Arnold Kling  

Will Europe Collapse?

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Bryan comments here and here about Tyler's theory that Europe has better government than the U.S., and thus can afford a larger welfare state.

Bryan says that Tyler is using a straw man by suggesting that market-oriented economists see Europe on the verge of collapse. I might be willing to step into the straw-man role, depending on how you define "on the verge." I think that collapse is a long way off, but I think it is a real possibility.

Anthony de Jasay writes,


There is a subconscious belief in France that the state does not pay Paul by taking the money from Peter. It just gives it to Paul, and Peter is not made worse off. This is so because the money sits in an imaginary reservoir and the state can "unblock" it (debloquer is the French word used to describe this happy event). . .

Polls say that endlessly recurring rail strikes are approved by the majority of commuters who suffer great inconvenience from them. When tobacconists claim, and get, compensation for falling cigarette sales, everyone thinks that this is the least the state can do, and when imports make food too cheap, it is thought only fair to French farmers for the state to make it dear again.


I agree with Bryan that where voters are stupid, there is no guarantee that they won't get the policies that they deserve. I guess I am more willing than Bryan to take the next step and suggest that these policies may eventually be bad enough to cause collapse.

I disagree with Tyler's premise that we have more government failure than Europe. If we had Europe's military, the Taliban would still be ruling Afghanistan.


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COMMENTS (16 to date)
John Goes writes:

Do you foresee an economic collapse, a government collapse, or both? Bryan's point, I think, is that in some sense Europe is already "collapsed" in many sectors of the economy. What Tyler implied was that market-oriented economists believe that there will be a catastrophic collapse, a Great French Depression or something of this sort. That may happen, I wouldn't bet on it, but one does not need this possibility to point out the consistent problems Europe has as a result of its addiction to the State.

Nathan Smith writes:

Americans' assumptions about the state were just as misguided, I think, in the Great Society era of the 1960s and 1970s. Americans changed their minds, but that owes a good deal to the leadership of Reagan and the Republicans, and to think tanks and renegade opinion-makers.

So I think "stupid voters" is too simple an explanation. Something about Europe organizes the political classes and punditry to prevent them from organizing widespread the angst and alienation among the European public into a movement that will override the social-democratic pieties that are holding Europe back. Anti-Americanism and the EU's democratic deficit are part of the explanation.

Bruce G Charlton writes:

Maybe the problem is with the concept of 'collapse'. Maybe some commentators are thinking of a collapse like Weimar Germany collapsing into National Socialism - and that is not likely.

But pro-European social democrats seem to exhibit a kind of 'magical thinking' that continued economic decline in Europe will lack any significant consequences. Even when a declining society does not 'collapse' it may find itself shrinking such that its key functions are increasingly taken-over by thriving countries - and to the ruling elites that _will_ feel like a collapse, because the stuff they rule over will get less and less. This will encourage zero-sum thinking and probably increase social conflict.

The UK is a good example. Until our economic decline was reversed during the late 1980s (after benefits began to be seen from earlier economic reforms), we had endemic 'class warfare' (national and local strikes, violent rhetoric and some actual violence)- and this seemed to get worse and worse. And the economic reforms initially made things worse, leading to the bitter and divisive national coal miners strike in 1984.

The fact to bear in mind is that with policy reforms, theings (almost) always need to get worse before they can get better - which means that the longer reforms are delayed, the worse will be their initial consequences.

The big problem in Europe is France, where they do not seem even to have reached the point of understanding the _need_ for reform of their economic (and science and technology, and mass media) social systems. This may because - for lack of any other plausible source of national pride - they have focused on endogenous French culture and language as their focus for feeling superior.

This obsession with 'French-ness' among the ruling class lends a 'fascist' dimension to France's possible futures.

Tino writes:

As I always point out, Americans with Swedish ancestry have about 60% higher average income than Swedes, (and the same poverty rate). That is approximately the cost of the larger Swedish welfare state vs. the smaller American welfare state. Claiming that the European experiment is some kind of free lunch is ludicrous.

Of course a Swede making 1800$ after taxes per month is not miserable, and her country is hardly "collapsing". As Caplan pointed out this is just a straw man. People such as Steyn that talk about collapse usually refer to demographic and cultural factors, not economic ones (Steyn also does not seem to understand that white-non Hispanic fertility is as low in the US as in most Europe).

