be limited to 20 rounds or less. …the EU passed a compromise last month… The final measure bans the sale of most military-style rifles and requires all potential buyers to go through a psychological check before they can buy a weapon. …it’s not yet clear if gun owners will have to turn in newly illegal weapons.

How typical of the French. They want to make it more difficult for law-abiding people to have guns, an approach that presumably won’t have much – if any – impact on terrorists who presumably can get weapons illegally.

And the EU once again ignores its own federalist rhetoric on subsidiarity to push for statist continent-wide policy.

Moreover, Kalashnikovs and AR-15s are no more dangerous or deadly than other rifles, so targeting guns that “are intended primarily for military use” is irrelevant nonsense.

The bottom line is that more gun control in Europe won’t help the fight against terrorism. Instead, it simply means citizens don’t have the right to defend themselves.

So I’m glad the Czechs are trying to do the right thing, in spite of the paternalistic left-wing ideologues elsewhere in Europe. And I hope there will be lots of civil disobedience as more gun control policies emanate from Brussels.

P.S. If you enjoy sarcasm, here’s a clever video showing how leftists think about gun control. And here’s another one.

P.P.S. If you enjoy when leftists accidentally make the argument against gun control, you’ll enjoy the exploding cigars by Trevor Noah and the New York Times.

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I like the main components of the Trump tax plan, particularly the sweeping reduction in the corporate tax rate.

But, as I say at the beginning of this Fox Business interview, there’s a big difference between proposing a good idea and actually getting legislation approved.

But just because I’m pessimistic, that doesn’t change the fact that a lower tax burden would be good for the country.

Toward the end of the interview, I explained that the most important reason for better tax policy is not necessarily to lower taxes for families, but rather to get more prosperity.

If we can restore the kind of growth we achieved when we had more market-friendly policy in the 1980s and 1990s, that would be hugely beneficial for ordinary people.

That’s the main economic argument for Trump’s plan.

But now I’ve come across what I’ll call the emotionally gratifying argument for Trump’s tax cuts. The Bureau of National Affairs is reporting that European socialists are whining that a lower corporate tax rate in the United States will cause “a race to the bottom.”

U.S. President Donald Trump’s plans to slash corporate taxes by more than half will accelerate a “race to the bottom” and undermine global efforts to combat corporate tax evasion by multinationals, according to a second political group in the European Parliament. The Socialists and Democrats, made up of 190 European Parliament lawmakers, insisted the Trump tax reform, announced April 26, threatens the current work in the Organization for Economic Cooperation and Development and the Group of Twenty to establish a fair and efficient tax system.

As you might expect, the socialists make some nonsensical arguments.

Paul Tang—who heads the Group of the Progressive Alliance of Socialists and Democrats and leads the European Parliament negotiations on the pending EU Common Corporate Tax Base (CCTB) proposal—accused the Trump administration of pursuing a “beggar-they-neighbor policy similar to those in the 1930s.”

Huh?!? Does Mr. Tang think there were tax cuts in the 1930s?

That was a decade of tax increases, at least in the United States!

Or is he somehow trying to equate tax cuts with protectionism? But that makes zero sense. Yes, protectionism was rampant that decade, but higher tariffs mean higher taxes on trade. That’s the opposite of tax cuts.

Mr Tang is either economically illiterate or historically illiterate. Heck, he’s a socialist, so probably both.

Meanwhile, another European parliamentarian complained that the U.S. would become more of a tax haven if Trump’s tax cut was enacted.

Sven Giegold, a European Green Party member and leading tax expert in the European Parliament, told Bloomberg BNA in a April 27 telephone interview that the Trump tax plan further cemented the U.S. as a tax haven. He added the German government must put the issue on the agenda during its current term as holder of the G-20 presidency. …The European Green Party insists the U.S. has become an international tax haven because, among other things, it has not committed to implement the OECD Common Reporting Standard and various U.S. states, including Delaware, Nevada and South Dakota, have laws that allow companies to hide beneficial owners.

He’s right and wrong.

