IT'S NOT uncommon to hear allegations from free-market advocates that Europe still suffers from a good deal of lingering sympathy for the defunct ideals and policies of socialism. It didn't hurt their argument last week when Spain's Socialist Prime Minister José Luis Rodríguez Zapatero led the European Union to recommend that its member nations cease inviting Cuban dissidents and human rights activists into their embassies in Havana. But such wayward flirtation withCuba's communist dictatorship is not nearly as damning for the EU as are the tax-heavy and regulation-rich economic policies that its member nations continue to exhibit.
Compared to the United States over the last few decades, most EU nations have maintained significant state control over individual lives by exacting high levels of coercive taxation, dispersing more welfare handouts and upholding more economic regulations. Predictably, the citizens of Europe have paid dearly for this encroachment with a large share of both their liberty and prosperity.
As a troubling example of Europe's resultant woes, Germany this week announced its highest unemployment numbers since the end of World War II, with more than five million jobless citizens dependent on government welfare entitlements. Days later, Bloomberg News quoted German officials admitting that 70,000 more welfare recipients have yet to be included in the official unemployment numbers, while 1.5 million more unemployed are "hidden away" in "early retirement programs, training measures and subsidized work." And it appears that things are going to get worse before they get better, as more than 1,200 full-time German jobs are disappearing each day.
The real human effects of this situation are devastating, and not just for the obvious reasons. Last week, the British Telegraph ran a stunning personal story titled, "If you don't take a job as a prostitute, we can stop your benefits," about the plight of unemployed German females who have become dependent upon the German welfare system. The article explains, "Under Germany's welfare reforms, any woman under 55 who has been out of work for more than a year can be forced to take an available job -- including in the sex industry -- or lose her unemployment benefit." This is a particularly harsh illustration of the old truism that as government increases its control over the economy, individuals lose control over their own lives.
Sadder still is the fact that such economic jaundice does not stop at the German borders. Germany's 11.4 percent unemployment rate is not the first but the second highest in the EU (behind Spain), while notoriously tax-heavy France comes in close with 9.4 percent. Across the board, Europe's high tax and handout rates have stalled employment opportunities, hobbled economic growth and created widespread cycles of dependency on the welfare bureaucracy.
At the same time, lower taxes and smaller government have helped save Americans from a similar fate. As David Brooks recently pointed out in The New York Times, American economic growth over the past 25 years has been 55 percent higher than in western Germany, 48 percent higher than France and 39 percent higher than the EU average. Not only that, but America's 30 percent higher gross domestic product means that the gap between American and European standards of living has been widening since the 1970s. To explain this phenomenon Brooks notes that, "In the 1970s, Western Europeans actually worked more than Americans. But as taxes rose and incentives to work diminished, Europeans cut back their hours or dropped out of the labor force." Indeed, according to a recent Bloomberg survey of 70 economists, "Germany's rising unemployment contrasts with the U.S., where the jobless rate probably remained unchanged at 5.4 percent in January as 200,000 jobs were created outside farming."
It isn't that we Americans are any smarter, more committed or more productive than our European counterparts. It's just that European economies are to a much larger degree suffocated and constricted by bloated bureaucratic dictates and harmful state interventions. As the EU congeals in the coming years, its member nations will have the opportunity to remedy their economic plight with a series of smart free-market reforms. Indeed, Germany itself has already taken some steps in the right direction by passing a modest tax relief package in 2000, the benefits of which may start to be felt in the near future.
But as long as EU nations choose to maintain their outmoded programs of high taxes and heavy regulations, their economies will be consigned to keep playing second fiddle to the wealth engines of other, freer nations.
Anthony Dick's column appears Mondays in The Cavalier Daily. He can be reached at adick@cavalierdaily.com.
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