Posts tagged with: welfare state

Writing in the Wall Street Journal today, William McGurn looks at some of the root causes of the catastrophic decline of the city of Detroit. Census information released last week showed the city — once the fifth largest in America and a place which had such awe-inspiring industrial might that President Roosevelt labeled it the Arsenal of Democracy — had lost more than 25 percent of its population in the last decade. Detroit’s population fell to 713,777 in 2010, the lowest since 1910 (two years after Henry Ford’s Model T was introduced). The city, vasts stretches of which are depopulated, is now smaller than Austin, Tex., Charlotte, N.C., and Jacksonville, Fla.

What happened to Detroit?

As McGurn points out, much of Detroit’s problems are of its own making. There was no tsunami or hurricane to blame. He quotes Rev. Robert A. Sirico, president of the Acton Institute, on the cultural factors that have contributed to the city’s demise:

Most Americans did not need to be told that Detroit is in a bad way, and has been for some time. Americans know all about white flight, greedy unions and arrogant auto executives. The recent census numbers, however, put an exclamation mark on a cold fact: A once-great American city today repels people of talent and ambition.

“Detroit is a classic example of how a culture that was legendary for enterprise and innovation was slowly eroded by toxic politicization from the 1960s on,” says the Rev. Robert A. Sirico, president of the Michigan-based Acton Institute. “It’s been class warfare on steroids, and the inevitable result is that so many Detroiters who had the means—black and white—have fled the city.”

Another way of putting it is this: Unlike New Orleans and Japan, the ruin we see in Detroit is entirely man-made.

Read “A Requiem for Detroit” in the Wall Street Journal.

Blog author: jcouretas
posted by on Thursday, March 10, 2011

A new commentary from Acton Research Director Samuel Gregg. Sign up here to get the latest opinion pieces delivered to your email inbox on Wednesday with the free weekly Acton News & Commentary.

Deficit Denial, American-Style

By Samuel Gregg

Until recently it was thought the primary message of the 2010 Congressional election was that Americans were fed up with successive governments’ willingness to run up deficit-after-deficit and their associated refusal to seriously restrain public spending.

If, however, the results of a much-discussed Wall St Journal-NBC News poll released on March 2 indicate what Americans really think about fiscal issues, then much of the country is clearly in denial – i.e., refusing to acknowledge truth – about what America needs to do if it doesn’t want to go the way of many Western European nations.

While the poll reveals considerable concern about government debt, it also underscores how unwilling many Americans are to reduce those welfare programs that, in the long-term, are central to the deficit-problem.

Here are the raw facts. America’s federal social security program has become the largest government pension scheme in the world in terms of sheer dollars. It is also by far the federal budget’s single greatest expenditure item.

According to the Office of Management and Budget, “human services” ― Social Security; Medicare; Health-expenditures; Education, Training, Employment, and Social Services; Veterans benefits; and the euphemistically-named “Income Security” (i.e., unemployment-benefits) ― were consuming 4 percent of America’s GDP in 1949. By 1976, this figure had increased to 11.7 percent. In 2009, it was consuming 15.3 percent of GDP.

During the same period, human services began consuming a steadily-increasing size of federal government expenditures. In 1967, human services spending was 32.6 percent of the federal budget. By 2009, this figure had increased to 61.3 percent. It is predicted to rise to 67 percent by 2016. In 2010, 75 percent of human services spending was on Social Security, Medicare, and Income Security ― in short, the core welfare state.

These disturbing numbers make it clear any serious federal deficit reduction must involve spending-cuts to federal welfare programs. That doesn’t mean other areas of government-spending should be immune from cuts. But the deficit simply can’t be properly addressed without a serious willingness to reduce welfare-expenditures.

And yet despite all the passionate rhetoric from Americans about the need to diminish government-spending, the Wall St Journal-NBC News poll suggests that fewer than 25 percent of Americans favor cutbacks to Social Security or Medicare as deficit-reduction measures. As the Wall St Journal’s own commentators noted: “Even tea party supporters, by a nearly 2-to-1 margin, declared significant cuts to Social Security ‘unacceptable.’

Unacceptable? Think about that word. Do large numbers of Americans really believe there is something morally evil about significant reductions to welfare-spending under any circumstances? Since when – apart from Greece and other models of fiscal rectitude – have welfare payments assumed the status of an absolute right subject to no qualification? Have we really gone so far down the path of economic-Europeanization?

Granted, the same poll suggests much larger numbers of Americans are willing to raise the retirement age to 69 and means-test social security. But is that the best Americans are willing to do?