Yes, the United States is a tax haven, but only for foreigners who passively invest in the American economy (we generally don’t tax interest and capital gains received by foreigners, and we also generally don’t share information about the indirect investments of foreigners with their home governments).

Corporate income, however, is the result of direct investment, and that income is subject to tax by the IRS.

But I suppose it’s asking too much to expect politicians to understand such nuances.

For what it’s worth, I assume Mr. Giegold is simply unhappy that a lower corporate tax rate would make America more attractive for jobs and investment.

Moreover, he presumably understands adoption of Trump’s plan would put pressure on European nations to lower their corporate tax rates. Which is exactly what happened after the U.S. dropped its corporate tax rate back in the 1980s.

Which is yet another example of why tax competition is something that should be celebrated rather than persecuted. It forces politicians to adopt better policy even when they don’t want to.

That is what gets them angry. And I find their angst very gratifying.

P.S. You may have noticed at the very end of the interview that I couldn’t resist interjecting a plea to reduce the burden of government spending. That’s not merely a throwaway line. When the Congressional Budget Office released its fiscal forecast earlier this year, I crunched the numbers and showed that we could balance the budget within 10 years and lower the tax burden by $3 trillion (on a static basis!) if politicians simply restrained spending so that it grew 1.96 percent per year.

P.P.S. It’s worth remembering that the “race to the bottom” is actually a race to better policy and more growth. And politicians should be comforted by the fact that this doesn’t necessarily mean less revenue.

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I wrote yesterday about the most recent OECD numbers on “Average Individual Consumption” in member nations.

There was a very clear lesson in that data about the dangers of excessive government. The United States was at the top in this measure of household living standards, not because American policies are great, but rather because huge welfare states in Europe have undermined economic vitality on the other side of the Atlantic.

Indeed, the only countries even remotely close to the United States were oil-rich Norway and the two tax havens of Switzerland and Luxembourg.

Those AIC numbers gave us an interesting snapshot of relative living standards in 2014.

But what would we discover if we looked at how that data has changed over time?

It appears that the OECD began assembling that data back in 2002. Here’s a table showing how nations rose or fell, relative to other OECD nations, since then. Based on convergence theory, one would expect to see that poorer nations enjoyed the biggest relative gains, while richer nations fell in the rankings. And that is what generally happened, but with some notable exceptions.

Here are the countries that did not conform, for either good reasons or bad reasons, to convergence theory.

We’ll start with the nations that have bragging rights.

  • Chile started at the very bottom compared to the rich nations of the western world, so anything other than a large increase would have been a disappointment. But the magnitude of Chile’s increase is nonetheless quite impressive and presumably a testament to pro-market reforms.
  • Finland was almost 7 points below the OECD average in 2002 and now is more than 2 points above the average, which is a significant jump for a nation near the middle of the pack. Maybe having sensible leaders is a good idea.
  • Oil-rich Norway was above average at the start of the period and even farther above average at the end of the period.
  • The United States was very high in 2002 and remained very high in 2014. Since that outcome violates convergence theory, that’s a non-trivial accomplishment and another piece of evidence that big governments in Europe are imposing a harsh economic cost.
  • Switzerland also started high and remained high. That’s presumably a reflection of good policies such as federalism and spending restraint.

Now for the nations that did not fare well.

  • Luxembourg suffered a large drop, some of which is understandable since the tiny tax haven was in first place back in 2002. But the magnitude of the decline – particularly compared to the United States and Switzerland – is not an encouraging sign. This may be a sign that anti-tax competition efforts by the OECD have hit the nation hard.
  • Greece, Spain, Ireland, and Italy all tumbled in the rankings even though – at best – they started in the middle of the pack. It will be interesting to see how these nations perform as they recover (or don’t recover, as I expect in the cases of Italy and Greece) from the European fiscal crisis.
  • Slovenia also went from bad to worse, which perhaps is not a big surprise since it is one of the least reform-oriented countries to emerge from the Soviet Bloc.
  • The United Kingdom suffered a rather large decline, almost all of which happened under the profligate Blair and Brown Labour governments. This will be another nation that will be interesting to watch in coming years, particularly because of Brexit.
  • France and the Netherlands also suffered, starting well above average in 2002 but falling to the mean in 2014.

