AND YOU CAN"T MAKE US WORK (via Robert Schwartz):

Europe’s Not Working (Olaf Gersemann, October-December 2005, American Enterprise)

Adjusted for differences in price levels, per capita income in the United States now exceeds France by close to 40 percent. Germany and Italy lag even further behind. [...]

Nearly every top politician in Germany is on record giving a grave, smug warning about the danger of letting “American conditions” seep into the German economy. In Germany’s economic debate, “American conditions” is code for stiff economic competition, low taxes, minimal state intrusion, and limitedduration welfare payments. Ireland and Britain have adopted many of these policies themselves, rocketing past Germany and France in living standards in the process. But for political opportunists in continental Europe, the quickest way to dismiss any talk of market freedom or reduction in the size of government is to ooze concern about American economic brutalism.

Even Kajo Neukirchen, widely considered to be Germany’s toughest business executive, has said that he does “not want American conditions, with hiring and firing being the order of the day.” And during British attempts to talk France and Germany into some economic reforms this summer, even Blair cabinet member Jack Straw made it a point to insist that his country does not have “a far-right economy” like the U.S.

While condemning American-style capitalism, Europe’s politicians continue to present their own continent as an economic beacon. [...]

When a majority of French voters rejected the proposed European constitution this summer, they could have been acting for any number of good reasons. Start with the fact that at over 60,000 words—touching everything from the “right to good administration” to the “right to be heard” to the promise of “a free placement service” for every worker—this is a bureaucratic monster rather than a constitution. Yet when the French said “non,” polls showed it was not out of any qualms over the megalomaniacal document itself. It was because the average Frenchman wanted to punish the European Union for its role in opening up Europe’s economies somewhat. The typical French voter was not upset because her economy is too centralized and manipulated; she said she wanted France’s economy to be more statist than even Brussels allowed.

Likewise, the backlash against Gerhard Schroeder solidified not when his socialist nostrums ran the German economy further into the ground over six years, but when he finally put forth some timid reforms—such as cautiously cutting unemployment benefits—to try to slip out of his economic mess. A majority of Germans pronounced these reform steps as going in the “wrong direction”—as if Germany could possibly survive going any further in the social democratic direction.

The attitude still most widely held in Europe is that it is the job of politicians to distribute and redistribute society’s goods—be it jobs, income, or wealth. There is a deep zero-sum mentality in Europe which starts from the idea that politics, not competition, should govern economics. Asked in April 2005 whether competition is good for economic growth and employment, only 45 percent of Germans strongly agreed. In both France and Italy, the share was only 29 percent.

Do not be surprised, then, if Angela Merkel, the leader of Germany’s Christian Democrats, and likely successor of Gerhard Schroeder as German chancellor, behaves little better in the economic realm. Consider government finances. Germany’s federal government currently taxes away about 44 percent of the nation’s output, and the Schroeder government has long insisted this is not enough. When introducing its draft for next year’s budget during this summer, the Schroeder administration complained that “with the current financial endowment, an adequate public infrastructure, a good public education systemÉ can’t be guaranteed any more.”

You might expect that Ms. Merkel, as the head of Germany’s supposed conservative party, would want to change course. Yet her fiscal platform is remarkable mainly for two things: She has proposed a reduction of payroll taxes—but only in exchange for an increase of the Value Added Tax from 16 to 18 percent on purchases. Furthermore, this year Merkel abandoned a whole host of tax-cutting proposals that her party had demanded previously in its status as the opposition. With the announcement of the special national elections on September 18, and the chance to regain power, the Christian Democrats abandoned many of the economic principles that had served to separate them from the Social Democrats. Prominent, allegedly pro-capitalist German pundits applauded, with one of them explaining that “there is simply no room for a lasting tax relief.”

Events have caught up to Mr. Gersemann's essay and Mr. Schroeder has tightened the noose of Reformer that Ms Merkel foolishly draped around her own neck.

MORE:
In German voters, the voice of anger (Katrin Bennhold, 9/14/05, International Herald Tribune)

Many feel betrayed by an economy that has allowed big companies to reach record profits at a time when unemployment remains at 11.4 percent. They are angry at a government that, despite imposing painful reforms, has not kept its promises to cut that joblessness.

At the same time, 69 percent of voters, according to a survey by the Allensbach polling institute, say they think Angela Merkel's Christian Democrats - whom other surveys say will take the biggest chunk of votes this weekend - will also have trouble solving Germany's economic problems. Sixty percent, the Allensbach survey indicated, have lost faith in politicians altogether. [...]

In East and West alike, nostalgia abounds - along with acute worry for the next generation in a country where the notion that children will be better off than their parents was the defining motivation of the postwar years.

Back in Leipzig, in the working-class housing project of Grünau, Peter Wilhelm said he would happily trade his right to vote for the resurrection of the wall that once separated the East from the West. "At least then everyone had work and we could afford what is in the supermarket," said Wilhelm, 48, a furniture mover who earns 6.50 an hour. He and his wife pay 500 a month for their apartment.

"If I had known what would become of this country, I would not have had children," he said, stroking the hair of his 3-year-old daughter, Jessica. "They grow up to be unemployed, and if they find a job they are still poor. It's no life."

Painful reforms?

Posted by Orrin Judd at September 15, 2005 12:00 AM