They've seen the future and they know it doesn't work.
In recent years, American liberals' love-affair with all
things contemporary Western European (sans Margaret
Thatcher and Benedict XVI) has acquired an increasingly desperate
edge. As evidence for the European social model's severe
dysfunctionality continues to mount before our eyes, the American
left is acutely aware how much it discredits its decades-old effort
to take America down the same economic path. Hence, the ever-more
screechy insistence that Europe's existing mess is due to specific,
even one-off factors.
Exhibit A in this regard is the New York Times'
Paul Krugman. In his latest missive on this topic,
"What Ails Europe?" our Nobel Laureate
informs us that European welfare states aren't central to the
problem. Sweden, he points out, is doing well, despite the fact it
has a large welfare state. Instead, Krugman maintains, what truly
plagues Europe is a money problem.
Putting aside the fact that Sweden has actually
implemented significant welfare reforms andeconomic liberalization policies since the 1990s, Europe does
indeed face huge monetary challenges. Having a common currency
while permitting euro-members to violate mutually-agreed debt
limits was always a recipe for disaster. Greece could
happily splurge on adding tens of
thousands of public sector workers to the government's payroll and
financing Chicago-esque patronage politics, while Portugal
built dozens of now-idle, often half-finished
soccer stadiums.
Why? Because everyone knew if things went bad,
then preserving the euro (a sacred cow for Europe's political
class) from the impact of nations' defaulting meant that
heavyweights like Germany would go to considerable lengths to try
and prevent a currency-meltdown.
Yet this amounts to only a partial -- and therefore
inadequate -- explanation of Europe's present disarray. Moreover,
it can't disguise the truth that there's something even more
fundamental driving Europe's economic crisis. And this reality is
that the Social Democratic project is coming apart at the seams
under the weight of the economic policies and priorities pursued by
most Social Democrats (whatever their party-designation) --
including the American variety.
From the beginning, post-war Social Democracy's goal (to
which much of Europe's right also subscribes) was to use the state
to realize as much economic security and equality as possible,
without resorting to the outright collectivization pursued by the
comrades in the East. In policy-terms, that meant extensive
regulation, legal privileges for trade unions, "free" healthcare,
subsidies and special breaks for politically-connected businesses,
ever-growing social security programs, and legions of national and
EU public sector workers to "manage" the regulatory-welfare state
-- all of which was presided over by an
increasingly-inbred European political class
(Europe's real "1 percent") with little-to-no experience of the
private sector.
None of this was cost-free. It was financed by punishing
taxation and, particularly in recent years, public and private
debt. In terms of outcomes, it has produced some of the developed
world's worst long-term unemployment rates, steadily-declining
productivity, and risk-averse private sectors.
Above all, it slowly strangled the living daylights out of
economic freedom in much of Europe. Without Germany (which,
incidentally, also engaged in welfare reform and considerable
economic liberalization in the 2000s), it's hard to avoid
concluding that Social Democratic Europe would have imploded long
ago.
But don't take my word for it. In mid-February, the
European Central Bank's new president, Mario Draghi, bluntly
stated: "The European social model has already
gone." That is decidedly not music to American liberal
ears. Further distorting the tone, Draghi added: "there was a time
when (economist) Rudi Dornbusch used to say that the Europeans are
so rich they can afford to pay everybody for not working. That's
gone."
Then there are the pointed criticisms of the European
model expressed in a recently released World Bank
report. Outside the parallel universe inhabited
by Occupy Wall Street and assorted fellow-travelers, few would
accuse the World Bank of harboring many radical free marketers, let
alone the "neoliberal" bogeymen regularly conjured up by European
politicians.
Among other things, the report refers to weak work
incentives, anemic entrepreneurship levels, feeble venture-capital
markets, over-regulated service sectors, European businesses
choosing to stay small to avoid compulsory unionization and extra
red-tape, labor markets crippled by powerful restrictions on
companies' ability to dismiss employees, research and development
steadily falling further behind America, and on-going declines in
annual work hours. The report also notes that Europe, with just 10
percent of the world's population, accounts for an astonishing 58
percent of the entire world economy's spending on social
protection.
Such is the long-term economic price associated with what
amounts to many Europeans' near-obsession with securing economic
security and equality through state action. It also has made a
continent that once literally ruled most of the world into a
textbook example of the basic un-workability of the Social
Democratic dream.
Hence, it's little wonder that Krugman and others dismiss
those who warn of disturbing parallels between Europe and America
as having "no idea what they're talking about." The purpose of such
remarks is to shut down discussion -- just one of American
liberalism's many illiberal traits -- in the face of awkward truths
and facts.
In a way, we're been here before. Prior to Communism's
defeat in Eastern Europe and the former USSR, many American
liberals were in denial about the performance of command economies.
Another Nobel Laureate, the late Paul Samuelson, argued in the
thirteenth edition of his renowned textbook Economics,
that "the Soviet economy is proof that, contrary to what many
skeptics had earlier believed, a socialist command economy can
function and thrive." Providentially, this edition was published in
the year, ahem, 1989.
Such tragically mistimed observations, however, reflected
decades of ignoring the realities of life in command economies. In
the tenth edition of Economics (1976), for example,
Samuelson claimed: "It is a vulgar mistake to think that most
people in Eastern Europe are miserable."
Vulgar? A mistake? Well, I guess all those secret police,
informers, "re-education facilities," barbed-wires, and Soviet
troop concentrations in the "workers-paradises" were just there for
decorative purposes.
In the real world, of course, there are genuine arguments
for us to have about what Europe's present drama means for America.
Even some of Krugman's New York Times' colleagues
have engaged such questions, albeit
rather tentatively. But to just deny that Europe's failures don't
represent an important canary in the tunnel for America surely
reflects a disposition from which American liberals regularly
accuse their critics of suffering: instinctual
closed-bloody-mindedness.
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