Until recently, many thought that Europe had escaped the worst of the 2008 financial crisis. Some even argued that the crisis has demonstrated the European social model’s superiority over “Anglo-Saxon capitalism”. In 2010, however, we have seen an entire country bailed out, riots in Athens, governments slashing budgets, and several European nations staring sovereign debt default in the face. Some are even claiming that the euro is finished. So what went wrong for Europe? How adequate have been the responses of European governments? And what are the consequences for America? The video is from the Aug. 2 Acton Lecture Series in Grand Rapids, Mich.
At MercatorNet, Sheila Liaugminas looks at the bank regulation push — enshrined in another 2,000 page document that few of the legislators behind this effort will actually read. In “Social Order on the Surface” she recalls an Acton conference where she heard this from Rev. Robert A. Sirico:
Politicians are not our leaders in a rightly ordered society, they are our followers … Not all views of culture are equal. but we can’t engage socially on our disagreements because everything becomes political … There is no legislature that can govern the human heart … A correct understanding of who the human person is is important to social ordering. Man is prior to the state. You can’t have a ‘common good’ if the good of the individual is not taken into consideration first.
Liaugminas also links to Research Director Samuel Gregg’s recent journal article “Smith versus Keynes: Economics and Political Economy in the Post-Crisis Era” in the Harvard Journal of Law and Public Policy.
“Statism is expanding in the U.S. right now under the guise of ‘the common good,'” Laugminas said. “Acton is only one institute engaging the debate about how Washington is handling the moral and ‘economic dimension of human reality,’ but we’d better pay attention.”
Advancing the “common good” behind the banner of statism has turned out to be an exercise in reckless selfishness and rapidly advancing insecurity. Where the gospel of redistribution of wealth was advertised as a way to ensure social equality, it now threatens to impoverish great masses of those who bought into the glittering promises. And promises are still being made. Recall President Obama telling Joe the Plumber that “spreading the wealth around” would be good for everybody (see video above).
Culture matters, much more so than politics. In “End of the European Siesta?,” Guy Sorman on City Journal explains why the financial fix for Europe’s debt problems are really superficial and temporary. Europe, he contends, needs to throw off the socialist ideologies — now embedded in cultural attitudes — that are at odds with its founding free market philosophy.
… the European Union is based on a free market. It was so conceived in political philosophy and in economics, and the only possible way to govern it is in accordance with such economic freedom. Yet all the national governments, even those of the right, have in fact created gigantic welfare states inspired by socialist ideology.
The fact is that, at the origins of Europe, Jean Monnet, a Cognac entrepreneur with strong American connections, concluded that European governments had never succeeded and would never succeed in making Europe a zone of peace and prosperity. He thus replaced the diplomatic engine with an economic engine: free trade and the spirit of enterprise, he envisioned, would generate “concrete areas of solidarity” that would eliminate war and poverty.
The “fatal drift” away from economic freedom, Sorman explains, inevitably led to the EU project going off the rails. Is America headed down the same path? Is the culture of free enterprise, for so long integral to what it means to be an American, now in permanent decline? More from Sorman on Europe:
Unfortunately, the national governments thought it possible to reap the economic benefits of a free Europe and the electoral delights of socialism. By “socialism,” I mean the unlimited growth of the welfare state—the accumulation of entitlements and jobs protected by the state. This de facto socialism, this sedimentation of electoral promises and acquired rights, grew in Europe at a much faster rate than did the economy or the population. It could thus only be financed by loans, which seemed risk-free, since the euro appeared “strong.” The euro’s strength drove its holders into a frenzy: suddenly, anything could be bought on credit. The result was a remarkably homogeneous indebtedness in all the countries of Europe, on the order of 100 percent of national wealth—ranging between Germany’s 91 percent and the Greeks’ 133 percent (a relatively modest difference), all reflecting a common socialist drift. Germany, Greece, Spain, and France differ less in their levels of debt or modes of administration, which are in fact quite similar, than in their debtors’ capacities to repay. All European states are run socialist-style, in contradiction with the European Union’s free-market principles. Some will be more able than others to deal with defaults, but all have drifted off course.
How shall we explain this fatal drift? The true cause lies in ideology. Socialism dominates minds across Europe, whereas liberalism—which has retained its original free-market meaning in Europe—is under attack in the academy, in the media, and among intellectuals generally. In Europe, to support the market against the state, to recommend modesty on the part of the state, is taken for an “American” perversion. And socialist ideology is sufficiently engrained that it’s almost impossible for a non-suicidal politician to win election without promising still more public “solidarity” and still less individual risk. These welfare states, through their financial cost and the erosion of ethical responsibility that they foster, have smothered economic growth in Europe. We are the continent of decline, albeit decline with solidarity.