Spain’s unreconstructed-1960s-lefty Socialist government has just lifted Spain’s retirement-age to 67. Unsurprisingly, that won’t fully kick-in until 2027, long after Spain’s political class and their tame voting constituencies have met their Maker and no longer need to live off their children’s futures. But can Americans who proclaim their attachment to free enterprise and personal responsibility really do no better than left-wing Western Europeans?

Back in 2007, the journalist Robert J. Samuelson summarized the situation perfectly. “Most Americans,” he wrote, “don’t want to admit that they are current or prospective welfare recipients. They prefer to think that they automatically deserve whatever they’ve been promised simply because the promises were made. Americans do not want to pose the basic questions, and their political leaders mirror that reluctance. This makes the welfare state immovable and the budget situation intractable.”

Presidential campaigns are invariably accompanied by a great deal of posturing. It would be helpful, however, if some serious candidates for the nation’s highest office in 2012 – Republican or Democrat – would use their moment in the spotlight to educate Americans about what’s at stake.

One former American vice-president once reportedly insisted, “Deficits don’t matter.” Unfortunately, there is mounting proof he was wrong. After examining data on 44 countries over approximately 200 years, two economists recently found evidence suggesting that developed nations with gross public debt levels exceeding 90 percent of GDP (i.e., America) find that their medium-growth rates fall by one percent, while average growth declines by an even greater proportion.

That’s worrying because while deficit-cutting matters, wealth-creation matters even more if we are to dig ourselves out of our fiscal hole. America now seriously risks seeing its burgeoning welfare costs suffocating the productive sector of the economy that makes social welfare possible in the first place.

Incidentally, it won’t be the rich who suffer. It will be the poor. In their laudable concern for the weakest among us, Americans ought to remember that and start matching political rhetoric with consistent fiscal action.

Dr. Samuel Gregg is Research Director at the Acton Institute. He has authored several books including On Ordered Liberty, his prize-winning The Commercial Society, and Wilhelm Röpke’s Political Economy.

Ray’s post pointed to something that’s been bugging me about Jim Wallis’ “What Would Jesus Cut?” campaign. As with the “What Would Jesus Drive?” campaign (“Transportation is a moral issue.” What isn’t these days?), Wallis’ campaign assumes the moral high ground by appropriating the Holy Name of Jesus Christ to advance his highly politicized, partisan advocacy. Jesus becomes an advertising slogan. And what is implicit here is that those who oppose Wallis are somehow at odds with the Gospel of Christ; those who agree with him are on Christ’s side and especially as it concerns “the least of these.”

But watch the video above and listen to the language of this MSNBC program host. What Wallis and his organization have done is give occasion for the use of Christ’s name for the most partisan, mocking and disrespectful purposes. Wallis should be ashamed of himself, but instead he lets this all pass so he can right away get to his simplistic talking points about “the budget as a moral document.” He arrogantly does this as the voice for the “faith community.”

Did I say simplistic? I should have added “dishonest” to my description of what Wallis is doing.

No serious person would take Wallis’ sound bites or the Sojourners campaign as a real help to understanding our nation’s grave budget and debt problems. In that respect, what Wallis is doing is aggravating a problem that has cried out for honest, bipartisan cooperation for many years. He makes inflammatory assertions about cuts to programs for nutrition, malarial bed nets, and the like, and generally raises false alarms about budget cutters abandoning “the most vulnerable.” Really? If this were true, it would cast those Christians on the other side of Wallis — those who honestly believe we need to do something serious about the budget and mounting debt — as haters of the poor. Look at the White House chart on the budget and show me where this abandonment is happening. Just the opposite.

And all these vague, unattributed assertions, like the bed nets. If you don’t see it the way Wallis sees it, you must be indifferent to children dying of malaria. Right? That’s insulting to say the least. How many mosquito nets flow into Africa annually? Where do they come from? What share of these is funded by U.S. taxpayers? Are they effective? We don’t get answers to these questions. Maybe Wallis should read this article in the left leaning Guardian newspaper that explains why “Mosquito nets can’t conquer malaria.” How is malaria defeated? Economic growth.

Against his claims of abandoning the poor, Wallis harps on defense spending. Again, this is a dishonest diversion. Defense spending is not the main problem as this chart vividly shows (HT: Heritage Foundation).

Should defense spending be treated as a sacred cow? No. Is there waste in the defense budget? Undoubtedly. But let’s not make vague assertions about children going hungry because of redundant or unneeded military programs.

