FRARY COLUMN, RUMMAGING IN THE DUSTBIN OF LEFTISH HISTORY

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FLAMMENWERFER
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FRARY COLUMN, RUMMAGING IN THE DUSTBIN OF LEFTISH HISTORY

[i]THIS APPEARED IN THE DOWNEAST COASTAL PRESS THIS WEEK.[/i]

MODELS FOR AMERICA

At the beginning of the twenty-first century there were a passel of books published in America by sages pointing eagerly to Europe as a model for the United States to follow.

Mark Leonard, in Why Europe Will Run the 21st Century argued that the European way of doing things will be the model of change in the century that lies before us. The European Union's exercise of "soft power," i.e., the threat of being excluded from the world's largest market will replace crude military power. Compliance with the 80,000 pages of law written by Eurocrats in Brussels unencumbered by the crudities of democratic politics will make a better life for all.

T.R. Reid argues in The United States of Europe: The New Superpower and the End of American Supremacy that the Europeans are forming an innovative superpower based on cooperation and "determined to change a world that has been dominated by Americans." It is set to dominate the market in cell phones and pharmaceuticals and so on.

Jeremy Rifkin, in The European Dream: How Europe's vision of the Future is Quietly Eclipsing the American Dream. asserts that the American Dream based on independence, economic growth, and personal wealth is tired and languishing in the past. The new European Dream, he assures us, aims at sustainable development, quality of life, and multilateralism.

Reviewing the models proposed by liberal and leftist sages over the years, I take these books very seriously. The portend a disastrous future. For Europe.

The history of leftlurching models-to-emulate have been flawless in drawing up road maps to disaster. With the close of World War II there was a nearly unanimous consensus among leftlurchers that the US must embrace the Soviet model of central planning. Without massive government interventions the demobilization of nine million servicemen and the termination of a huge armaments industry would lead inevitably to a return to the depression.

They were ignored. The government contracted. The economy boomed.

Their enthusiasm for central planning revived when the Soviets sent the Sputnik up. Articles and columns multiplied demonstrating the past, present and future advantages of government direction of the economy. It was hopeless, we were told, to rely on the chaos of the free market. It could not compete with a rational mobilization of national resources. The "˜sixties boom dampened this enthusiasm, but certain delusions persisted. When Ronald Reagan characterized the Soviet Union as a failure destined for the dust-bin of history, sophisticated and learned professor sprung forward to scoff. Then the whole rotten structure collapsed and nothing more was heard on the subject.

In the interim there had been a boom for the Japanese model industrial policy model, directed by a wise and dedicated bureaucracy called the Ministry of International Trade and Industry. Japan, Inc. was destined to outstrip the retrograde American system of undirected and unregulated competition. Robert Reich, a future Secretary of Labor in the Clinton administration, wrote a book touting industrial policy which Walter Mondale made it a center-piece of his presidential campaign.

Then Japan slipped into a fourteen-year recession, Reich repudiated his own recommendations, and the phrase "industrial policy" slipped into total oblivion along with Fritz Mondale.

At a March 2000 meeting of European Union leaders in Lisbon Portugal there was consensus that Europe would become the world's most competitive and dynamic economy over the ten years to follow.. This would be achieved by creating a society based on science, modernization, investment in human beings and an end to social marginalization. Nothing was said about demography and tensions with immigrant communities.

It happens that 2000 was the year European economic growth reached 3%, higher than it had been before and higher than it has been ever since. Unemployment has grown. Productivity has hardly improved. More fundamental is Europe's demographic free-fall. Its population is dropping, and the number of tax-takers is steadily overtaking the number of tax-payers. With tax rates already at 45% and above, further tax increases are not possible without stalling economic growth entirely. They cannot pay for their extravagant welfare provision without economic expansion. Despite what Rifkin et al. say, they cannot choose "quality of life" over economic growth.

And worst of all, it begins to look as if the immigrant workforce they rely on to replace their own missing children have no urge ever to assimilate.

I conclude that the European Model will dissolve more quickly than any of the fantasy-models that excited liberal opinion-makers in the past.

Economike
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FRARY COLUMN, RUMMAGING IN THE DUSTBIN OF LEFTISH HISTORY

Good essay.

In my view, one major flaw in the European model is that it make no provision for defense from within or without. It will remain under the protection of the U. S. from external threat, but it will struggle to defend itself from within.

I suspect that the real shift in power and influence in this century is from the Atlantic to the Pacific.

francisz
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FRARY COLUMN, RUMMAGING IN THE DUSTBIN OF LEFTISH HISTORY

We've had this discussion before, but it is not all doom and gloom for the post welfare state: see Denmark.

[url=http://www.tnr.com/doc.mhtml?i=20070115&s=cohn011507]Neoliberal Utopia awaits: Great Danes[/url]

By Jonathan Cohn for New Republic (January '07)

It is a brief overview of the conservative reaction to one of Europe's most liberal and generous welfare states - and the resulting shift in focus from welfare provision to job creation. Something of a success.

We need to consider the successes as well as the failures.

Economike
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FRARY COLUMN, RUMMAGING IN THE DUSTBIN OF LEFTISH HISTORY

I don't view Danish economic success on a right versus left scale. It shows that supply-side economics can succeed in a high-aggregate-tax economy.

The economic success of the Danes - and the [url=http://worthwhile.typepad.com/worthwhile_canadian_initi/2007/06/doing-it... in general[/url] - is a lesson in smart tax policy. Compared to the U. S., Danish marginal tax rates on capital income are low. This means that the return on capital for Danes is at globally competitive rates.

It seems reasonable to assume that lower taxes on capital encourage producers to stay and work in Denmark. In effect, the Danes choose to tax labor income heavily and leave capital income relatively unscathed.

Lower taxes on capital income would also increase U.S. productivity. However, there are compelling reasons, in my view, why the Danish fiscal model wouldn't translate readily to the United States. First, Danish labor mobility is low; Danes tend not to emigrate in search of better jobs and/or lower taxes, and don't have a significant proportion of immigrants in the labor pool. Their apparent social satisfaction may be related to cultural factors - population homogeneity and stability, particularly the perception that government and free-riders aren't wasting social service revenues. And the relative regressivity of consumption taxation may help to eliminate overtones of class warfare - the same taxpayers tend to be the beneficiaries of redistribution.

Thomas Golebiewski
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FRARY COLUMN, RUMMAGING IN THE DUSTBIN OF LEFTISH HISTORY

[quote="Economike"]Good essay.

In my view, one major flaw in the European model is that it make no provision for defense from within or without. It will remain under the protection of the U. S. from external threat, but it will struggle to defend itself from within.

I suspect that the real shift in power and influence in this century is from the Atlantic to the Pacific.[/quote]

What happens when the US empire collapses and can no longer provide even token defense for Europe?

Economike
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FRARY COLUMN, RUMMAGING IN THE DUSTBIN OF LEFTISH HISTORY

[quote]What happens when the US empire collapses and can no longer provide even token defense for Europe?[/quote]

That's easy. People on the streets will suddenly start smiling and waving at each other. Smokers will feel the urge to quit. Little streams of corn will come trickling down the rocks. The average first-grader will complete the New York Times Sunday crossword in less than an hour. Cripples will throw down their crutches and walk. The music of the spheres will resound.

Next question. :P

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