Europe and the Bleedingly Obvious
Please forgive me the vanity of quoting myself, but the temptation to say "I told you so" is just too great here.
In 2006, I published Menace in Europe: Why the Continent's Crisis is America's, Too. (I hate that title, by the way. My publishers insisted upon it, telling me the sales force thought the title I wanted, "Blackmailed by History," would never sell. I deeply regret that I didn't go to war over that. It didn't sell, anyway, and now I have to look at a book with a title I loathe for the rest of my life. There's a lesson in this, somewhere.)
I was sorry that the few people who did read it focussed almost entirely on one part of the book's message, my concern about growing Islamic radicalization in Europe. That was only one of my anxieties, and while it is a serious issue, I also noted the potential for a rise in equally minatory neo-fascist movements in Europe, and firmly dissociate myself from those who insist upon trivializing this possibility. It's a grave mistake for American conservatives to imagine that these movements represent something like the Tea Party. They don't.
But even this is not my point. My point is this. I wrote, in 2006:
Americans need not be much impressed by, or attempt to emulate, Europe's controlled economies and social welfare policies. ... Americans who are tempted to consider high levels of structural unemployment a reasonable price to pay for cradle-to-grave social welfare should consider more closely the social costs of that unemployment, particularly the barrier it constitutes to the economic integration and advancement of immigrants and thus to the entire polity's harmony and welfare. ...
I do not prophesy the imminent demise of European democratic institutions, nor do I predict imminent catastrophe on European soil. But I don't rule out these possibilities either. Europe's entitlement economy will collapse. Its demography will change. The European Union may unravel. ... We have no idea what these events would herald, but it is possible and reasonable to imagine a very ugly outcome.
And once again, the only people to whom this will come as a surprise are those who have not been paying attention.
Today, Bloomberg finally notices: To Thrive, Euro Countries Must Cut Welfare State:
Clearly, the welfare-state expansion in Greece and Portugal was part of the reason these two countries ended up as clients of Europe’s bailout mechanisms. But Ireland and Spain had problems with the rapid expansion of the state, too. A big part of rising affluence during the boom years was generated by escalating real-estate bubbles, which caused private debt to soar. They boosted the construction sectors and, more generally, pushed domestic consumption to the point where Spain had to borrow as much as 8 percent of gross domestic product every year to finance its current account deficit. Like other bubbles, they spearheaded economic growth, which allowed governments to expand the state rapidly.
That growth vanished and gold turned to sand. Simply put, the bubble-fueled prosperity wasn’t sustainable. A record of solid fiscal surpluses was quickly turned into high structural deficits. Spain, for instance, entered 2008 with a budget surplus of slightly more than 2 percent, and ended 2009 with a structural deficit of 9 percent.
This has been a familiar story during the crisis. Yet surprisingly few people in Europe have bothered to understand the role that the welfare state played in creating it. ...
Europe’s crisis economies will now have to radically reduce their welfare states. State spending in Spain will have to shrink by at least a quarter; Greece should count itself lucky if the cut is less than a half of the pre-crisis expenditure level.
The worse news is that this is likely to be only the first round of welfare-state corrections. The next decade will usher Europe into the age of aging, when inevitably the cost of pensions will rise and providing health care for the elderly will be an even bigger cost driver. This demographic shift will be felt everywhere, including in the Nordic group of countries that has been saved from the worst effects of the sovereign-debt crisis. ...
Europe’s social systems will look very different 20 years from now. They will still be around, but benefit programs will be far less generous, and a greater part of social security will be organised privately. Welfare services, like health care, will be exposed to competition and, to a much greater degree, paid for out of pocket or by private insurance.
The big divide in Europe won’t be between North and South or left and right. It will be between countries that diligently manage the transition away from the universal welfare state that has come to define the European social model, and countries that will be forced by events to change the hard way.
Well, you know--no kidding. How can something that was so obvious have escaped so many people? That's a serious question, by the way. What the hell was wrong with so many people that they couldn't see this coming? This crisis was a barreling freight train complete with deafening sirens and flashing-red, all-hands-on-deck alarms. Yet for some reason, the world just decided to grab a comfy pillow, pop a Xanax, and take a good long snooze on the train tracks.
- Comment (45)
- · Quote
- · UnfollowFollow (6)
Comments:
Jan '11
Re: Europe and the Bleedingly Obvious
Claire Berlinski, Ed.: In 2006, I published Menace in Europe: Why the Continent's Crisis is America's, Too. …
This crisis was a barreling freight train complete with deafening sirens and flashing-red, all-hands-on-deck alarms.
You should've just titled it "Locomotive Breath."
May '10
Re: Europe and the Bleedingly Obvious
For a while, you can get elected by promising the people free stuff. If you don't bother to have any grandchildren, the promise is hard to keep.
Feb '11
Re: Europe and the Bleedingly Obvious
The family tree as a funnel.
Apr '11
Re: Europe and the Bleedingly Obvious
Never underestimate Mankind's seemingly unlimited capacity for self-deception. And maybe add in a dash of Europe's historical tribalism in the sense that an economic system emphasizing the individual over the collective was unfailingly dismissed by Continentals as the "Anglo-Saxon Model."
Apr '11
Re: Europe and the Bleedingly Obvious
Why the snooze, that IS the question.
1) Much of the ruling class, the European nomenklatura, are deeply involved in the Keynesian multicultural social democratic EU experiment. They believe in the efficacy and virtue of their labor. They will not go gently into that good night.
2) Many others are on the receiving end of the statist spigot. There is fear of disabusing them. They are and will continue to be very unhappy as the flow stops.
3) Europe has a history of hard leftism. There are many communists and ex-communists still around and they are beginning to rally around the latest crisis. The socialists will win in France. Greek communist parties are on the rise.