If you like this kind of data on whether nations are trending in the right direction or wrong direction, I’ve also tinkered with the data from Economic Freedom of the World.

Last year, I highlighted countries that have made significant moves in the EFW rankings, including oft-overlooked success stories such as Israel and New Zealand.

I also looked specifically at changes in Europe this century and did not find any reason for optimism.

The bottom line is that there’s no substitute for free markets and limited government. If nations want faster growth and more prosperity, they need to mimic jurisdictions such as Hong Kong and Singapore.

Unfortunately, there’s very little reason to be optimistic about that happening in Europe.

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One of the more surreal aspects of the 2016 campaign was watching Bernie Sanders argue that the United States should become more like a European welfare state.

Was he not aware that Europe had major problems such as high unemployment and a fiscal crisis?

Didn’t he know that America’s economy was growing faster (which is a damning indictment since growth in the U.S. was relatively anemic during the Obama years)?

Perhaps more important, didn’t he know that Americans enjoy much higher living standards than their European counterparts? Was he not aware that European nations, if they were part of America, would be considered poor states?

If you don’t believe me, here’s a chart I prepared using the “average individual consumption” data from the Organization for Economic Cooperation and Development. These are the numbers that measure the material well-being of households. As you can see, the United States is far ahead of other nations. Indeed, the only three countries that are even close are two admirable tax havens and oil-rich Norway.

What about Denmark and Sweden, the two nations that Bernie Sanders said were role models? Well, the United States could copy them, but only if we wanted our living standards to drop by more than 30 percent.

By the way, since the OECD is a left-leaning bureaucracy that is guilty of periodically rigging numbers against the United States, you can be confident that this AIC data isn’t structured to favor America.

So why does the United States have such a big advantage?

In a new study from the National Bureau of Economic Research, Professor Martin Feldstein addresses why Europe is lagging the United States.

Although the official statistics imply that the rate of growth of real GDP in the United States has declined in recent years, it has still been substantially higher than the real growth rates in Europe and the other industrial countries. The sustained higher rate of real GDP growth in the United States over a longer period of time has resulted in a substantially higher level of real GDP per capita in the United States than in other major industrial countries.

He lists 10 reasons for the growth gap. Here are the ones that are related to public policy, followed by my brief observations.

(4) Labor markets that generally link workers and jobs unimpeded by large trade unions, state-owned enterprises, or excessively restrictive labor regulations. In the private sector, less than seven percent of the labor force is unionized. There are virtually no state-owned enterprises. While labor laws and regulations affect working conditions and hiring rules, they are much less onerous than in Europe.

Given America’s high ranking in the World Bank’s Doing Business, this makes sense.

(6) A culture and a tax-transfer system that encourages hard work and long hours. The average employee in the United States works 1800 hours per year, substantially longer than the 1500 hours worked in France and the 1400 hours worked in Germany.

The U.S. subsidizes leisure, but not nearly as bad as Europe (think of Lazy Robert).

(7) A supply of energy that makes North America energy independent. The private ownership of land and mineral rights has facilitated a rapid development of fracking to expand the supply of oil and gas.

Apparently the United States is one of the few nations where you own minerals under your land. Good for us.

(8) A favorable regulatory environment. Although the system of government regulations needs improvement, it is less burdensome on businesses than the regulations imposed by European countries and the European Union.

Given the data from Economic Freedom of the World, I’m not sure I believe this.

(9) A smaller size of government than in other industrial countries. According to the OECD, outlays of the U.S. government at the federal, state and local levels totaled 38 percent of GDP while the corresponding figure was 44 percent in Germany, 51 percent in Italy and 57 percent in France. The higher level of government spending in other countries implies that not only is a higher share of income taken in taxes but also that there are higher transfer payments that reduce incentives to work. In the United States, …There is no value added tax. State income taxes vary but are generally about five percent… So Americans have a higher pre-tax reward to working and can keep a larger share of their earnings.

