Europeans: You Don’t Get It, Do You?

As a native of the old continent, I am always interested in its future (e.g. see my recent post). Claire Morgan, GPI director at Mercatus, attracted my attention yesterday to a very good article in the Washington Post by Fareed Zakaria: The Decline and Fall of Europe. I recommend the article, see here.

The article discusses a recent report from the OECD (ironically based in Paris) that just came out. Going for Growth (this is the title of the new report) informs us about growth prospects in the OECD. The first issue makes the case that Europe is in a very sorry state. Unless, serious reforms are undertaken, by year 2025, the US GDP per capita will be twice as large as that of Europe. As Zakaria puts it:

It's often noted that the European Union has a combined gross domestic product that is approximately the same as that of the United States. But the E.U. has 170 million more people. Its per capita GDP is 25 percent lower than that of the United States, and, most important, that gap has been widening for 15 years. If present trends continue, the chief economist at the OECD argues, in 20 years the average U.S. citizen will be twice as rich as the average Frenchman or German.

When you look at such a figure (assuming it is a good estimate), one cannot start wondering: what are Europeans doing? They are fast approaching the abyss, and yet, they seem to continue as if nothing was happening. I have come to believe that no one in the general public in Europe really understands what is at stake. It is as if civilization was there to stay irrespective of what they do—and in spite of two world wars.

What a shame for the continent of the enlightenment. The 20th century witnessed the results of “secular-rationalism” (which included Marxism); a movement born with the French Revolution. Unfortunately, it may continue in the 21st century. So in case you were wondering, the Jacobin legacy is still alive and well, but Europeans don’t get it.

Comments

[Max]

Well, I live in Germany and I must say that most of the Germans have already decided the issue and chosen that a dictatorship is a good way to go, or as they call it the "Große Koalition" (Big Coalition).

The remains of what one could call a free market, are still competitive and are providing jobs as long as they are in niche markets where they can built on their first-rate products.
However, this will only serve a minority of the Germans and most likely only high-skilled labor.

[CMB]

I lived in Germany from 2002 to 2005 and got the impression that attitudes are changing. To say that "no one" in Europe gets it is surely not correct. And with Germany's continuing very good performance as an exporter, surely the talk of an "abyss" is also a little overblown. But you do wonder where Germany will end up unless general attitudes toward the market and risk-taking change. In Germany this change in attitudes is certainly going to need to realized from the top down, and this will require a major politician who is prepared to push hard for a free(er) market. With Ludwig Erhard, Germany has already produced at least one of them since the War. As I see it, it just needs to produce another one. German reform would certainly drive reform elsewhere in Europe. Many Eastern Europeans certainly already get it, and competition (including tax competition) from these countries will help drive change too.

[jn]

I think you are being a little too pessimistic Frederic (I hope). In my recent trips to La Belle France, I was surprised at how dismissive of the French economy so many of my French colleagues were. They were all suffused with the view that things were hopeless.

But the feeling seems more analogous to the East bloc in the early 1980s. None of the Nomenklatura truly believed in communism, but all were clinging to the system to get their piece of the pie. I think a crack or crash could come anytime. But whether it will be reformist, catastrophic, revisionist or merely cathartic is unclear.

[Nick]

I think that there is some light at the end of a very long tunnel. Tony Blair has at least been attempting to convince other European leaders to reform economic policy (notably CAP) and Angela Merkel brings some promise with her admiration of Thatcher's free market policies. I think it is the structure of the EC that is the problem rather than a problem with the general public. They have become disenfranchised by the political process which is incredibly slow to move forward due to competing priorities. To paraphrase Jean-Francois Reveel, Europe is like an orchestra in which every member wants to be the lead violin. Until that changes, and policies like the CAP and restrictive labour protection continue, Europe will continue to lag behind the USA.

[Dave]

Had dinner with a Swiss friend last night. (I'm American.)

He said that until he took some finance classes at NYU, he didn't really understand the advantages that American-style capitalism conferred on markets.

He told me that many Europeans are of the mind that Americans do things one way, and Europeans do things another, and, in the end, neither region has any real advantage over the other.

Now that he sees the light, he thinkg that it will be impossible for Europe to come to terms with its economic and labor problems until their economies face the brink of systemic failure.

[c8to]

you always do well as an exporter when you are growing slower than the rest of the world.