At Public Discourse, Acton’s Research Director Samuel Gregg examines why many European governments are so hesitant to engage in much needed but painful economic reforms – especially reforms that involve diminishing the size of expansive welfare states. The causes are many, but in “Fatal Attraction: Democracy and the Welfare State,” Gregg zeroes in on a potentially damaging linkage between democratic systems of government and the growth of large welfare states that seek to provide economic security to ever increasing numbers of people. Substantive economic reform becomes extremely difficulty in these circumstances. Gregg writes:
No doubt, this reflects a disinclination of many European politicians—on the left and right—to concede that the post-war European effort to use the state to provide as much economic security as possible has encountered an immovable obstacle in the form of economic reality. Yet it is arguable—albeit highly politically incorrect to suggest—that it also reflects the workings of a potentially deadly nexus between democracy (or a certain culture of democracy) and the welfare state.
One justification for democracy is that it provides us with ways of aligning government policies with the citizenry’s requirements and of holding governments accountable when their decisions do not accord with the majority’s wishes. But what happens when some citizens begin viewing these mechanisms as a means for encouraging elected officials to use the state to provide them with whatever they want, such as apparently limitless economic security? And what happens when many elected officials believe it is their responsibility to provide the demanded security, or, more cynically, regard welfare programs as a useful tool to create constituencies that can be relied upon to vote for them?
Read more of “Fatal Attraction: Democracy and the Welfare State” on Public Discourse.
This week’s Acton Commentary from Research Director Samuel Gregg.
By Samuel Gregg
In recent months, the European social model has been under the spotlight following Greece’s economic meltdown and the fumbling efforts of European politicians to prop up other tottering European economies. To an unprecedented extent, the post-war European model’s sustainability is being questioned. Even the New York Times has conceded something is fundamentally wrong with the model they and the American Left have been urging upon America for decades.
Western Europe’s postwar economies were shaped by an apparent concern for the economically marginalized and the desire to realize more just societies. This inspired the extensive government economic intervention, high-tax rates and generous welfare states now characterizing most contemporary European economies. After 1945, Communists and Christian Democrats alike rallied around these policies. For Marxists, it was a step toward realizing their dream. For non-Marxists, it was a way of preventing outright collectivization.
Even today, words like “solidarity” and “social justice” permeate European discussion to an extent unimaginable in the rest of the world. If you want proof, just switch on a French television or open a German newspaper. The same media regularly contrast Europe’s concern for justice with America’s economic culture. America, many Europeans will tell you, embodies terrible economic injustices in the form of “immense” wealth-disparities, “grossly inadequate” healthcare, and “savage” competition.
But while such mythologies dominate European discourse, it’s also true that Western Europe’s economic culture is characterized by a deeply unjust fracture. Modern Europe is a continent increasingly divided between what Alberto Alesina and Francesco Giavazzi called in The Future of Europe (2006) “insiders” and “outsiders”.
The “insiders” are establishment politicians of left and right, trade unions, public sector workers, politically-connected businesses, pensioners, and those (such as farmers) receiving subsidies. The “outsiders” include, among others, entrepreneurs, immigrants, and the young. Naturally the insiders do everything they can to maintain their position and marginalize outsiders’ opportunities for advancement.
So how do Europe’s insiders maintain the status quo?
Sell! Sell! Sell!
Over at Public Discourse, a new article by Acton’s research director Samuel Gregg examines the deeper reasons behind the problems of the euro. In “Europe’s Monetary Sins,” Gregg points out that many of the euro’s present difficulties reflect a basic refusal of Europe’s political class to acknowledge some of the unpleasant economic realities associated with the EU’s social model, as well as a tendency to say one thing while really doing another. In short, Gregg argues that many of Europe’s economic predicaments flow from a crisis of truth, an unwillingness to recognize it, and the subsequent formulation of policy on the basis of untruths and half-truths. The most recent result of this process, Gregg says, is that the independence of the European Central Bank has been severely compromised:
Ever since its foundation in 1998, the ECB has been a whipping boy for European politicians from the left and right who argue that the ECB’s legally mandated priority of maintaining price stability has kept productivity and economic growth rates in the EU far below those of America. In reality, these problems have little to do with monetary policy and everything to do with low rates of entrepreneurship, unsustainable levels of welfare expenditure, an aversion to competition, high rates of public sector employment, and structural rigidities associated with some of the world’s most inflexible labor markets. Indeed, it is probable that the ECB’s avoidance of the low interest-rate policies adopted by the Federal Reserve in the 2000s may have made the 2008 recession in Europe more bearable than it might otherwise have been.
