In the Ruins of the Welfare State

Sweden’s capital Stockholm is surrounded by rundown, crime-ridden public housing projects. For the fourth night in a row these housing projects are erupting in riots, encircling Stockholm with a ring of burning cars, firebombed schools, with garages, recycling stations and other structures engulfed in flames. Mobs of immigrant youth – of which there are plenty in Sweden – attack shopping centers, mass transit and even fire and rescue teams called out to put out the fires they start.

The mobs aggressively charge at police, hurling rocks and other objects at them. They have vandalized at least two police stations and one train station. Last night (Wednesday), the fourth night in a row with riots, the unrest spread to most of the housing projects around Stockholm (there are two about dozen, each of them with roughly 8-10,000 residents). Cars and other property were being burned on at least 15 locations around the capital.

The riots are beginning to spread to other cities, primarily Gothenburg, Malmö and Uppsala. An inept government is sitting on the sidelines, confounded and clueless like Chamberlain when Hitler invaded Poland.

Sweden is just one example of a welfare state in decline and disintegration. The housing projects where the riots are erupting often have unemployment rates above 50 percent, with the vast majority of the residents being dependent on welfare. Contrary to the general perception in Europe as well as in America, Sweden is not a peaceful society that went through the recession largely unscathed. Their government finances are in good order, but that only means that they have over-taxed the private sector for a very long time, combined with moderate but frequent cuts in welfare programs. The cumulative effect over time has been that the private sector is being drained for life blood by taxes while the spending cuts are pushing the most vulnerable people into utter despair.

It is hardly surprising that Sweden has one of the highest crime rates in the industrialized world.

Unlike other countries in Europe, Sweden has been subject to a slow but steady austerity policies. Instead of causing an eruption of social and political protests at once, as has happened in countries like Greece and Spain, this Swedish strategy has worked like a slowly progressing venom in the economy. Eventually, the pressure from these cuts, combined with equally slow-progressing cuts in health care, public education and general income security programs, break out in one big eruption.

That is not to say there were no warnings. In my book Remaking America I tell the behind-the-scenes story of a crumbling welfare state, of how a young, frustrated generation burns down hundreds of public schools every year and how practically every social institution under the realm of the welfare state has turned from being benevolently user-friendly to being maliciously focused on balancing their budget under steady spending cuts.

Since the welfare state still maintains monopoly on all its services, people whose lives are being cut by austerity have nowhere else to go. The result is riots, social unrest, high crime rates and political extremism.

We are seeing all of this in Sweden, and in many other European countries. What we are not seeing is a realization among Europe’s political and intellectual leaders of how deep the crisis really is. George Friedman, chairman of Stratfor, provides an excellent analysis at RealClearWorld.com:

Spain invites endless historical considerations, but on this trip I was struck by something more immediate and prosaic. We were on the road from Granada, near the coast, to Madrid, the capital in the center of the country. It was a four-lane highway, what Americans would call an interstate. The road was clean, well maintained and, as we moved north, nearly empty. Every few kilometers a car would pass in the opposite direction, or we would run alongside another car heading north. It was not the paucity of cars that struck me; it was the almost complete absence of trucks. This was, after all, the road from the coast to the capital, not the only road but still a significant one. It was early afternoon on a weekday. The oddest moment came when we reached a tollbooth not too far from Madrid. There was only one booth open and when we pulled up there was no one in it and no coin or credit card slot. We waited, then we left. Perhaps the attendant was in the bathroom. Perhaps the revenue didn’t justify paying a toll taker. Perhaps this was one of the austerity measures they had taken. I will never know. What I do know is that the drive had a sort of post-apocalyptic feel, except that it was very clean.

A glimpse of an economic wasteland, emerging from the rubble as the austerity storm moves to the next country.