There is also growth in Europe, not that much below the US growth rate, thanks to open markets and the technology. (To some extent Europe can free-ride on US R&D, especially in medicine). It is the LEVEL that seems to be stuck far below the american level.

PS. Tyler Cowen used to piss me off with nonsense like this, until I understood that he was not a real economic libertarian. He is a cultural libertarian and an (unusually open minded) centrist liberal on economic issues. For example Cowen bases his outrages claim that Swedish economic policy was costless on his casual observations from trips to central Stockholm, rather than any hard data.

Steve Sailer writes:

I began reading National Review in 1972. That something very bad was sure to happen real soon now to Sweden due to its welfare state policies was a staple assumption of conservative commentators for the last 35 years.

Bruce G Charlton writes:

There really isn't much point in comparing the USA with countries that are smaller than some of the US States - this smacks of cherry-picking.

People would - rightly - object to an analysis that compared Italy, France or Germany with - say - Texas, or California. But that is pretty much equivalent to focusing on Sweden, or the Netherlands, or Switzerland - as a contrast with the US.

I prefer the approach adopted by Engram in his blog

http://engram-backtalk.blogspot.com/2007/04/quality-of-life-in-america-and-europe.html

where analysis focuses only on the big 4 European economies (UK, France, Germany, Italy) - and indeed, for a fair comparison, pools these economies together to get something about the size of the US.

This also avoids the common practice of comparing the US with - say - French productivity, Italian quality of life, and German inflation - where Europse is scoured for nations which exceed US performance on one specific variable.

As Engram says:

"...it is important to understand that an experiment is being performed. America's free market model is being tested against Europe's social welfare model. And the results, whether you look at overall economic performance ... or overall fertility rates ... or overall quality of life ... consistently support the American model over the European model. It's the American model that emerges as being superior, not the American people.

The results could have turned out otherwise. After all, no one knows in advance which economic system works best. You have competing theories, and then you run the experiment to settle the issue. That's how we figured out that communism was an ineffective approach. We ran what amounts to a controlled experiment by comparing East Germany with West Germany, and then we replicated the experiment by comparing North Korea with South Korea. The results are not debatable. Obviously, communism is a failure relative to capitalism.

Now we are running an experiment comparing the high-tax social welfare state version of capitalism vs. the low-tax, free market version that prevails in America. It's obviously a much closer contest, but the results seem to suggest that the American model is the better one. "

dearieme writes:

"If we had Europe's military, the Taliban would still be ruling Afghanistan". Since you have America's, you have been able to arrange a short interval between Taliban I and Taliban II. I think you might usefully have found a more persuasive example of your point.

Buzzcut writes:

>>"If we had Europe's military, the Taliban would still be ruling Afghanistan". Since you have America's, you have been able to arrange a short interval between Taliban I and Taliban II. I think you might usefully have found a more persuasive example of your point.

But that has nothing to do with the military, does it. That has to do with the strategery (or lack of it) of those who control the military.

One of the few things that government does well is blow things up and kill people. I personally think the only competant brach of the US government is the military. They are very, very good at blowing things up and killing people.

The problem is that our military is not the Peace Corps, and they're not the NYPD. Yet, in Iraq and Afghanistan, that's the role they're playing.

But should Taliban II come to power, do you really doubt that the Marines could take care of them in short order?

William Newman writes:

Steve Sailer writes: "I began reading National Review in 1972. That something very bad was sure to happen real soon now to Sweden due to its welfare state policies was a staple assumption of conservative commentators for the last 35 years."

I mostly agree, and I agree it's not to conservative commentators' credit. However, I think it's not as embarrassing a mistake as it sounds, either, because as best I recall, it wasn't just the welfare state, it was a complete economic policy basket, and Sweden's policy has changed somewhat over that period. For example, a short Google search didn't turn up a complete time series for marginal tax rates, but http://www.econlib.org/library/enc/MarginalTaxRates.html gives a fall from 87% marginal individual income tax rate in 1979 to 65% in 1990. 65% is below the 70% in USA 1980 when serious people still deny that the Laffer curve could've possibly applied. 87% is rather deeper into the "thou shalt not muzzle the kine" range. If you want to fault the conservative commentators for not foreseeing that the Swedes wouldn't relax key anti-market policies like that, very well, but as best I recall the progressive commentators didn't foresee it either.

