There is an important reason for my projection that the European crisis is moving into a long-term stagnation phase: the Europeans are not willing to give up their welfare state. The welfare state caused the crisis, primarily by using taxes to deplete margins in the private sector and by using entitlements to discourage work and entrepreneurship. Eventually, all it took was a regular recession spiced up with some speculative losses in the financial industry, and the entire Western world was hurled into a deep and very persistent crisis. Unfortunately, the Europeans have not yet seen the light. (Perhaps they will when my book is out this summer.) Especially European voters are very persistent in demanding that the welfare state remains in place. This is particularly evident in a pan-European poll predicting the results in the May elections for the European Parliament.
That poll showed strong socialist gains among European voters. This is hardly surprising, given that the majority of Europe’s voters apparently believe that the last few years’ worth of austerity policies have been an ideological attack on the welfare state. In reality, it was a warped, economically stupid attempt to save the welfare state by making it fit inside a smaller, crisis-burdened economy. Higher taxes combined with spending cuts – in any combination – has the result of raising the burden of government on the private sector, hence to preserve the welfare state under tougher economic conditions.
As is well known, Europe has long history of fascination with socialism in various forms, from the light versions applied in assorted iterations of the welfare state to the full-blown totalitarian variant that plagued the Soviet sphere for decades. Generations of Europeans have grown up to a life in deep dependency on government. This is unhealthy anytime, anywhere, but it becomes economically dangerous in a crisis like the one Europe is now stuck in.
As if to compound the prospect of a collectivist victory in the May EU elections, the French socialists have launched a bold campaign to win a majority of their country’s delegation to the European Parliament. From Euractiv.com:
France’s ruling Socialist Party (PS) kicked off its European election campaign on Monday (3 March) with the ambition of securing the majority of French seats in the European Parliament, which is currently held by the country’s centre-right party, EurActiv France reports. At a press conference, the French Socialist Party’s first secretary, Harlem Désir, confirmed the Party of European Socialists’ (PES) ambition to take over the majority of seats in the EU Parliament and the job of EU Commission president. Europe, Désir said, “must turn the page of Liberal and Conservative governments, which for years have harmed the European dream. Their blind support to deregulation, widespread competition, fiscal and social dumping, has only led to austerity, unemployment and soaring populism across the continent.”
Yes, how horrible to deregulate markets so people and businesses have more choices. What a horrifying thought to let businesses compete with each other so the best one wins… I can’t wait until the socialists take over the Olympics. Imagine…
- In the 100 meter sprint, everyone has to get to the finishing line at exactly the same time. If someone gets ahead, the distance by which he won is taxed away and given to those who were last in the race.
- To assure there is no gender discrimination, the race has to perfectly represent the 50-something different genders that apparently exist in this world (of course, you’d have to expand the width of the race track accordingly…)
- In hockey, if a player scores a goal for his team he will immediately have to place the puck in his own team’s goal.
- Gymnasts can no longer be very thin and small. All sorts of women of all sizes must be given the exact same chance to participate, not to mention the same points, regardless of their performance.
Socialist Olympics – where everyone’s a winner!
Now back to the EU election and the Euractiv story, which reports that the socialists are eagerly trying to engage other parties in a debate between the candidates for the presidency of the EU Commission:
For the Socialists, the “presidential” debate is also an opportunity to equate the [liberal] EPP with the incumbent Commission’s results, notably on issues such as social dumping and crisis management. “We are starting in a European climate of sanction towards the outgoing team on the right wing, which led a policy of austerity, recession and stagnation on the economic and social plan,” said Jean-Christophe Cambadélis, the campaign director for the EU elections.
This is actually an important point. By focusing so intensely on austerity throughout the crisis years, the incumbent EU Commission has indeed added fiscal insult to Europe’s macroeconomic injury. Ironically, their policies have expanded the presence of government throughout the economy by taking more from the private sector (higher taxes), giving less back (spending cuts) and depressing private consumption and business investments (higher taxes). In doing so, the commission has gone squarely against the purported ideological foundations of the conservative and liberal parties that have held a majority in the European Parliament since the 2009 elections.
In a matter of speaking, their deviation from their own ideological platform – their endeavor into statist territory – is now paving the way for “real” statists to take over.
And take over they will, says Euractiv:
According to estimates from the website Pollwatch 2014, the European Socialists and Democrats (S&D) would get 217 seats, while the EPP would get 200. The PS secretary general stressed that employment would be at the heart of the European campaign. “Jobs will be our priority,” said socialist MEP
Sounds good when you first hear it. So what do they want to do?
Catherine Trautmann, who took part in the press conference, mentioning the fight for a minimum wage at European level. To curb youth unemployment in particular, the PS secretary general has announced plans to strengthen the budget for the Youth Guarantee Scheme.
A minimum wage across Europe?? This is as ludicrous an idea as anything I have seen recently. What is it going to be measured against? Reasonably, it would have to be against some sort of benchmark, such as a fixed percentage of mean household income.
The problem with that – well, one of the problems with it – is that the benchmark would vary enormously from country to country. The way the European socialist party puts this idea it would be based on the same benchmark across the EU, which, using mean net household income would be 17,475 euros. Let’s say now that the minimum wage is 40 percent of that (a fraction sometimes used when calculating poverty ratios). This means that an average European household living on minimum wages would earn 6,990 euros.
Sounds fine and dandy, right? The problem is that the mean household income in seven EU member states are actually below this level. In Bulgaria and Romania the the minimum-wage level household income would be more than twice the mean household income.
In other words, an exquisite recipe for crashing the labor markets – the entire economies – of Europe’s poorer countries.
Apparently, this is not a problem for Europe’s socialists. Their next suggestion, as per the quote above, is more tax money to a government-run artificial-employment program they so aptly call “Youth Guarantee Scheme”.
It’s a scheme alright… But humor aside, the last thing Europe needs is more regulatory incursions, higher taxes and more people dependent on government. It will only cement the continent as an economic wasteland, stuck in permanent stagnation and industrial poverty.