TCS Daily


Sick Man of the World

By Kim Eskildsen - April 27, 2005 12:00 AM

A hundred years ago Europe was at the center of the world. The British controlled a far-flung empire - the banner head of a flourishing global free trade system. To the south of Europe, the former Sea of Prosperity, the Mediterranean, was lagging behind. The Ottoman empire was rapidly falling apart due to lack of development, ingenuity, renewal, and not least competitive interaction with the rest of the world. The empire was deemed the "sick man of Europe"; it soon broke down and on its remains the modern Turkish state was founded.

Today Europe is no longer on top of the world. Obviously many of its politicians still believe Europe is a strongly competitive economic superpower, just waiting to overcome the arrogant American empire, which is so absorbed by making money and spreading that dangerous disease, liberty, that it is only a matter of time before it will break down. Obviously Europe stands ready then to re-assume its role as the global economic superpower. It will be, needless to say, a very humane and empathetic superpower, very tolerant to suppressive regimes. But not to anyone, not to those who do not fulfill the utmost environmental criteria, support complete protection of the labor force, and guarantee animal and plant rights.

Right now European governments are struggling to make their budgets sustainable. Even though global growth is at a record-high 4 percent, Europe's policy makers are left having to put the best face on a one percent annual growth rate. They worry more about social rights first, about saving undiscovered species, and lets not forget the right to spend much more than we earn. Europe for the time being may lag a little behind the Americans, but as we have known since the Great Depression in the 1930s, capitalism is not a viable political system, and it is only a question of time before it breaks down again.

In the meantime European policy makers have discovered a new way of solving economic hardship. The methods are not new, nor particularly original, but they have proven their worth before. If the numbers don't fit reality, then reality has to fit the numbers. The Stability Pact initiated to protect the Deutsche Mark against fiscal irresponsibility from southern member states, has been refined into a Flexibility Pact meaning that deficits are no longer determined economically, but politically. The Lisbon Agenda assuring that Europe by 2010 is going to be the most competitive economy in the world, has now entered the final, five-year plan phase. That term must send a familiar chill down the spines of our new Eastern European member states, so warmly welcomed last year and whose only competitive advantage, cheap labor, has been so resolutely refused by the world's most competitive economy today.

While India and China are developing quickly and with high economic growth rates, Europeans sink still deeper down the social drain. They believe that the welfare state is the best of manhood's creations and that social reforms are impossible since more than 50 percent of the voters are either public employees or publicly pacified by social transfers. In Denmark 61 percent of the population is on the public payroll, just to give the reader an idea of the viability of social reform work in the Danish parliament; obviously it is one strike and out, if any politician were to be so daring.

Seen in that perspective it is rather difficult to see how Europe is going to get out of its position as the latest sick man of the world. The forthcoming French rejection of the new EU treaty tells it all. The French are dead scared due to the perspective of getting more immigrants into Europe who are either going to put pressure on wages, or social systems, or more likely both. Especially the idea of letting Muslim Turkey inside the Union scares many a Frenchman. In the wake of a French no, one could easily sit back and await the reaction of an innocent American kid visiting Paris on July 14: "But Mom, the Emperor ain't wearing no clothes."

The author is a fellow at MarkedsCentret think tank in Denmark

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