Europe is Revolting
Over on the AEI blog, Lee Harris explains why the revolt in Greece is likely to prove only the first of many to come in Europe--and why, at least by comparison, the United States is still doing just fine. An excerpt:
During periods of economic recession, Americans will naturally grumble and many will blame the president or the party that happens to be in power during the downturn. They may even vote a president out of office. But that is pretty much the extent of the political damage. Not so under the European model, where austerity programs have led to mass riots, street violence, and government paralysis, as in Greece. There is a reason for this difference that has little to do with hot Latin blood: It is the unavoidable consequence of the European model.
Free markets “impose” austerity in the form of unplanned economic slowdowns and recessions. At such times, people may ask for the government to intervene in order to stimulate the economy, and they may get angry when it fails to do this, or when it does it unsuccessfully, as in the case of the Obama stimulus package. But no one seriously argues that the period of austerity (i.e., recession) was the deliberate policy of this or that administration. But the European austerity programs are the deliberate policy of the governments that have imposed them, and this is a fact that every citizen forced to tighten his belt is perfectly aware of....
The problem with centralized planning is not that it makes bad decisions. The problem is that, even if it makes good decisions, these decisions will be made by a group of centralized planners and not by anonymous market forces. When these decisions demand austerity, loss of wages, higher prices, and cuts in social benefits, the people will resist them. And if the people get angry enough, they can bring down the government that has tried to impose an austerity regime on them, leading to both increased economic distress and political instability.
Greece, the warm-up act for Spain, Italy, and maybe, the way things are going, for France.
A tip of the hat to Dartmouth econ prof Meir Kohn.
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May '10
Re: Europe is Revolting
You take that quote and don't challenge it, Peter? The problem is that centralized planning almost always makes bad decisions. When you make decisions for 320 million people you always suffer from a lack of knowledge that would allow you to make the correct one.
It it is always more efficient for 150 million decisions to be made by families and individuals than for one bureaucrat to make one decision for all.
Re: Europe is Revolting
EJHill
You take that quote and don't challenge it, Peter? The problem is that centralized planning almostalwaysmakes bad decisions. When you make decisions for 320 million people youalwayssuffer from a lack of knowledge that would allow you to make the correct one.
It it is alwaysmore efficient for 150 million decisions to be made by families and individuals than for one bureaucrat to make one decision for all. · 17 minutes ago
If you click through and read the whole thing, EJ, you'll see that Harris is under no illusions: he completely agrees with Hayek's observation that central planners can never have enough information to make good decisions. But when it comes to the current political upheavals, that's not the problem--or, rather, the problem.
Dec '10
Re: Europe is Revolting
Shouldn't that be "the people are revolting?"
Re: Europe is Revolting
How did "austerity" become conflated with "recession"? I understand the use of the term to mean "profligate leech-states sucking blood from the economy at a reduced rate of slurp," but now it means "economic contraction" as well?
I keep waiting for someone in Europe to say "The government cannot spend less money; it would destroy the economy. Hold on, what did I just say? Good Lord, when exactly did I take leave of my senses?"
And now I write this paragraph, which is the third to end with a question mark?
Sep '10
Re: Europe is Revolting
Dear James ... I have a fifth and a sixth question marked phrase to add ...
Have you watched the "students" in Montreal Canada?
And is Canada a European Model?
I think yes, no?
(That was three, yes?)
Carsten Stroud
Edited on May 17, 2012 at 11:10pmMar '11
Re: Europe is Revolting
Peter Robinson
Over on the AEI blog, Lee Harris explains why the revolt in Greece is likely to prove only the first of many to come in Europe--and why, at least by comparison, the United States is still doing just fine.
You mean, other than the almost $16 Trillion debt of the US, compared to which the Greek debt is minuscule?
The only difference is that we can still print money - for now.
Edited on May 17, 2012 at 11:19pmFeb '11
Re: Europe is Revolting
"Greece, the warm-up act for Spain, Italy, and maybe, the way things are going, for France."
Germany will have gone down somewhere between Spain and Italy. Do you imagine for a second if this comes true, we won't be in the toilet as well?
Aug '10
Re: Europe is Revolting
The current student violence in Quebec is another good example of this phenomenon.
Quebec students enjoy the cheapest post-secondary tuition fees in all of North America. Tuition fees must go up, but even then Quebec students will still have the cheapest tuition fees in North America.
Like students in other jurisdictions, Quebec students are upset that tuition fees are going up.
The reason Quebec students are reacting violently while students in other jurisdictions aren't is because Quebec tuition fees are set entirely by the provincial government.
It's not that the provincial government is simply allowing post-secondary institutions to raise their tuition fees. Instead, the provincial government is centrally imposing an increase in tuition fees.
That makes all the difference. Most people can endure (even though they'll grumble) when they see a government allow something they don't like, but they get really mad when they see a government impose something that they don't like.
