TCS Daily


The Future for The Unheavenly City

By James K. Glassman - November 16, 2005 12:00 AM

PARIS -- Of the riots here, there is both less and more than meets the eye.  

Less, literally, because if you've been in this city for a few days, you wonder what the commotion is about. The restaurants, museums, and shops are full. There's not even much of a police presence. The action is far away in suburbs with bucolic names like Clichy-sous-Bois, where young Muslims, many of them third-generation Frenchmen whose parents emigrated from North Africa, are torching cars. This is hardly a riot as we knew such things in, say, the United States in the 1960s. Casualties and damage have been minor.  

But there's more here, too. For one thing, the disturbances are going on and on, now entering their third week. The demoralized French government can't seem to get a grip.  

It's easy to put any interpretation you want on dramatic events. Sometimes, as the late Harvard social scientist Edward C. Banfield put it, people riot "for fun and profit." But clearly at the heart of these riots is a rotten European economic and social model. It seeks to insulate people from the rigors and anxieties of the marketplace through generous pensions, unemployment and health benefits, mandatory vacations, limits on the length of the work week, and protections against low wages and layoffs.  

Whatever the noble intentions of the social model, its results -- especially in Germany, Belgium and France, where it's been taken to absurd extremes -- have been disastrous. Businesses simply don't want to hire new workers, and the consequences are complacency, enervation and despair. The Euro Zone economies have grown in the past year at 1 percent, compared with nearly 4 percent for the United States. The unemployment rate in France is 9.8 percent, nearly twice that of the United States. That's been the norm for a decade.  

In Brussels last week, I moderated a discussion on the "knowledge-based economy" -- a buzz-phrase that emerged from a European Union conference in Lisbon in 2000 at which Europe decided to become "the most dynamic and competitive knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion, and respect for the environment by 2010."  

Unfortunately, no top-down directive can make that happen.  

Good jobs are slipping away from Europe. Today, 400,000 E.U. science graduates live in the United States. European companies increased R&D spending by just 2 percent last year, compared with 7 percent in Asia and the United States.  

In the ultimate knowledge-based, non-polluting industry - pharmaceuticals -- research has flowed decisively to the United States. One of the panelists, Pat Cox, the former president of the European Parliament, pointed out that as recently as 1980, eight of the ten top-selling drugs were developed in Europe; now, eight of ten are American.  

Why? In addition to the lack of job flexibility engendered by the social model, there are special problems in the drug sector, Cox pointed out, including price controls and a crazy E.U. rule that prevents companies from communicating directly with consumers.  

What does all this have to do with burning cars? Plenty.  

Raymond Torres, head of employment policy at the Organization for Economic Cooperation and Development, says that "when few jobs are being created, it makes those with weaker credentials more prone to being shut out entirely."  

The paternalist social model is a failure -- especially for the young people who should be providing the main resource for dynamism in an aging continent. Instead, the system is creating a permanent underclass far worse than America's own.  

In his 1970 book, "The Unheavenly City," Banfield developed the thesis that, while successful contributors to society look to the future, the underclass is "present-oriented." Burning cars make a bright present but a dim future.  

Future orientation comes through an economic system that convinces people that by investing (in themselves, if not in businesses), they will reap large benefits down the road. In much of Europe, that is not happening.  

In August 1944, Hitler commanded the destruction of this beautiful city as the Allies marched to liberate it. "Is Paris burning?" he asked, over and over. Hitler's generals frustrated his orders, and Paris was saved.  

My guess is that Europe, as well, will be saved from the destruction its current social model threatens. "We know what we need to do," said Cox last week. Yes, the solution is clear. Do what Cox's Ireland has done -- adopt economic liberalism with a European face. Time, however, is running out.  
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