Also, correct me if I'm wrong, but didn't progressive commentators over the same period pretty consistently expect that the European model would deliver not just on increased transfer payments but on public goods and economic growth? I think the strong position of the US in things like scientific research, higher education, and broad measures of economic prosperity is as much of a rebuke to the left as the stability of Sweden is a rebuke to the right. How many 1970s progressives anticipated that by 2006 the Europhiles would be reduced to trying to ignore high unemployment and low per-capita GNP while sniping at US health care and pre-college education (not the freest-market sectors in the US...) and statistical measures (like rates of health insurance coverage) driven by the US's accepting poor immigrants?

Matt writes:

Take a 2% versus 3% growth rate and extend it out 100 years. At the end of 25 years, the country with 3% growth is about 25% larger than the other. In another 25 years, the difference will grow to more than 60%. 50 years later, one is 2.5 times larger than the other.

If Europeans compare their standard of living to their own standard of living yesterday, they can continue growing and never collapse. If their citizens look to the increasing wealthy U.S. and demand that their nations try to close the gap, their welfare state will collapse.

William Newman writes:

Arnold Kling writes "I disagree with Tyler's premise that we have more government failure than Europe. If we had Europe's military, the Taliban would still be ruling Afghanistan."

Maybe, but I doubt it. (Also, even if true it wouldn't necessarily prove your point, since the Europeans spend rather less on their military, and mostly (perhaps excepting Britain and/or France) don't seem as interested in force projection.)

Good fortune in one's opponents can do wonders for one's reputation for military excellence. Israel had and has a first-rate military, but its reputation for supreme excellence has diminished since other other first-rate militaries got their turn stomping on Middle Eastern dictatorships in high-intensity combat.

How impressive are the US results in Afghanistan? High marks for choosing achievable objectives, I think. But demonstrating supreme military excellence? I doubt it. The Afghans are perceived as particularly formidable opponents since they drove out the Soviets. Eventually. After the Soviets tried to impose their choice of government. And, perhaps coincidentally, by the time the Soviets withdrew, the Afghans were receiving open support, including very modern arms, from a superpower. If the US found it intolerably expensive to keep Iraq on its preferred track after China started openly arming their preferred Iraqi factions with innovative precision guided munitions, it might be a similar situation. That wouldn't make the Iraqis amazingly formidable opponents.

In particular, I don't think the US difficulties in Iraq show that the Iraqis would be particularly strong opponents in a campaign where a major power picks one or more factions in the country, arms them and gives them low-manpower high-firepower support, somehow keeps other major powers from intervening, and goes with them to stomp on their rivals. Given the diplomatic means to stop other major powers from opposing them, I suspect the Europeans (or, perhaps, the British or French alone) could successfully prosecute such a campaign in Iraq. If they did, that wouldn't show their military was qualitatively superior to the US military.

eddie writes:

Matt's point is an excellent one. Europe isn't collapsing, it's just not growing as quickly as elsewhere. Future Frenchman will be able to marvel at how much wealthier they are than today's Frenchman, while simultaneously wondering why they are so much poorer than their contemporaries in America. Or in China and Mexico, for that matter.

David writes:

Eddie, the issue is that the welfare state that France has created has in turn resulted in the creation of a huge dependant population that will only continue to grow as France's population ages. That coupled with France's labor policies that make a huge percentage of their young unemployable will eventually result in a welfare state that is unsupportable by future generations diminished both in relative population and economic vibrancy. So France really does run the risk of a completely unsustainable welfare state. One that unless action is taken could result in an economic collapse.

John writes:

I fail to see how the US is less of a welfare state then most european countries.

Matt writes:

Europeans suffer population substitution. Natives price themselves out of existence and are replaced with immigrants.

Italy -> Romania
France -> Islamamania
Spain -> Shrinking
Germany -> Turkish

Europe has collapsed many times in the 20th century, degenerating into war and reform. Europe used to collapse every hundred years or so with various forms of Roman rule.

Chris writes:

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