Against considerable political pressures, the ECB has hitherto doggedly defended its independence. All that, however, changed when the European Union decided to set up its 750-billion-euro bailout fund in early May 2010 to stabilize financial markets and rescue the holders of not only Greek government debt, but also, implicitly, the holders of any EU government debts that seemed shaky.
I want to second Marc’s article recommendation from earlier today. The phrase “a must read” is badly overworked, but in this case I can’t help myself: Claire Berlinski’s A Hidden History of Evil in the latest City Journal is a must-read. A few excerpts:
Communism was responsible for the deaths of some 150 million human beings during the twentieth century. The world remains inexplicably indifferent and uncurious about the deadliest ideology in history.
For evidence of this indifference, consider the unread Soviet archives. Pavel Stroilov, a Russian exile in London, has on his computer 50,000 unpublished, untranslated, top-secret Kremlin documents, mostly dating from the close of the Cold War. He stole them in 2003 and fled Russia. Within living memory, they would have been worth millions to the CIA; they surely tell a story about Communism and its collapse that the world needs to know. Yet he can’t get anyone to house them in a reputable library, publish them, or fund their translation. In fact, he can’t get anyone to take much interest in them at all.
Then there’s Soviet dissident Vladimir Bukovsky, who once spent 12 years in the USSR’s prisons, labor camps, and psikhushkas—political psychiatric hospitals—after being convicted of copying anti-Soviet literature. He, too, possesses a massive collection of stolen and smuggled papers from the archives of the Central Committee of the Communist Party, which, as he writes, “contain the beginnings and the ends of all the tragedies of our bloodstained century.” These documents are available online at bukovsky-archives.net, but most are not translated. They are unorganized; there are no summaries; there is no search or index function. “I offer them free of charge to the most influential newspapers and journals in the world, but nobody wants to print them,” Bukovsky writes. “Editors shrug indifferently: So what? Who cares?”
Stroilov claims that his documents “tell a completely new story about the end of the Cold War.” … They suggest, for example, that the architects of the European integration project, as well as many of today’s senior leaders in the European Union, were far too close to the USSR for comfort. This raises important questions about the nature of contemporary Europe….
According to Zagladin’s reports, for example, Kenneth Coates, who from 1989 to 1998 was a British member of the European Parliament, approached Zagladin on January 9, 1990, to discuss what amounted to a gradual merger of the European Parliament and the Supreme Soviet.
Zagladin’s records also note that the former leader of the British Labour Party, Neil Kinnock, approached Gorbachev—unauthorized, while Kinnock was leader of the opposition—through a secret envoy to discuss the possibility of halting the United Kingdom’s Trident nuclear-missile program.
“We now have the EU unelected socialist party running Europe,” Stroilov said to me. “Bet the KGB can’t believe it.”
Bukovsky’s book about the story that these documents tell, Jugement à Moscou, has been published in French, Russian, and a few other Slavic languages, but not in English. Random House bought the manuscript and, in Bukovsky’s words, tried “to force me to rewrite the whole book from the liberal left political perspective.” …
In France, news about the documents showing Mitterrand’s and Gorbachev’s plans to turn Germany into a dependent socialist state prompted a few murmurs of curiosity, nothing more. Bukovsky’s vast collection about Soviet sponsorship of terrorism, Palestinian and otherwise, remains largely unpublished.
No one talks much about the victims of Communism. No one erects memorials to the throngs of people murdered by the Soviet state….
Indeed, many still subscribe to the essential tenets of Communist ideology. Politicians, academics, students, even the occasional autodidact taxi driver still stand opposed to private property. Many remain enthralled by schemes for central economic planning. Stalin, according to polls, is one of Russia’s most popular historical figures. No small number of young people in Istanbul, where I live, proudly describe themselves as Communists; I have met such people around the world, from Seattle to Calcutta.
The full 3000-word essay is here. It’s well worth the time.
