A recent editorial about the core countries of Europe captures the essence of the severe problems facing them. Their citizens have some choices to make.
Of course, so do we. But let's stay with Europe for now.
The European Revolt Against Reality is appropriately subtitled 'What will it be: "Mitterrand for all" or "Schroder does Europe"?'
The Mitterrand for all approach is about the preferred French model of "buy now, pay later, tax forever." That pretty much sums up the views of lots of other European countries as well.
In stark contrast to the French, former German Chancellor Gerhard Schroder emphasized hard work, limiting entitlement programs, and assuming personal responsibility.
Thus, there's quite a contrast between the French way and the German approach to national problem solving.
So while I'm cheering and hoping for "Schroder does Europe" to prevail, I'm not optimistic about the outcome. Let's quote from the editorial:
"Forget for a moment François Hollande, who sent Nicolas Sarkozy
packing on Sunday. Set aside, too, the triumph of the radical left and
the neo-Nazis in Greece who together captured one-third of the vote.
Look instead at Europe's real mess: the sickly state of the EU-15,
the core of the Union, most of which today uses the euro: Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the
Netherlands, Luxembourg, Portugal, Spain, Sweden and the United Kingdom.
In the 1970s, their average growth clocked in at 3.2%, in the 80s at
2.5%, in the '90s at 2.2%—and in the '00s, 1.2%. Yes, the 2008 crash was
bad for everybody, but Europe is still heading down. This year, growth
is likely to end up at an anemic 1%.
Europe has been falling back for decades, and this is the source of
all its trouble. Yesterday's economic wonderland, with its ever growing
list of benefits and privileges, is losing it. While the U.S. share of
global GDP has held steady at around 26% for two generations, the
EU-15's share has dropped to 26% from almost 35% in 1970.
Back to Dark Sunday's elections. You might have thought that the
French and Greek parties would have hyped themselves as saviors: Anoint
us, and we shall lead ye from debt and decline. Wrong.
The winners were
those who yelled: "Stop the world, we want to get off!" Cursed be the
market, blessed be the all-providing state.
In Greece, the big winner was the Coalition of the Radical Left, or
Syriza, which won nearly 17% of votes—almost four times its take in the
2009 elections. Together, the far left and far right have overwhelmed a
government that had pledged to slash spending and cut into the bloated
Meanwhile, unemployment now averages close to 11% in the euro zone.
The odd-man-out in this drama of decay is Germany. Joblessness, which
stood at five million only a few years ago, has dropped to less than
three million. The public budget deficit is heading toward zero. Why
this Teutonic miracle? Germany had cleaned house before the crash
Go back nine years, when Social Democratic Chancellor Gerhard
Schröder launched his "Agenda 2010." He declared to the Bundestag: "We
shall reduce social benefits, promote individual responsibility and
demand more from each and all." True to his word, he loosened up labor
markets, cut payroll, personal and corporate taxes, and enacted a
"workfare" program that egged the unemployed off the dole. Angela Merkel
is now reaping what her predecessor sowed—efforts for which he lost his
Today, elsewhere in Europe, leaders' attempts to change their
economies' bad old ways have not met with political boons. Since 2008, a
dozen euro-zone governments have fallen like the House of Lehman. Yet
what is the alternative but to pursue the reforms? Where would the cash
come from, when Germany is the last man standing among the large
countries? Perhaps Europe is still rich enough to keep Greece on the
dole indefinitely. But it does not have the resources to put France,
Italy or Spain on euro-welfare.
Which brings us back to the new French president, who in 1981 was a
young Elysée staffer when François Mitterrand enacted the very program
Mr. Hollande has been hawking: buy now, pay later, tax forever. Two
years later Mitterrand's Socialist Party was drubbed in local elections,
Saul turned into Paul and Mitterrand started preaching discipline and
markets. This time, the Socialist president won't even get his first 100
For one thing, Mrs. Merkel will not relent. She will not allow Mr.
Hollande to loosen the debt brakes enshrined in the EU's fiscal pact by
inserting the kind of "growth" Mr. Hollande wants—a euphemism for
spending Europe into insolvency. She knows that the euro, indeed the EU,
is at stake—and that neither will be saved by Keynes-to-the-max.
"Growth" à la Mr. Hollande will not heal but feed Europe's disease.
The country needs labor liberalizations, with youth unemployment topping
22%. The French job market tells a simple, sordid tale: high wages and
lifetime job security are great for insiders and deadly for newcomers.
If core Europe does not regain competitiveness now, it will sink and
fall apart. So what will it be: "Mitterrand for All" or "Schröder Does
Watch the new French president in the coming weeks. My bet is that he
will take a page out of "Casablanca" and sputter: "I am shocked,
shocked to find out about the mess Mr. Sarkozy has left." Then he will
blame Mrs. Merkel's brutishness for forcing him to deliver a "blood,
toil, tears and sweat" speech in which he breaks all his campaign
And if he doesn't yield to reality? The markets will speak."
Government growth and spending programs don't promote economic growth. They stifle it.
Welfare entitlement programs don't foster work. They stifle it.
Personal responsibility and hard work go together. That's the way of the private sector.
Private sector growth can make bad things disappear.
Government growth prevents good things from happening.
No matter what the politicians say, and no matter what the people choose to believe, that's the plain and simple truth.
Now let's decide which road we'll travel in America, just as the Europeans must.
The choice is ours.