A smaller burden of government spending may be America’s biggest advantage. And that’s connected with our other big advantage, which is not being burdened by a government-fueling value-added tax.

(10) The U.S. has a decentralized political system in which states compete. The competition among states encourages entrepreneurship and work effort and the legal systems protect the rights of property owners and entrepreneurs. The United States political system assigns many legal rules and taxing power to the fifty individual states. The states then compete for businesses and for individual residents by their legal rules and tax regimes. Some states have no income taxes and have labor laws that limit unionization.

We still have some federalism, and that helps.

Overall, Feldstein’s list is impressive, though it fails to note that there are areas where Europe has better policy, such as lower corporate tax rates, lower death taxes, private postal services, and private infrastructure. There are even European nations with school choice and private retirement accounts.

Notwithstanding these attractive features, Feldstein is right about more economic liberty in the United States. And that helps to explain higher living standards in America.

What makes this especially noteworthy is that convergence theory says that poorer nations should automatically catch up to richer nations. Yet Europe’s catch-up period came to halt in the 1980s and the continent has since been losing ground.

And for fans of apples-to-apples comparisons, it’s very illuminating that Americans of Scandinavian descent earn about 40 percent more than those who didn’t emigrate and still live in Scandinavia.

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It appears that Venezuela is on the brink of collapse as it enters the fourth circle of statist hell.

And the death of Cuba’s long-time dictator gives hope that the people of that island nation may soon escape communist tyranny.

Moreover, one certainly hopes that the lunatic leadership of North Korea’s brutal regime won’t last forever.

Let’s cross our fingers that these evil governments will soon lose power. But that’s only the first step. We also need to think about the policies that would enable these nations to undo the damage of pervasive socialism.

We can learn some lessons by looking at the experience of post-communist nations in Eastern Europe, which is a topic I addressed in the latest edition of The Conservative, which is the quarterly magazine published by the Alliance of Conservatives and Reformers in Europe.

I started the article with some broad observations about grim political and economic impact of communism.

Communism was an awful system for people trapped behind the Iron Curtain. The political cost was enormous. Personal rights and individual liberties were sacrificed to protect the power of the state. Human rights were abused, dissidents were imprisoned, and some were even killed. Communism also imposed huge economic costs. Collectivized agriculture, central planning, price controls, and government-run industries were among the policies that resulted in a debilitating misallocation of resources. And because labor and capital were poorly utilized, living standards lagged far behind western nations.

That was the bad news.

The good news is that the Soviet Empire collapsed, the Berlin Wall was dismantled, and democratic forms of government are now the norm in Eastern Europe.

But good news isn’t perfect news. Nations that emerged from the Soviet Bloc are still economic laggards. And if you dig into the latest version of Economic Freedom of the World, a big problem is that post-communist nations have not been very successful in defending property rights and implementing the rule of law.

Establishing genuine capitalism, though, has been a bigger challenge. Part of the problem is policy. And to be more specific, data from the Fraser’s Institute’s Economic Freedom of the World shows that the major difference today between Western Europe and Eastern Europe (nations that were part of the Soviet Bloc) is that the former get much better scores for “Legal System and Property Rights.” Indeed, the average ranking of Western European nations is 20.6 (with 1 being the best) while the average ranking of Eastern European countries is 67.1 (Economic Freedom of the World ranks 159 jurisdictions).

Here’s a graph comparing Western European nations with Eastern European nations.

As you can see, this is an area where Western Europe leads the world. Nordic nations tend to be at the very top of the rankings (thus helping to offset bad fiscal policy in those countries), and other countries in the region also are highly ranked (though a few countries in the region, such as Italy and Greece, don’t get good scores).

Eastern European countries, by contrast, don’t do well. There’s a significant gap when looking at average scores. Indeed, only Estonia ranks in the top 25.

