Free Markets, Free People

Europe forced to re-examine the concept of “reality”

It’s something we’re ignoring, for the most part, as well:

Europeans have boasted about their social model, with its generous vacations and early retirements, its national health care systems and extensive welfare benefits, contrasting it with the comparative harshness of American capitalism.Europeans have benefited from low military spending, protected by NATO and the American nuclear umbrella. They have also translated higher taxes into a cradle-to-grave safety net. “The Europe that protects” is a slogan of the European Union.

But all over Europe governments with big budgets, falling tax revenues and aging populations are experiencing rising deficits, with more bad news ahead.

With low growth, low birthrates and longer life expectancies, Europe can no longer afford its comfortable lifestyle, at least not without a period of austerity and significant changes. The countries are trying to reassure investors by cutting salaries, raising legal retirement ages, increasing work hours and reducing health benefits and pensions.

“We’re now in rescue mode,” said Carl Bildt, Sweden’s foreign minister. “But we need to transition to the reform mode very soon. The ‘reform deficit’ is the real problem,” he said, pointing to the need for structural change.

The reaction so far to government efforts to cut spending has been pessimism and anger, with an understanding that the current system is unsustainable.

Reality can be a real problem – in the real world.  And Europe has begun to bump up against it.  Greece is simply the worst of the bunch.  The “social paradise”, as European nations have fashioned it with some variations here and there, is unsustainable.  There are a number of reasons, not all having to do with economic profligacy.  And we face precisely the same future problems as they are beginning to face now.  For instance, just like Europe, we have fewer and fewer people paying for the retirement of more and more people.  Unlike Europe, though, we’re projected to have a positive population growth in the future (not that it will make what we have promised to pay in the future any more affordable), whereas Europe has a negative population growth among native Europeans.

This sort of a drop in workers vs. pensioners is not at all uncommon, even here in the US. Unless something is done now, we stand a good chance here of having the very same problem Europe is now facing in the not too distant future.

According to the European Commission, by 2050 the percentage of Europeans older than 65 will nearly double. In the 1950s there were seven workers for every retiree in advanced economies. By 2050, the ratio in the European Union will drop to 1.3 to 1.

One of the things the liberal side of the house likes to do is point to how little the Europeans spend on the various styles of government run health care they have. But since the financial crisis, which pushed the due date on all the debt they’ve piled up and promised to incur within their social welfare states, they’re talking about cuts to their health systems as well:

Figures show the severity of the problem. Gross public social expenditures in the European Union increased from 16 percent of gross domestic product in 1980 to 21 percent in 2005, compared with 15.9 percent in the United States. In France, the figure now is 31 percent, the highest in Europe, with state pensions making up more than 44 percent of the total and health care, 30 percent.

If you wonder why the Tea Party types and libertarians are screaming about cuts in spending and the size of government, it’s because they’ve been watching Europe, understand that’s the way this administration and the Democrats want to push us and are warning of the obvious eventual outcome of such an move. We have the opportunity now to stop what Europe will soon be going through.

But, as one French pensioner says:

“For years, our political leaders acted with very little courage,” he said. “Pensions represent the failure of the leaders and the failure of the system.”

And we’re in exactly the same position now for the very same reason.



15 Responses to Europe forced to re-examine the concept of “reality”

  • Europeans have boasted about their social model…

    Assisted, of course, by their useful idiots on this side of the pond. You know the type – they pretend to understand quantum physics but can’t read a basic graph.

    That’s been one of the most frustrating things about debating the left in the last twenty years. Just because something works today, while storing up problems, debt, and obligations in some indefinite future, doesn’t mean it’s a good model or worthy of emulation. Maggie Thatcher nailed it with her quote about socialists eventually running out of other people’s money.

    Of course, if you’re one of the parasites taking other people’s money (say, you work in a public university teaching a class no one really cares about, and doing it incompetently because you’re an imbecile), then you are predisposed not to see those problems and to be emotionally attached to the idea that somehow, everything will just work out.

     These people are in for a serious dose of reality someday. The thing that sticks in my craw is that they insist on dragging us over the cliff with them. Well, that, and their attitude of smug moral superiority.

    • Unfortunatly Billy, it isn’t just the socialists or academics who are to blame. Lot’s of average middle class voters have voted over the years for bigger government, more social security, more welfare, more subsidies etc.
      It isn’t just electing people that we need to concentrate on, it is re-teaching the American people that you just cannot get something for nothing, and that taking from “the rich” to give to the poor is not a basis for a just society. It is simply theft.

      • Lot’s of average middle class voters have voted over the years for bigger government, more social security, more welfare, more subsidies etc.

        Indeed. And they should have known better. But they were assured by “experts” that it would all just work. That they could have their cake and eat it too. I consider those experts far more culpable.