We marveled at it and then realized that there was nothing that ought to have surprised us about it. The unemployment rate in Spain is more than 27 percent. Gasoline costs 1.4 euros a liter (more than $6.50 a gallon). At that price, a drive is no longer a casual undertaking; it has to justify itself. As for trucks, when that many people are out of work — and have been for many months — the demand for goods declines to the point that trucks will be rare on the road.

An excellent way to put abstract reasoning into a real-world context. But there is more:

We stayed in a very nice hotel in Granada. In the morning when we left the hotel, there was a beggar sitting on the sidewalk, his back to the wall, to our right. … He was in his mid-to-late 20s, wearing glasses and reading a book. He was dressed in khakis and a decent shirt. He wasn’t mad, he wasn’t drunk and he wasn’t like the hippies of my youth. He wasn’t playing an instrument. He was sitting, absorbed in a book and begging. There were other beggars in Granada of the more conventional sort but also several more who looked like this one.

Youth unemployment in Spain is epidemic. It almost tripled in six years, from 17.9 percent in 2006 – a disturbingly high number in itself – to 53.2 percent in 2012. Preliminary numbers for 2013 point to 57 percent and rising.

An entire generation is being sentenced to a life in the ruins of the welfare state. The consequences of this are almost unfathomable. Friedman again:

When a young man is unemployed because he is a musician or an artist awaiting discovery or because he has lived carelessly, that’s one thing. But this is different unemployment. It is a generation whose dreams are shattered. They may have hoped to be a businessman or a craftsman, but that’s not going to happen now. Unemployment of this sort doesn’t go away in a few months or years. This is the level of unemployment the United States experienced in the Great Depression, the kind of unemployment that scars an entire generation.

Just as the Great Depression was prolonged by reckless welfare-statist policies, the crisis in Europe has taken a choke hold on the economy and is not going to let go any time soon:

No one knows how long this will last but everyone suspects that it will be a long time, and I share that suspicion. How do you accept a situation that says you, at the age of 22, will live on the margins of society along with half of your friends? More important, how do you live with that fact if you worked hard preparing for a career? … when nearly half a generation, most from middle-class families, finds itself at the bottom, there is no explanation to provide solace.

One of the factors that define industrial poverty is that the growing generation will live a life less prosperous than the life their parents have. Europe has been on the doorstep of industrial poverty for some time now, and this economic crisis was all it took to push the entire continent over the edge. And they will not climb back up again in at least a generation.

If the political leaders of Europe stick to defending the hollowed-out welfare state as a political ideology, the continent is doomed to being an economic wasteland for the rest of this century.

Add to that the risk for political extremism. Friedman sees this, too:

In its place there is, quite reasonably, a sense of victimhood. Whatever explanation one gives for the Spanish crisis — the stupidity of politicians, the laziness of the public, the greed of bankers or whatever else — the generation that is bearing the burden is the only one that is not guilty — at least not yet. This — being the victim in personal calamity shared by half a generation — is the foundation not just of political instability but also for the politics of rage. The older middle-class citizens, with the lives they thought they had secured shattered, hurled into the ranks of the permanently impoverished, represent the vanguard, if you will. But those who will never live the lives they thought they would, they are the explosive mass.

Then Friedman makes an outstanding observation:

I think the reason things are so calm — occasional riots hardly count — is that no one really believes that they won’t awake from the nightmare. There is a firm belief that this period will end. The denial of what has happened is not confined to Spain.

When the denial washes away; when one million young, unemployed, Spaniards join forces with 645,000 young, unemployed French, 200,000 young Greeks without work and another 3.8 million young in the EU with no job to go to; when they wake up and realize that this nightmare is not going away… that is when politicians like the leaders of Golden Dawn in Greece will be there, ready to scoop up their rage, funnel their frustration into political action.

And transform Europe in a way that Stalin nor Hitler may have had wet dreams about, but neither of them was able to do.

Make sure to read the rest of George Friedman’s excellent article. He does not seem to understand the root cause of the crisis and therefore cannot prescribe any solution, but his projection of where Europe is heading is intelligent and well worth the time.