And bad scores in this category are akin to putting a house on a foundation of sand. Other policies may create a house that looks very nice, but it probably won’t last very long on the unstable foundation.

And speaking of other policies, post-communist nations have better fiscal policy than the countries from Western Europe. Or, to be more accurate, they have less-worse fiscal policy.

If you examine the overall ratings for “Size of Government,” Eastern European nations actually are ranked significantly better, with an average ranking of 89.2 compared to 129.2 for Western European countries. This is because tax rates tend to be lower (many former Soviet Bloc nations have flat tax regimes, for instance) and welfare states aren’t as burdensome.

As I already hinted, doing “significantly better” on fiscal policy than Western Europe does not mean Eastern Europe has good fiscal policy.

Indeed, an average ranking of 89 means that most Eastern European nations are in the bottom half of the world.

So while it’s good that some Eastern European nations have flat taxes, that’s not an economic elixir if there are very high payroll taxes, stifling value-added taxes, and onerous energy taxes.

And since the burden of government spending is extremely onerous in Western Europe, it’s hardly an impressive achievement that Eastern Europe ranks slightly higher.

Though there’s one aspect of fiscal policy where the post-communist countries are lagging their neighbors to the west.

…if you dig into the details and examine the various components that determine “Size of Government,” there’s one area where Eastern Europe lags. The numbers for “Government Enterprises and Investment” are better in Western Europe. …In other words, politicians play too large a role in the allocation of capital in former communist nations.

To put that message in blunter terms, there’s too much cronyism in Eastern Europe.

So long as politicians can directly (state-owned enterprises) or indirectly (handouts, subsidies, and bailouts) provide favors and tilt the playing field, the enriching forces of private markets will be stunted.

Which is why I shared this conclusion in my article.

The bottom line is that post-communist nations need to choose genuine capitalism if they want a brighter future for their citizens.

If you want to close with some good news, I did point out in the article that there are some bright spots in the region, especially Estonia, though Poland also has made big progress.

P.S. Courtesy of Reddit‘s libertarian page, here’s an amusing cartoon strip.

It doesn’t quite meet the requirement for getting added to my “Government in Cartoons” page, but it definitely could be part of this collection of anti-politician jokes.

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I’ve put forth lots of arguments against tax increases, mostly focusing on why higher tax rates will depress growth and encourage more government spending.

Today, let’s look at a practical, real-world example.

I wrote a column for The Hill looking at why Greece is a fiscal and economic train wreck. I have lots of interesting background and history in the article, including the fact that Greece got into the mess by overspending and also explaining that politicians like Merkel only got involved because they wanted to bail out their domestic banks that foolishly lent lots of money to the Greek government.

But the most newsworthy part of my column was to expose the fact that “austerity” hasn’t worked in Greece because the private sector has been suffocated by giant tax hikes.

…the troika…imposed the wrong kind of fiscal reforms. …what mostly happened is that Greek politicians dramatically increased the nation’s already punitive tax burden. The Organization for Economic Cooperation and Development’s fiscal database tells a very ugly story. …on the eve of the crisis, the tax burden in Greece totaled 38.9 percent of GDP. This year, taxes are projected to reach 52.0 percent of economic output. Every major tax in Greece has been dramatically increased, including personal income taxes, corporate income taxes, value-added taxes, and property taxes. It’s been a taxpalooza… What’s happened on the spending side of the fiscal ledger? Have there been “savage” and “draconian” budget cuts? …there have been some cuts, but the burden of government spending is still a heavy weight on the Greek economy. Outlays totaled 54.1 percent of GDP in 2009 and now government is consuming 52.2 percent of economic output.

For what it’s worth, the spending numbers would look better if the economy was stronger. In other words, Greece’s performance wouldn’t be so dismal if GDP was growing rather than shrinking.

And that’s why tax increases are so misguided. They give politicians an excuse to avoid much-needed spending cuts while also hindering growth, investment and job creation.