4) For some time the EU social democratic project has been financed with OPM (other people's money) and dodgy bookkeeping. That flow of OPM (bonds, bills and notes) is coming to an end.
5) But the debts, demographic implosion, and loony expensive leftist projects (green energy, carbon taxes, state enterprises, regulation) remain.
6) The kernel of the problem is haircuts. Debts that cannot be paid back will not be paid back. Coming to terms with this reality lies in the near future.
Edited on April 20, 2012 at 5:21pmMar '11
Re: Europe and the Bleedingly Obvious
Claire,
If you add to your knowledge by reading Ron Pestrito's American Progressivism (progressivism in the progressive's own words) and even better by also taking Hillsdale College's Constittution course on line you may finally grasp the complete lunacy of liberalism. Progressivism came into America from, chiefly, Germany through our colleges. By taking over the school system they have trained everyone to believe progressivism/liberalism is rational. It isn't.
Ma'am I have complete respect for the intellectuality of you and your father David but this scam has even exceeded your powers of analysis. GRIN
Ron
Oct '10
Re: Europe and the Bleedingly Obvious
I wish my I-told-you-so's were in book form.
Oct '10
Re: Europe and the Bleedingly Obvious
Claire Berlinski, Ed.
Well, you know--no kidding. How can something that was so obvious have escaped so many people? That's a serious question, by the way. What the hell waswrongwith so many people that they couldn't see this coming?
Obama still refuses to see it coming. He and his party are adopting the same european welfare model for the U.S. that is falling apart as we speak.
Nov '11
Re: Europe and the Bleedingly Obvious
Viator: Why the snooze, that IS the question.
1) Much of the ruling class, the European nomenklatura, are deeply involved in the Keynesian multicultural social democratic EU experiment. They believe in the efficacy and virtue of their labor. They will not go gently into that good night.
2) Many others are on the receiving end of the statist spigot. There is fear of disabusing them. They are and will continue to be very unhappy as the flow stops.
....
Wow, you really hit the nail on the head.
After having lived in Spain for quite some time (please don´t ask me why), I can only say that you have just said exactly what I was about to mention.
You also expressed it with more precision than I could have ever had. This is why I am so grateful for Ricochet.
I´m picking up Claire´s book a.s.a.p., and would really love to read more posts about this topic in particular.
Apr '11
Re: Europe and the Bleedingly Obvious
Claire,
The political class knows these things are detrimental, they just don't care. As long as the collapse doesn't happen on their watch, they'll be fine. They'll get to reap the benefits of overspending and some future government will have to pay for it.
The founding fathers were geniuses for understanding why federal government needs to be limited.
Apr '11
Re: Europe and the Bleedingly Obvious
Of course, we don’t see our train coming either. The United States is better off than Europe, but is on a similar path. We have a federal government that consistently spent more than it takes in, and federal state and local governments each of which has promised to spend even more in the future. People have planned their lives based on the governments keeping those promises. When someone tries to adjust the promised goodies, people get very upset, see Wisconsin.
Feb '11
Re: Europe and the Bleedingly Obvious
"Americans need not be much impressed by, or attempt to emulate, Europe's controlled economies and social welfare policies. ... Americans who are tempted to consider high levels of structural unemployment a reasonable price to pay for cradle-to-grave social welfare should consider more closely the social costs of that unemployment"
Maybe the book should have been called Menace FROM Europe.
(I read it when it first came out--need to re-read)
Apr '11
Re: Europe and the Bleedingly Obvious
What you don't touch upon is the corporatism or crony capitalism that supports the system. The European banking system allows leverage several times greater than our own and enjoys Byzantine like opaqueness. It's interrelatedness (borrowing and lending to each other) is increasingly dangerous. It is the very definition of Ponzi.
A EU collapse is inevitable. The only question is whether it will be a spectacle or a Japanese-like slow and painful Seppuku.
I heard an “analyst” on CNBC yesterday tell us that the US will suffer greatly because of the coming EU recession. Really? Our exports to the EU are less than 14% of total. The danger is again the banking sector. How will the unwind of CDS (derivate) happen? We just don't know.
Re: Europe and the Bleedingly Obvious
Yes, I think this is a very important point, and one that I overlooked.
Re: Europe and the Bleedingly Obvious
Ron: Claire,
If you add to your knowledge by ... taking Hillsdale College's Constittution course on line ...
Funny you should mention that, because, why, I am taking that course on line! And I highly recommend it.
Re: Europe and the Bleedingly Obvious
What's this "we" business, kimosabe?
I'll grant you that I didn't see it coming at all in 2006, which was a real failure of foresight. There's a limit to how much I can revel in my own prescience when I didn't notice these processes at work in my own country.
Re: Europe and the Bleedingly Obvious
It's a mixed blessing. I assure you that no one who branded me a lunatic at the time has picked up the phone to say, "Hey, Claire, seems I owe you an apology--looks like you were right."
Re: Europe and the Bleedingly Obvious
Herkybird
Never underestimate Mankind's seemingly unlimited capacity for self-deception.
No, I dare say I never will--but man, does it scare me.
Re: Europe and the Bleedingly Obvious
See my previous comment; c.f.--Catherine Ashton is our lead negotiator with Iran.
Mar '11
Re: Europe and the Bleedingly Obvious
Claire Berlinski, Ed.
How can something that was so obvious have escaped so many people?
Seems to me that it's a human trait for large groups to stick their fingers in their ears and go "LALALA I CAN'T HEAR YOU" when reality doesn't match up to their ideal, especially when that ideal involves living off of the fruits of the labor of other men... or worse, borrowing against the fruits of the labor of other men. We have a rather large problem with that ourselves, ya know.