News reports today on the Greek debt crisis are packed with scary terms like “implosion” and “financial doomsday” and “ebola” and “contagion.” The anxiety has ratcheted up considerably this week, and not just for EU heads of state but also for President Obama. He should be worried. As I pointed out in a previous post, “Die Hard — The Welfare State,” the United States awaits its own day of reckoning for the sins of mounting government debt, a bloated public sector and a lack of political will — by both Democrats and Republicans — to come to grips with the problem. The day of reckoning will come. The only question is when. A roundup:
Alexis Papachelas in the Greek daily Kathimerini:
The financial figures are devastating and, even by the most optimistic forecasts, repaying our debt will be extremely hard. The EU and the IMF are willing to lend us money for 2010, but hesitate to make any commitment for the years to come – first because they also have domestic issues and, second, because they fear they may need an additional 450 billion euros for Spain or Portugal. Moreover, Greek politicians have made a very bad impression on them, so they think that even if Greece were to sign an EU-IMF deal, the risks are high. They see no social and political consensus down the road, nor any sign of professionalism or political will among the political elite.
In a February 10 wire story by ANSA, it was reported that Benedict XVI has once again exhorted economists and leaders to place “people at the center of [their] economic decision-making” and reminded them that the “global financial crisis has impoverished no small number of people.”
For those who follow Benedict closely in Rome, one might wonder why the Holy Father’s words, delivered during his February 10 general audience, even made national headlines. To be sure, it is not the first time we hear the Holy Father expressing his views on the price the world is still paying for not placing the human person, along with and our God-given freedom, innovation and basic dignity, at the core of economic models and financial choices.
The pope is perhaps sounding like a broken record, criticizing and admonishing the “same-o, same-o” regarding the global financial crisis and the Church’s social teachings. Why so?
No doubt, a wave of recent woes in the European financial news have caused Benedict grave concern.
The robust euro currency has experienced a precipitous fall since January 1, and especially so since emergency meetings were held in Brussels last week to save Greece — one of Europe’s most corrupt nations and lowest-ranking economic performers — from Euro-zone fall out; while earlier this week, in an unprecedented move, Germany and France threw on their red capes to rescue the cradle of Western civilization from the brink of financial disaster. Then there were the corrupt public officials in Spain who finally received severe sentencing for illegally boosting a once-thriving Spanish housing market. And the local financial reports became even more bleak in Italy, when in late January two of the country’s “too-big-too-fail” production plants (at Fiat and Alcoa) announced imminent closure, and thousands of their incensed employees rallied in union-led strikes to save their jobs in early February.
It was these same very worried plant workers who appeared under Benedict’s apartment window during a January 31 Angelus and heard the pope’s anger: “The financial crisis is causing the loss of many jobs and this situation requires a great sense of responsibility on the part of all: entrepreneurs and government leaders [alike].”
Hence the pope’s sermonizing against the continued causes and effects of the financial market’s moral failings certainly still do have concrete realities to draw upon. The aftermath of corporate and political leadership’s deafness to the Church’s basic social teachings seems endless and with no sign of turning around.
So we should rightly ask ourselves whether we have become a little too hard of hearing, rather than thinking the Holy Father is not saying anything new.
The Holy Father, a patient and loving university professor at heart, knows that he should not worry about the needle skipping on his turntable of teaching: After all, he knows all too well that repetition is the best form of learning.
Sooner or later, our human hearts are bound to embrace the repeated Truth that continues to call us home during this dark period. Its final acceptance and application will be our only way out.
In this week’s Acton Commentary, I explore the differing mainstream cultural views of gun rights and abortion in the United States and Europe. The point of departure is last month’s Supreme Court decision in DC v. Heller (07-290) striking down the District’s handgun ban (SCOTUSblog round-up on the decision here).
In “Guns, Foreign Courts, and the Moral Consensus of the International Community,” I write that the “tendency to invoke foreign jurisprudence is becoming more troubling as it becomes clearer that the moral consensus that once united Western nations has almost entirely broken down.”
As Paul J. Cella commented on a number of related stories at home and abroad, “We are only a tendentious opinion from one of the Liberal Usurpers on the Court, or their creature Kennedy, under the spell of the New York-DC elite adulation — one tendentious opinion citing foreign law, or sweet mystery of life, or mystical evolving standards, away from the same tyranny that would send the homeowner who defends his wife against thugs to jail, while showering the thugs with sympathy.”
At the same time the Court was deciding Heller, it ruled “that imposing the death penalty for child rape violates the Eight Amendment’s ban on cruel and unusual punishment.” La Shawn Barber has details on the difficulties surrounding that decision, but in relation to the topic of my commentary I want to point out that the EU Constitution in its original form as circulated for ratification in 2004, under Article II-62, titled “Right to life,” held in part, “No one shall be condemned to the death penalty, or executed.” At the same time this article made no explicit or special mention of abortion.
For more insight into the disconnect between the UN/EU on the one side and the US on the other over gun rights, see Kenneth Anderson’s illuminating post, “International Gun Control Efforts?” (HT: The Volokh Conspiracy).