Let’s close by reviewing Greece’s performance according to Economic Freedom of the World. The overall score for Greece has dropped slightly since 2009, but the real story is that the nation’s fiscal score has dramatically worsened, falling from 5.61 to 4.66 on a 0-10 scale. In other words, during a period of time in which Greece was supposed to sober up and become more fiscally responsible, the politicians engaged in an orgy of tax hikes and Greece went from a failing grade for fiscal policy to a miserably failing grade.

Here’s a the relevant graph from the EFW website. As you can see, the score has been dropping for a decade, not just since 2009.

This is remarkable result. Greek politicians should have been pushing the nation’s fiscal score to at least 7 out of 10, if not 8 out of 10. Instead, the score has gone in the wrong direction because of tax increases.

Though I don’t expect Hillary and Bernie to learn the right lesson.

P.S. For more information, here’s my five-picture explanation of the Greek mess.

P.P.S. And if you want to know why I’m so dour about Greece’s future, how can you expect good policy from a nation that subsidizes pedophiles and requires stool samples to set up online companies?

P.P.P.S. Let’s close by recycling my collection of Greek-related humor.

This cartoon is quite  good, but this this one is my favorite. And the final cartoon in this post also has a Greek theme.

We also have a couple of videos. The first one features a video about…well, I’m not sure, but we’ll call it a European romantic comedy and the second one features a Greek comic pontificating about Germany.

Last but not least, here are some very un-PC maps of how various peoples – including the Greeks – view different European nations.

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The famous French diplomat Charles Maurice de Talleyrand supposedly said that a weakness of the Bourbon monarchs was that they learned nothing and forgot nothing.

If so, the genetic descendants of the Bourbons are now in charge of Europe.

But before explaining why, let’s first establish that Europe is in trouble. I’ve made that point (many times) that the continent is in trouble because of statism and demographic change.

What’s far more noteworthy, though, is that even the Europeans are waking up to the fact that the continent faces a very grim future.

For instance, the bureaucrats in Brussels are pessimistic, as reported by the EU Observer.

…the report warns of a longer term risk for the EU economy. “As expectations of low growth ahead affect investment today, there is potential for a vicious circle,” the commission’s director general for economic and financial affairs writes in the report’s foreword. “In short, the projected pace of GDP growth may not be sufficient to prevent the cyclical impact of the crisis from becoming permanent (hysteresis), ” Marco Buti writes.

The people of Europe share that grim assessment.

Pew has some very sobering data on angst across the continent.

Support for European economic integration – the 1957 raison d’etre for creating the European Economic Community, the European Union’s predecessor – is down over last year in five of the eight European Union countries surveyed by the Pew Research Center in 2013. Positive views of the European Union are at or near their low point in most EU nations, even among the young, the hope for the EU’s future. The favorability of the EU has fallen from a median of 60% in 2012 to 45% in 2013.

Here’s the relevant chart.

Establishment-oriented voices in the United States also agree that the outlook is rather dismal.

Writing in the Washington Post, Sebastian Mallaby offers a grim assessment of Europe’s future.

…since 2008…, the 28 countries in the European Union managed combined growth of just 4 percent. And in the subset consisting of the eurozone minus Germany, output actually fell. …most of the Mediterranean periphery has suffered a lost decade. …The unemployment rate in the euro area stands at 9.8 percent, more than double the U.S. rate. Unemployment among Europe’s youth is even more appalling: In Greece, Spain, France, Croatia, Italy, Cyprus and Portugal, more than 1 in 4 workers under 25 are jobless.

The bottom line is that there’s widespread consensus that Europe is a mess and that things will probably get worse unless there are big changes.

But the key question, as always, is whether the changes are positive or negative. And this is why I started with a reference to the Bourbon kings. European leaders today also are infamous for learning nothing and forgetting nothing.

Indeed, the proponents of bad policy want to double down on the mistakes of bigger government and more centralization.

The International Monetary Fund (aka, the “Dr. Kevorkian” or “dumpster fire” of the global economy), led by France’s Christine Lagarde, actually is urging a new form of redistribution in Europe.