What’s more, Wallis seems to be impervious to the fact that spending on welfare and War on Poverty programs has been a massive and costly failure. His use of anecdote and selectively trivial factoids serves as a smokescreen for this reality. Is is possible that government nutrition programs might be wasteful or redundant? He doesn’t seem to be aware of that possibility. In a recent report on duplication in government programs, the GAO said this about nutrition programs:

Domestic food and nutrition assistance is provided through a decentralized system of primarily 18 different federal programs that shows signs of overlap and inefficient use of resources. [But] not enough is known about the effectiveness of many of these programs. Research suggests that participation in 7 of the 18 programs— including the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), the National School Lunch Program, the School Breakfast Program, and SNAP—is associated with positive health and nutrition outcomes consistent with programs’ goals, such as raising the level of nutrition among low-income households, safeguarding the health and well-being of the nation’s children, and strengthening the agricultural economy. Yet little is known about the effectiveness of the remaining 11 programs because they have not been well studied.

Reality gets complicated. Talking points are easier. Writing in 2005, Washington Post columnist George Will described how a freshman Sen. Barack Obama used a string of “old banalities” to attack the Bush administration for not doing enough to alleviate the suffering caused by Hurricane Katrina. Will wrote:

[Obama] included the requisite lament about the president’s inadequate “empathy” and an amazing criticism of the government’s “historic indifference” and its “passive indifference” that “is as bad as active malice.” The senator, 44, is just 30 months older than the “war on poverty” that President Johnson declared in January 1964. Since then the indifference that is as bad as active malice has been expressed in more than $6.6 trillion of anti-poverty spending, strictly defined.

At least Obama had the decency not to invoke the name of the Lord. As for the “What Would Jesus Cut?” campaign, the “faith community” hasn’t been spared that.

Blog author: jcouretas
posted by on Wednesday, December 15, 2010

Video: Hundreds of protesters clashed with riot police across central Athens on Wednesday, smashing cars and hurling gasoline bombs during a nationwide labour protest against the government’s latest austerity measures. The former Development Minister Costis Hatzidakis was attacked by protesters outside a luxury hotel. He was escorted, bleeding from the scene as his attackers yelled “thieves” at him. Source: Russia Today

In the Greek daily Kathimerini, Alexis Papachelas writes:

There are no easy answers and, to make matters worse, we still have no idea about how the global crisis will affect Europe in early 2011.

The Greek government chose a course of treatment for the economy that is much like shock therapy, meaning that it tried to squeeze as many changes as possible into a short period of time.

If this strategy is successful, the government will have a strong card to play when it has to deal with its European peers and market forces in the case that debt restructuring is offered as a solution. If, however, the strategy fails, the shock therapy may turn into that extra bit of force that breaks the valve on the pressure cooker that is Greek society.

Read Acton Research Director Samuel Gregg’s new essay on Public Discourse titled, “Socialism and Solidarity.”

On Public Discourse, Acton Research Director Samuel Gregg observes in a new piece that “while moral beliefs have an important impact upon economic life, the manner in which they are given institutional expression also matters. This is illustrated by the different ways in which people’s responsibilities to those in need—what might be called the good of solidarity—are given political and economic form.”

Excerpt:

… the rather modest welfare and labor-market reforms presently being implemented in Spain, Greece and France have sparked considerable moral indignation (and not just from welfare recipients) despite widespread acknowledgment that such reforms are inevitable. Obviously there are many whose negative reaction is partly driven by consciousness that such reforms mean that the days of not-very-demanding jobs for life may be numbered. Nevertheless it’s also true that many Western Europeans genuinely believe the good of solidarity is threatened by efforts to move beyond the present and economically unsustainable status quo, precisely because of the state-oriented institutional expression given by Europeans to the surely uncontroversial proposition that we are our brother’s keeper.

While Americans are often regarded as more individualistic than Western Europeans, this perception is partly driven by the different economic and institutional expressions that Americans have often given to the idea of concern for neighbor. This was among one of the distinguishing features of America that struck the French social philosopher Alexis de Tocqueville when he visited the United States between 1831 and 1832. The emergence of social and economic problems, Tocqueville noted, did not elicit demands from Americans for the government to “just do something.” Indeed, Tocqueville marveled at the relative absence of government from American life and the corresponding vitality of civil society, especially when compared to the state’s all-pervasive presence in his native France.

Tocqueville quickly realized, however, that this “absence” of the state was not symptomatic of a callous disregard by Americans towards their fellow citizens in need. Though Americans tended, Tocqueville noted, to dress up their assistance to others in the language of enlightened self-interest, he observed that Americans usually expressed the value of helping those in need through the habits and institutions of free and voluntary association. In short, Tocqueville wrote, Americans banded together to try and resolve social and economic problems through voluntary associations. Some of these associations (like churches) had a more-or-less permanent presence in American society. Others lasted only as long as a particular economic or social problem persisted. As a consequence, the same pressures for centralized top-down government-led solutions and all their economic implications that prevailed in France were not present in the young American republic.

Read all of “Socialism and Solidarity” on the Public Discourse website.

