TCS Daily

Burn, Social Model, Burn

By Johnny Munkhammar - November 9, 2005 12:00 AM

The intense riots that started in the suburbs of Paris and have now spread throughout France and even across Europe may have been triggered by a single event, but their real causes run deep and are complex. They are a reflection of the way the so-called European Social Model has been applied in France. The areas involved can rightly be described as powder kegs that have been ready to explode for a long time.

It would be wrong to point to a single explanation for the rioting. There will be nationalists who blame immigration. True, immigration has its problems, and most Western European countries struggle to integrate their immigrant populations. But the riots in France are not a direct result of this so much as they are a result of desperation bred by economic and social policies.

There will be those who blame capitalism and globalization. Jobs are moving out, people are moving in and many citizens feel insecure in times of rapid change, they say. This is wrong and dangerous. The more open countries are to globalization, and the better conditions for enterprise, work and growth they create, the more they win. France -- and much of Western Europe -- has done largely the opposite.

France is one of the strongest defenders of the European Social Model. The main feature of the Model is a big state -- with high taxes, a regulated labor market, public welfare monopolies and large social security systems. But after the events in Paris, isn't it about time that France too realizes that this is an anti-social model that we should leave behind?

The big state mentality clearly creates and worsens many of the conditions that lead to the kind of social desperation we're seeing in Paris. A regulated labor market creates unemployment. Those without jobs do not feel secure, but neither do those with jobs; they know how hard it would be to find another one. The young people in Western Europe -- often with many years of education -- can't find work and lose the hope for the future.

The high taxes required to support the Model do not simply reduce people's opportunities to run their own lives, they also put a brake on growth. Economic activity is low and living standards stagnant; and in several places they are deteriorating. Small businesses must pay high taxes and are extremely regulated, so that way to a better life is also shut for many.

The anti-social effects of the Model hit immigrants harder. Regulated housing markets produce ghetto-like suburbs. Since hiring always involves a risk for the employer, a regulated and unionized labor market excludes immigrants. They are deprived of their opportunities to compete. Reforms that take us away from this Model could solve much of this. With low taxes, a free labor market and fewer regulations for companies, the situation could change. We could have new jobs and increased prosperity. And we could give immigrants the chance to integrate into society and work.

The countries of Western Europe could become winners in a globalized world. In a society with good conditions for creative activity -- where the state is smaller -- most people would get a chance to take care of their lives. There are countries that have done this, such as Ireland, New Zealand, Australia, Slovakia, the US and Estonia. For every job lost, there are two new ones. Small companies are growing. This is what we could do too.

Leaving this anti-social model behind may be the most important thing we could do to create better opportunities for immigrants. They want to contribute to society, they want to work -- not just be locked up in suburbs denied every opportunity.

If we don't do something soon to defuse this bomb, we will see Paris of today repeated all across Western Europe.

The author is Director of Timbro, an economic think tank based in Sweden. He has just published "European Dawn - After the Social Model" (Timbro/Stockholm Network)


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