Apr '11
Re: Europe is Revolting
Germany will do fine without having to prop up the bond ratings of the PIIGS. The Germans have no problems with austerity as they have shown at least three times in the last century.
Hang On: "Greece, the warm-up act for Spain, Italy, and maybe, the way things are going, for France."
Germany will have gone down somewhere between Spain and Italy. Do you imagine for a second if this comes true, we won't be in the toilet as well? · 9 minutes ago
Aug '10
Re: Europe is Revolting
Carsten Stroud: Dear James ... I have a fifth and a sixth question marked phrase to add ...
Have you watched the "students" in Montreal Canada?
And is Canada a European Model?
I think yes, no?
I vote no.
Quebec is a European model. So, one might argue, is California.
But Canada and the United States, being federal countries with (theoretically) strict division of powers, are both very different structurally from the vast majority of European countries.
The exceptions (federal countries like Switzerland, Germany, and Austria) just happen to be the countries doing the best right now.
Canada was under threat of adopting the European model, when Pierre Trudeau's gang did everything they could to wrestle power away from the provinces. That's when we got the Canada Health Act, activism on the Supreme Court, and Human Rights Commissions. It's taken decades for us to recover, and we still risk a backslide as soon as conservatives lose control of the federal government.
I'd argue that the USA is at risk of adopting the European model if Obama and the Democrats aren't booted out in November. The Obama/Pelosi strategy has been eerily similar to that of Pierre Trudeau.
May '12
Re: Europe is Revolting
I think it is dangerous to assume that this can not or will not happen in the U.S. Never before have so many received benefits from the federal government supported in combination by a minority of citizens and the balance from debt passed on for generations.
Regardless of who wins the presidential election in November they will be inaugurated with our national debt (public and intra-government) in excess of $16Trillion. That is real money, even in Washington.
It isn't mathematically possible to tax this problem away so a lot of the aforementioned folks receiving government benefits will no longer do so and then standby. At last count the U.S.A. has more food stamp recipients than Spain has people. Add in Earned Income Tax Credits, WIC, 99+ weeks unemployment, Social Security and Medicare for ~1/4 of our lifespan, etc. and we have a recipe for every bit as big a mess as Greece et al. when the gravy train is cut back.
I don't think the problem is as much with central planning as it is with maximum redistribution ending.
Mar '11
Re: Europe is Revolting
You got it, they stink on ice!
Dec '10
Re: Europe is Revolting
It's fixin' to get a might sporty in Europe, me thinks.
Nothing quells the rage quite like a good bloodbath.
It's been a lot of years since they've had a good one over there, you know.
Aug '10
Re: Europe is Revolting
Seeing Europe collapse in a pile of recriminations, whining, kicking and screaming about benefits, and complaining about having to work to 62 is quite a change from recent examples where anti-semitism caught fire, cities next, and then whole countries.
This is bad theater compared to the awful past. Maybe Pascal Bruckner is going to review this play.
No precedent for this one .
Dec '10
Re: Europe is Revolting
James Lileks: How did "austerity" become conflated with "recession"? I understand the use of the term to mean "profligate leech-states sucking blood from the economy at a reduced rate of slurp," but now it means "economic contraction" as well?
I keep waiting for someone in Europe to say "The government cannot spend less money; it would destroy the economy. Hold on, what did I just say? Good Lord, when exactly did I take leave of my senses?"
And now I write this paragraph, which is the third to end with a question mark?
According to a graph I saw recently (you're going to scream for citations I don't have), it happened in about the mid-seventies when GDP calculations became linked with government spending, such that currently, for every $1 dollar of GDP growth, $4 dollars of government spending are required in the US. If economic expansion (GDP growth) is inextricably linked to government spending, you can see how recession (negligible or negative GDP growth) can be blamed on austerity measures.
And for extra fun, you can contemplate this from the same source. About 30% of all income in the US is in transfer payments. Ka-ching!
May '10
Re: Europe is Revolting
A very old 'Wizard of Id' comic strip: Rodney runs into the throne room and proclaims, "Sire, the peasants are revolting." The king replies, "They certainly are."
Sep '10
Re: Europe is Revolting
Another eccon professor that misses the point. When a government is run on debt and gets to the point where no one will lend that government any more money the result is austerity. The austerity is a result of debt and poor or no planing. Politicians in Europe and the US have been buying votes with borrowed money. It is now time for Europe to pay the piper for this systemic corruption. The US's turn will come more quickly than most expect with similar results.
Dec '10
Re: Europe is Revolting
And Europe seems to be in some sort of rebellion too!
Edited on May 20, 2012 at 5:21amDec '11
Re: Europe is Revolting
Peter,
Remember when you had daniel hannon on uncommon knowledge? He was talking about the problems of the english health system and he made the profound point that once you have taken responsibility for the well being of people, it is immoral to limit resources.
I think it was the interview for "The new road to serfdom."