The International Monetary Fund called on Thursday for the creation of a fund…in the euro zone… Managing Director Christine Lagarde said… “countries would be pooling budgetary resources in a common pot which could be used for projects and certain operations”

Lagarde says the new fund should have strings attached, so that nations could access the loot if they complied with the EU’s budget rules, and also if they use the money for structural reform.

That sounds prudent, but only until you look at the fine print.

The current budget rules are misguided and are more likely to encourage tax hikes rather than spending restraint. And while many European nations need good structural reform, that’s not what the IMF has in mind.

Lagarde told a news conference the new fund could pay for projects related to migration, refugees, security, energy and climate change.

Instead, it appears that this is just a scheme to transfer money from countries such as Germany and Estonia that have restrained spending in recent years.

Germany, Estonia and Luxembourg are the only EU countries that have posted budget surpluses since 2014. Lagarde said the pooling of budgetary resources could put these surpluses to good use.

Sigh.

But the problem goes way beyond an international bureaucracy led by someone from Europe. This is the mentality that is deeply embedded in most European policymakers.

Simply stated, the people who helped create the European mess by pushing for bigger government and more centralization agree that the time if right for…you guessed it…bigger government and more centralization. Here’s an excerpt from a report by the Delors Institute.

…a true economic and monetary union still needs to be built. It will have to be based on significant risk sharing and sovereignty sharing within a coherent and legitimate framework of supranational economic governance. This third building block includes turning the ESM into a fully-fledged European Monetary Fund.

The bureaucrats in Brussels predictably agree that they should get more power, as noted in a story from the EU Observer.

The EU should raise its own taxes and use Brexit as an opportunity to push for the idea, a report by a group of top officials says. …”The Union must mobilise common resources to find common solutions to common problems,” says the document, seen by EUobserver. …The paper also proposes a EU-level corporate income tax that would be combined with a common consolidated corporate tax base… Other proposals include a bank levy, a financial transaction tax, or a European VAT that would top national VATs. …The new budget EU commissioner Guenther Oettinger said that the report was “of great quality”.

And the senior politicians in Brussels are also beating the drum for added centralization.

…divergence creates fragility… Progress must happen…towards a genuine Economic Union…towards a Fiscal Union…need to shift from a system of rules and guidelines for national economic policy-making to a system of further sovereignty sharing within common institutions…some degree of public risk sharing…including a ‘social protection floor’…a shared sense of purpose among all Member States

Wow. I don’t know if I’ve ever read something so wildly wrong. As Nassim Nicholas Taleb has sagely observed, it is centralization and harmonization that creates systemic risk.

And all this talk about “common resources” and “public risk sharing” is simply the governmental version of co-signing a loan for the deadbeat family alcoholic.

Yet Europe’s ideologues can’t resist their lemming-like march in the wrong direction.

What makes this especially odd is that there is so much evidence that Europe originally became rich for the opposite reason.

It was decentralization and jurisdictional competition that enabled prosperity.

Matt Ridley, writing for the UK-based Times, drives this point home.

…the leading theory among economic historians for why Europe after 1400 became the wealthiest and most innovative continent is political fragmentation. Precisely because it was not unified, Europe became a laboratory for different ways of governing, enabling the discovery of regimes that allowed free markets and invention to flourish, first in northern Italy and some parts of Germany, then the low countries, then Britain. By contrast, China’s unity under one ruler prevented such experimentation. …Baron Montesquieu…remarked, Europe’s “many medium-sized states” had incubated “a genius for liberty, which makes it very difficult to subjugate each part and to put it under a foreign force other than by laws and by what is useful to its commerce”. …David Hume…mused…Europe is the continent “most broken by seas, rivers, and mountains” and so “the divisions into small states are favourable to learning, by stopping the progress of authority as well as that of power”. …the idea has gained almost universal agreement among historians that a disunited Europe, while frequently wracked by war, was also prone to innovation and liberty — thanks to the ability of innovators and skilled craftsmen to cross borders in search of more congenial regimes.

But now Europe has swung completely in the other direction.

