Things really aren’t looking good across the pond. Acton’s Director of Research, Samuel Gregg, has written quite a bit about the decline in Europe. His latest ‘Meanwhile, Europe is (Still) Burning’ in the American Spectator, discusses the inability or unwillingness of European governments to respond to economic trouble.
Two of the world’s large economies, France and Italy, are examples of this. In France, workforce unemployment is 11 percent, the government has engaged in possibly illegal activity by hiding the fact that it hasn’t cut its fiscal deficits, and it won’t actually get around to making these cuts until 2017. The situation in Italy is even worse: unemployment is at 12.6 percent, youth unemployment is at 42.9 percent, and the country is ranked as one of the worst in the world in terms of “labor market efficiency.”
Despite these problems, necessary changes are not being made:
Prime Minister Matteo Renzi is the latest Italian head of government to propose some marginal labor-market reforms. Alas, he too has discovered that Italy’s unions are essentially opposed to anything except the status quo. That’s why an estimated 1 million Italians marched in the streets on October 25, claiming that “fundamental rights” (which evidently don’t extend to Italians below 30) were being endangered.
In response to criticisms of union intransigence, the General Secretary of Italy’s Confederazione Generale Italiana del Lavoro, Susanna Camusso, insisted in a letter to the Wall Street Journal that unions weren’t against reform. All they wanted, she said, was “a reform of the social safety net to include all workers; a reform of the fundamental law for the regulation of labor relations aimed at extending universal rights and protections to everyone; a new type of employment contract designed to promote permanent employment.” In other words, she wants even more state-enforced guarantees for employees.
What General Secretary Camusso doesn’t appear to grasp is that if you want an economy that grows, seeking to realize “permanent employment” through state intervention is a nonstarter. In competitive, entrepreneurial economies that produce growth, businesses must be able to hire quickly and, if necessary, let people go. It’s precisely because it’s virtually impossible to fire anyone in a permanent Italian job that employers avoid hiring full-timers, or keep their businesses below 15 employees so that they don’t face their workforces’ compulsory unionization (so much for freedom of association).
Why are European governments refusing to make the changes necessary that will improve their economies?
Part of the problem is the consensus style of politics prevailing in much of Europe. Most EU states’ electoral systems are designed to prevent one party getting outright majorities, partly because of memories of the sharp left-right fissures that tore many European nations apart in the recent past. This means endless compromises. That’s not always a bad thing, but it often nullifies attempts to apply harsh but necessary medicine in times of crisis. Then there is the journalist Janet Daley’s observation that virtually all European nations are governed by people (including those belonging to center-right parties) who adhere to broadly social democratic positions and who are remarkably isolated from the rest of the population. This creates an incestuous bubble, from which Europe’s politicians and civil servants rarely emerge.
Part of the puzzle requiring more attention, however, is the fact that large segments of Europe’s population like the (untenable) status quo. Let’s say you are an Italian baby boomer enjoying a comfortable salary. You also know that you keep your job no matter how lousy your performance. A well-padded retirement soon awaits you. So why should you desire change?