The Ghost of Decadent Past/dymaxionweb.com

By Dennis Mullin

EUROPE: Six months ago my French neighbor was chortling over the eternal demise of the U.S, and the imminent ascendancy of Europe as the new global economic and cultural leader. Amid the latest meltdown, I am reminded of a friend who told me several years ago that the long term division of labor would leave Asia as the factory floor, America as the high-tech lab and farmland, and Europe as the world’s museum. Interestingly the global crises are making that clearer, and a meltdown in Asia (which many see coming next in China) may remind us of it yet again. Also, this is not a new process. What many don’t appreciate is that since 1970 it has not been the U.S. that has faded before the onslaught from the East, but the core 15 nations of the EU. Over those 40 years the EU share of world GDP has plummeted from 37 percent to below 28; the American chunk, 27 percent, has stayed remarkably even. Basically Asia, and China and India’s gains, have come at Europe’s expense -- not America’s.

BAILOUT: The massive bailout of Greece and the riots in the streets confirm that Europe, supposedly reasserting itself on the world stage, is a continent in decline. That is the understatement of the decade from Joel Kotkin, Distinguished Presidential Fellow in Urban Futures at Chapman University in Orange, California and adjunct fellow with the Legatum Institute in London. But he does at least go on to offer some interesting insights into the phenomenon on Daily Beast.

For much of the last quarter century, European pundits, particularly in France, have been promoting the notion that the old continent sat on the verge of a grand resurgence. The events of the past month -- culminating in a trillion dollar rescue of the Euro -- should, at least, put that dodgy notion to rest.

Although the financial crisis may have originated on Wall Street, it’s been Europe and the Euro that now represent the big threat to drive world markets back into recession. The show stealers are India, China and Brazil. Still the big boy on the block, the American economy is growing, albeit not spectacularly.

IMPLODING: There’s little case for arguing that the “Euro-model” has been a rip-roaring economic success. It’s imploding on its weak periphery, and the collapse is threatening even bigger players, including the United Kingdom.

What a change from the heady predictions of the European elites just a decade ago. Back then Jacques Attali, eminence grise for former French President Francois Mitterrand, asserted that “Japan and Europe” would likely “supplant the United States as the chief superpowers wrangling for global economic supremacy.” More recently, author Jeremy Rifkin wrote a book about what he defined as The European Dream, a green-tinged, social democratic ode to enlightened diversity that he predicted would supplant the declining dirty, unruly model forged by the United States on the world stage.

You can blame the spendthrift Greeks for this trouble, or even the lack of geeks in Europe (anyone found a continental Google or Apple lately?). But Euro-stagnation is nothing new. It’s deeply rooted and longstanding. Indeed, since 1970 it has not been the U.S. that has faded before the onslaught from the East, but the core 15 nations of the European Union. Over that 40-year period the EU-15’s share of world GDP has plummeted from roughly 37 percent to under 28 percent; the American chunk, roughly 27 percent, has stayed remarkably even. Basically Asia, and particularly China and India’s gain largely has been at Europe’s expense, not ours.

FAULTY MODEL: In stating the case for European superiority, much has been made by boosters of Europe’s different institutional framework, tax or regulatory structure. No question these have advantages and disadvantages compared with those of the United States, but there’s little case for arguing that the “Euro-model” has been a rip-roaring economic success. It’s imploding on its weak periphery, and the collapse is threatening even bigger players, including the United Kingdom.

Europe’s problems extend well beyond policy, into the realm of culture and demographics. Even in France, people and what they do actually matter more than abstract ideas. A culture that believes in itself, not only to have children, but also start businesses and innovate will overcome one, however theoretically well managed, that does not. This is the fundamental problem of Europe as whole, although it does not apply equally to every individual country in the union.

One key element is demographics. According to the most conservative estimates, the United States by 2050 will be home to at least 400 million people, roughly 100 million more than live here today. In contrast, the populations of much of the EU, as well as most of East Asia, will be stagnant or falling over the next few decades. Like other advanced countries, the United States will be aging but not nearly as quickly. By 2050, there may be close to 40 percent of the population in Japan and Germany over 65; in the United States that proportion should be closer to 25 percent.

DREAMING: If there’s going to be a European dream, they better start importing people or creating them. Otherwise, the European workforce will be dying out, literally. Between 2000 and 2050 the population of the U.S. between 14 and 64 is projected to expand by some 44 percent, while that of the EU contracts by 25 percent and Japan’s by over 40 percent.

With its growing workforce, the United States will require substantial economic growth in order to stave off downward mobility of its young population. Europe’s prime challenge will be to pay for its aging population with a diminished workforce, and perhaps find ways to invest in faster growth economies. Europe’s future may be as the world’s coupon-clippers, consultants and waiters.

Yet this may not be the fate of all Europe, particularly if the grand neo-Bonapartist European is allowed to fizzle and national characteristics can reassert themselves. The aptly named PIGS (Portugal, Italy, Greece and Spain) make clear that you cannot enjoy a Scandinavian welfare state with a Mexican-style economy. You have to earn the right to six weeks of vacation and Porsche-level heath care plans.