Another election has come and gone, and once again the balance of power has significantly shifted in Washington, D.C. and statehouses across America.  Tuesday’s results are, I suppose, a win for fans of limited government, in that a Republican House of Representatives will make it more difficult for President Obama and his Democrat colleagues in the Congress to enact more of what has been a very statist agenda.  But even with the prospect of divided government on the horizon, we who believe in individual liberty and the principles of classical liberalism still have much to be concerned with.  Perhaps the primary concern is whether or not those Republicans who were swept into office—not due to any real love of the electorate for the Republican Party, but rather due to anxiety over the direction the Democrats have taken the country—will be able to hold to the principles of limited government and individual liberty that so many of them claimed to espouse during the campaign, or whether those principles will be abandoned in a mad pursuit of power.  Forefront in the mind of every lover of liberty should be Lord Acton’s famous maxim: “Power tends to corrupt, and absolute power corrupts absolutely.”

My sincere hope is that with Americans deeply dissatisfied with both major political parties and finding that the government is either unable or unwilling to solve the major fiscal and social problems that we face, people will begin to re-think their basic assumptions about the role of government in American life.  For decades, the default assumption has been that the government is a force for good and can be a driver of positive social change.   Witness Social Security, Medicare, the Great Society, the War on Poverty, etc.  All of these programs were designed by experts to alleviate some pressing social need, and were assumed to be the right thing to do.  After all, who wouldn’t want to help the poor and elderly to live a fuller, better life?  And yet, as the years went by, all of these programs—though well-intentioned by their creators—have failed to achieve their lofty goals.  The Social Security “trust fund” is devoid of funds and packed with IOUs left by politicians who, over the years, have spent the money promised to seniors on other programs.  Medicare, Medicaid, and other government health care programs have warped the economics of health care, paying doctors less and less and therefore driving up the cost of private insurance in order to make up the difference.  Obamacare is little more than an attempt by the government to solve a cost crisis—created in large part by government intervention—with even more extensive government intervention into the market.  We already know how that story ends.  And as for the Great Society and the War on Poverty, trillions of dollars over the years simply failed to alleviate poverty in America, and in many cases only created deeper, more entrenched social problems.

It is clear by now to anyone who cares to look that massive government intervention into society tends to do more harm than good, no matter how well intentioned the interventionists are.  Government has its place—no arguments for anarchy are to be found here—but the government must be limited to its proper place.  The genius of the American founding came in the limitation of the national government to certain enumerated functions, leaving the people at liberty to take care of the rest of life as they saw fit.  The respect for individual liberty and the acknowledgement that the rights of citizens were not granted by the state but were granted to individuals by God himself provided a firm foundation for the vibrant growth and strength of the United States in the coming centuries.  As a people, we need to realize that the further we move away from those founding principles and the more we cede our liberty to governmental agents in return for a promise of security, the less likely it is that we will remain strong, vibrant, and free.

At the Acton Institute 20th Anniversary Celebration, Acton President Rev. Robert A. Sirico reminded us of the roots of human dignity and the importance of individual liberty during his keynote address:

Blog author: jcouretas
posted by on Wednesday, November 3, 2010

A new article from Acton Research Director Samuel Gregg published today in Acton News & Commentary. Sign up for the free, weekly email newsletter here.

+++++++++

A Tale of Two Europes

By Samuel Gregg

The word “crisis” is usually employed to indicate that a person or even an entire culture has reached a turning-point which demands decisions: choices that either propel those in crisis towards renewed growth or condemn them to remorseless decline.

These dynamics of crisis are especially pertinent for much of contemporary Europe. The continent’s well-documented economic problems are now forcing governments to decide between confronting deep-seated problems in their economic culture, or propping up the entitlement economies that have become unaffordable (and morally-questionable) relics in today’s global economy.

While some European governments have begun implementing long-overdue changes in the form of austerity-measures, welfare-reforms, and labor-market liberalization, the resistance is loud and fierce, as anyone who has visited France lately will attest.

No-one should be surprised by this. Such reforms clash directly with widespread expectations about employment, welfare, and the state’s economic role that have become profoundly imbedded in many European societies over the past 100 years. Yet it’s also arguable this is simply the latest bout of an on-going clash of economic ideas which goes back much further in European history than most people realize.

Certainly the contemporary controversy partly concerns the government’s role during recessions. From this standpoint, Europe (and America) is rehashing the famous dispute between the economists Friedrich von Hayek and John Maynard Keynes in the 1930s about how to respond to the Great Depression. Should we, as Hayek maintained, react by giving markets the flexibility they need to self-correct? Or do we prime the pump à la Keynes? (more…)

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.

+++++++++

Europe: The Unjust Continent

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?

(more…)