The European Commission’s obsession with harmonisation prevents the very pattern of experimentation that encourages innovation. Whereas the states system positively encouraged governments to be moderate in political, religious and fiscal terms or lose their talent, the commission detests jurisdictional competition, in taxes and regulations. The larger the empire, the less brake there is on governmental excess.

Ralph Raico echoes these insights in an article for the Foundation for Economic Education.

In seeking to answer the question why the industrial breakthrough occurred first in western Europe, …what was it that permitted private enterprise to flourish? …Europe’s radical decentralization… In contrast to other cultures — especially China, India, and the Islamic world — Europe comprised a system of divided and, hence, competing powers and jurisdictions. …Instead of experiencing the hegemony of a universal empire, Europe developed into a mosaic of kingdoms, principalities, city-states, ecclesiastical domains, and other political entities. Within this system, it was highly imprudent for any prince to attempt to infringe property rights in the manner customary elsewhere in the world. In constant rivalry with one another, princes found that outright expropriations, confiscatory taxation, and the blocking of trade did not go unpunished. The punishment was to be compelled to witness the relative economic progress of one’s rivals, often through the movement of capital, and capitalists, to neighboring realms. The possibility of “exit,” facilitated by geographical compactness and, especially, by cultural affinity, acted to transform the state into a “constrained predator”.

In other words, the “stationary bandit” couldn’t steal as much and that gave the private sector the breathing room that’s necessary for growth.

But today’s politicians in Europe want to strengthen the ability of governments to seize more money and power.

That strategy may work in the short run, but bailouts, redistribution, easy money, and statism are not a good long-run strategy.

So perhaps it’s appropriate that we conclude with a warning. As reported in a column for the UK-based Telegraph, one of the architects of the euro fears that bailouts are crippling the continent-wide currency.

The European Central Bank is becoming dangerously over-extended and the whole euro project is unworkable in its current form, the founding architect of the monetary union has warned. “One day, the house of cards will collapse,” said Professor Otmar Issing, the ECB’s first chief economist… Prof Issing lambasted the European Commission as a creature of political forces that has given up trying to enforce the rules in any meaningful way. “The moral hazard is overwhelming,” he said. The European Central Bank is on a “slippery slope” and has in his view fatally compromised the system by bailing out bankrupt states in palpable violation of the treaties. “…Market discipline is done away with by ECB interventions. …The no bailout clause is violated every day,” he said… Prof Issing slammed the first Greek rescue in 2010 as little more than a bailout for German and French banks, insisting that it would have been far better to eject Greece from the euro as a salutary lesson for all.

For what it’s worth, I fully agree that Greece should have been cut loose.

But European politicians and bureaucrats, driven by an ideological belief in centralization (and a desire to bail out their big banks), instead decided to undermine the euro by creating a bigger mess in Greece and sending a very bad signal about bailouts to other welfare states.

And keep in mind that the fuse is still burning on the European fiscal crisis.

As the old saying goes, this won’t end well.

P.S. While my prognosis for Europe is relatively bleak, there were some hopeful signs in the aforementioned Pew data.

First, Europeans at some level understand that government is simply too big. Indeed, they recognize that economic growth is far more likely to occur if fiscal burdens are reduced rather than increased.

Second, they also realize that the euro, while weakened and flawed, is a better option than restoring national currencies, which would give their governments the power to finance bigger government by printing money.

P.P.S. I can’t resist sharing one final bit of polling data from Pew. I’m amused that every nation sees itself as the most compassionate (though if you look at real data, all European nations lag the USA in real compassion). Meanwhile, the prize for self-doubt (or perhaps self-awareness?) goes to the Italians, who labeled themselves as least trustworthy. The schizophrenia prize goes to the Poles, who simultaneously view the Germans as the most trustworthy and least trustworthy.

Oh, and there’s probably some lesson to be learned from Germany dominating the data for being most trustworthy and least compassionate.

Maybe this poll should be added to my European humor collection.

P.P.P.S. Given the sorry state of Europe, now perhaps skeptics will understand why Brexit was the only good option for Brits.

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