CONTRASTS: This contrasts with the productive, disciplined countries of the north—roughly today’s version of the Medieval Hanseatic League—who continue to export goods and services enough to sustain their expansive, and generally less corrupt, welfare states. Essentially you have the sunny, good food and times countries—an arc from Portugal to Spain—and the gloomier places like Scandinavia, the Netherlands and Germany.

A secular kind of Protestant ethic is alive and well in post-Christian Europe. In some countries like Sweden and Denmark, blond and red-haired baby-making is making a modest comeback, lifting the future prospects for these countries. As for the Mediterranean crowd, get used to African or Arab chefs cooking your pasta. It might not be too bad, as long as the weather holds up.

Conrad Black writes in the National Post that the economic shambles in Europe is startling, especially given the lofty hopes briefly generated in the Europhoria following the implosion of the USSR. The most chronic problem in Europe, he says that barely 30% of Europeans work, to sustain the rest. Working hours have been steadily reduced in most countries; holidays have multiplied, and perhaps even more than elsewhere, Europe has fled to service industry and public-sector employment, which is often not really productive work, or may be just disguised welfare, or at least workfare.

DRACONIAN MEASURES: His take on the situation goes like this: Almost the whole continent has lumbered into double-digit deficits, three to four times the agreed maximum of the Eurozone, and cutting the deficits will require more draconian measures than the political leadership possesses the will to impose.

It was only 10 or 15 years ago when European elites dreamed audibly of standing on each others’ shoulders and reliving the glories of Europe’s preeminence in the world, before it gave us Nazism and Communism. There abounded smug remarks to the effect that the U.S. was about to become a majority non-white country, which continued until much of Western Europe itself, stunted by a collapsed birthrate and trying to replace the unborn with unassimilable immigration, erupted in sectarian violence. (In the U.S., meanwhile, almost all immigrants sign on to the American Way eventually.)

SINCE THE WAR: The assembly of a trillion dollar Euro-fund to backstop struggling EU members is impressive, but it is borrowed money in a debt-ridden jurisdiction, and the real test will be to see how much of Europe will be ready to impose the sort of fierce measures that have had the Greeks energetically rioting for the past several weeks. For notorious historical reasons, Europe has been paying Danegeld placebos to workers and small farmers since WWII and the recipients have become very addicted to them.

The customary solution is the devaluation of the currency, but the stronger economies, France and Germany, won’t stand for that. It may be that differently valued Northern and Southern euros will be necessary, but the burdens of a hard currency will not be shouldered easily by countries which have not borne them for literally thousands of years.

The 13 years of New Labour in Britain have squandered almost every advantage the 18 previous years of Margaret Thatcher and John Major accomplished, except flexible labor markets. Britain is overtaxed like the rest of Europe; public sector spending is over 50% of GDP, and now government is in the hands of a pantomime horse coalition of parties who do not agree on much and are led by two young pretty faces which have never been tested and were not impressive in the election campaign. Prime Minister David Cameron’s championship of the “Big Society” is jarring, acoustically and substantively. In the end, British luck usually holds, but that is what will be required to prevent Britain’s descent into Euroshambles.

RUSSIA, TURKEY: Russia is a melting iceberg, a sharply declining, alcohol-sodden population with no sign of economic progress or renewal apart from the oil industry and pandemic corruption and willful lawlessness in all areas of government. Its only distinct policy is to terrify or seduce former Soviet republics that seceded from the Soviet Union.

For decades, Europe has played Turkey as a 50-pound fish on a 20-pound line, reeling it in when Turkey was needed and rejecting the Turks as a Muslim rabble at other times. The predictable has happened, as Turkey is now enjoying greater economic growth than any other country in (or partly in) Europe. It is an Islamic regime that is casting aside Kemal Ataturk’s guardians of secularism, the army and the judiciary, who became so thoroughly corrupt in the 70 years that they have held the clergy at bay.

Turkey has virtually turned its back on Europe and on its former allies, Israel and the United States, and is now asserting influence over its former Arab satrapies. How far it will vanish into the Islamic world, where no matter what happens it will be a force for comparative moderation, is an open question.

THE OTHERS: And Japan, just now being passed by China as the world’s second economy, is racked by high debt and taxes, sluggish growth, aging and declining population and a completely dysfunctional political system. The country’s most popular politician, who has just founded a new party, has a radical pro-growth economic program, but his first priority is to shrink the Diet (parliament), by half. For nearly 60 years, Japan was a one-party state, and now is almost a no-party state. The Japanese will work it out, but not overnight and not with this crew.

Canada has the highest economic growth rate of any advanced economy, with the possible exceptions of Australia and Israel, and relatively modest debt (for which everyone should be grateful to Jean Chrétien and Paul Martin). The country’s financial and political institutions are working as well as any in the world and Canada is finally getting some recognition.