        Especially because they are incapable of facing up to the fact of their foolishness. They still don’t believe they were wrong, and they won’t even believe it when we go over the financial cliff. They’ll still be blaming people like us that socialism didn’t work this time.

        They never apologized for their support of the Soviet Union. Many of them today idolize Castro. They idolize the cartoonish, failed United Nations. Those academics and journalists have (in a sense, literally) sold their soul. They have substituted a faith in government and collectivism for the religious faith they sneer at. (And I say this as someone who is not religious.)

        It’s not just that they were wrong before, and pushed hard to get us into this mess. They insist on doubling down on their failures and preventing anyone who might actually be able to fix things from getting anything done.

        Average Joe might very well be prepared to accept an argument that we have to make some sacrifices now to avoid very, very bad results in the future. But when he has smarmy jackasses telling him we just need to raise taxes one more time and give government a little more power and it will all work out, then Average Joe doesn’t know what to believe. So there’s a pretty good possibility that he lets his emotion make the decision and goes along with one more round of collectivism hoping for the best.

        That’s why I despise the academics and journalists. Average Joe just wants to live his life, and doesn’t claim he’s an expert in these matters. Academics and journalists claim they are experts – their entire income is predicated on that claim, in fact. It’s clear that they’re way, way wrong, but they insist on burning the world to prove it. They’re despicable.

        • Actually, I think the problem lies in areas.
          1) Many people assume that the benefits the government hands out aren’t that expensive. And they certainly don’t know how expensive the bureaucracies are to run.
          2) Many people think that government regulation is easily done and easy to manage for companies. There is an assumption that big corporations have scads of money and staff to handle these simple regulations. The reality is, of course, very different. Anyone who has to actually deal with this stuff quickly realizes that. But, say you are professor at some small university. You don’t really have to deal too much with that stuff. Neither does Joe Worker.
          3) For some on the more lefty side of the spectrum, they truly believe there is just loads of windfall profits and super rich people who can pony up more and more money. True to some extent, but they don’t realize that bad incentives really hurt. Bulgaria lowered its income tax to a flat 10% and saw growing revenues. Seems like they still had some Laffer effect even that low.
          What is going to happen though, is we are going to run out of money, and then the politicians will explain it to the people. I know people who think that the safety nets and entitlements will be easily paid by just cutting defense spending…uhhh, they are in for a wake up call. But not yet.
          When the wake up call comes, those who like safety nets better figure out some ways to slim bureaucracies, cut red tape, and simplify government so those extra funds and growth can keep those safety nets at some level. There are going to be a lot of reforms made that should have been made years ago, but everyone is slumbering.

      • Middle class voters took those offers because they were packaged to seem like a panacea.  Pay a little bit now during your working life, and when you retire you’ll have this great pension and health care to tide you over in your twilight years.  Now you have a generation that is retired or getting close, and they find that the money that they’d allowed the government to take was being spent as fast as it was being collected, and that there’s nothing left for the very people who spent a lifetime paying in.  And not only are they not getting that pay-off, they’re not even getting back what they put in, and they’re looking at cuts that go even beyond that.
        It’s what makes the socialist model particularly insidious.  It’s designed to create a situation where you no longer are able to spend the amounts of money you promised to spend, but you are also in no position to simply stop spending.  You’re 65 years old and just retired, and the government has just told you that your nest egg is about to be wiped out.  And they’d just love it if you were the understanding type and accepted that the last years of your life might be spent sitting at a window and staring out at the neighborhood with a cup of ramen noodles in your hand.

    • This all goes back to the topic that David Brooks covered recent (but of course Brooks got it backwards), the ability to get something done.  Sometimes, we need that nothing be done.  Idiot politicians who think that they can solve every problem (with somebody else’s money) need to stop and say “NO.”  Less can be better.

  • But, as one French pensioner says:
    “For years, our political leaders acted with very little courage,” he said. “Pensions represent the failure of the leaders and the failure of the system.”

    Yeah….and I’m sure for years- decades- M. Pensioner there wasn’t among the screaming mobs demanding his????  It’s hard to blame politicnans for acting w/o courage, for decades any utterance of maybe possibly cutting these sorts of things invariably led to union/public unrest, demonsrations, and riots.

    He’s got his, now he feels safe enough to criticize.

    • Where does he say they’re “so well-informed…”?
      I’d venture the majority are aware of the problems in Europe, particularly that Europe has had 10-14% unemployment for over a generation.
      “Snark” only works when you comprehend the statement correctly.

  • No to raising state taxes. No to borrowing to close historic budget deficits. Yes to capping state spending. Yes to capping local property-tax hikes. Yes to freezing the salaries of state workers. Yes to trimming “benefits and pensions that are out of line with economic reality.” Yes to charter schools. Yes to slashing by 20% a state government that has, by Cuomo’s count, 1,000 agencies. Yes to nonpartisan redistricting and full financial disclosure.
    Its already happening. You know when a Democrat figures he has to run on this platform its really time for change.

    • if you can trust him. He is saying all the right things to get elected, but he won’t go against the seui and the teachers unions if he gets elected. No way. he is a lifelong democrat. They have him by the balls.

  • People all over the world are starting to learn – the hard way, in many cases – the meaning of the simple acronym TANSTAAFL – There Ain’t No Such Thing As A Free Lunch.  A lot of people are going to be hurt while we collectively digest this lesson.  The scary thing is, there are two ways to apply the lesson:

    1.  Stop offering free lunches (or, more precisely, get the government out of the free lunch business), or;

    2.  Make EVERYTHING a “free lunch” as has been done in various communist countries.  The result is everybody gets a “free lunch”.  Yeah, it doesn’t taste very good and doesn’t really satisfy, but EVERYBODY gets it (or they get a hole in the back of the neck if they don’t like it and dare to complain; you can’t make an omelette without breaking eggs).

    I fear that we will wind up with Number Two, and we’ll REALLY by in the sh*t (pardon my pun!).

    On another note, I wonder if we aren’t going to look back on the past couple of hundred years – The Enlightenment – as a transitory “Golden Age” of equality and opportunity that is really an anamoly in human history.  Consider what came before and what we face now: a relatively small group of people making their living off the labor of the rest by force.  Slavery, serfdom, the welfare state: are they not all the same thing at the base?  They all rest on the idea that one group of people have a right to the labor of another, and that government exists to see to it that this order is enforced.  Yes, one can dress these things up in noble-sounding names or ideas – that a superior race has a right to the labor of untermenschen; that the superior group is ordained by God to exercize “benevolent” rule over the rest; that it’s just right for one group to give part of its labor / money / wealth to support another; etc. – but, at the root, it’s still legalized, institutionalized slavery and theft.

    Yes, I know: a lefty would argue that capitalism is the same.  There is something in this argument, but I suggest that it goes back to the definition of “free market”, which we do not have and have not had for many years.  Oppression of the workers by the bosses doesn’t happen very well unless the bosses can coopt the government and use its power to keep the workers in line (I once read the lefty classic The Autobiography of Mother Jones, and this abuse of police power runs through the entire book).  In a truly “free” market, a man may sell his labor; he may attempt to bargain with his boss; he may quit.  In a market subject to government control, a third party – the government – is involved, and its enormous power may be used by one side or the other to abuse the third, to the ultimate detriment of all.

  • Too late.
    These problems have been brewing for decades. A catastrophic failure of the system is the only purge, and then the only real question is: who will be Augustus?
    The 17th Amendment gutted the 10th Amendment, and now we have Senators entirely beholden to their political Party, instead of to their states. Sure, they’re elected by their states, but what does that matter? The majority of the citizens in almost every state were against Big Government Medical. It passed because of Party politics, not because the citizens mattered.
    The same thing will happen with Cap & Tax; two-thirds of the country is against it, and it is based on exactly zero testable, empirical evidence. It is simply a conjecture: the planet is well within all past parameters of climate variability. Nothing unusual is occurring. Nothing. Every event today has happened many times before the first SUV came off the assembly line.  But the Party in power wants Cap & Tax for the immense revenues [causing equally immense price rises] that C&T will generate. And Democrat Senators are now owned by their Party, while a few Republican Senators are bought and paid for with earmarks and other goodies. It only takes buying one or two, and the threat of filibuster is negated.
    Then there’s the blatant gerrymandering of political districts within states. It is a system where politicians select their voters, rather than vice-versa. By packing 80% – 90% Republicans into one district, and having a 52% – 48%, or a 55% – 45% Democrat majority in six districts surrounding that one Republican district, you can have a state with an equal 50/50 split between the Parties, and still have an overwhelming majority of one Party.
    These and other problems have been festering for decades, and now they’re at our doorstep. Liberals are outnumbered by Conservatives almost 2 – 1 in the U.S., but they have learned to game the system better.
    There’s an old saying: if something can’t happen, it won’t happen. We will not get another ten years before the system implodes. Now there are 3 workers for each retiree; in 2020 there will be only 2. We won’t muddle through for another ten years.
    Sorry to be such a downer. But history goes in cycles like everything else, and now, in a perfect Hegelian storm, we have an Obama who never had to struggle in the real world, a tyrant backed by toadies and conniving, cut-throat socialists. And as we know, a communist is just a socialist in a hurry. That’s why they’re so impatient.