Tuesday, March 24, 2009

Slouching towards Europe

During last year's presidential race Barack Obama's most enthusiastic supporters were arguably not found in the streets of the U.S. but Europe, where a massive two-thirds of those surveyed in Italy, France and Germany said they would vote for him if given the chance. No wonder he made a campaign stop in Berlin.

Although the psychology behind this adulation likely has several explanations, including a reaction to the unpopularity of George W. Bush, I think perhaps the biggest reason is quite simply that Europeans see a lot of themselves in him. And why shouldn't they? On many of the major issues of the day Obama finds himself completely within the European mainstream. He opposed the Iraq War, supports cap-and-trade legislation to combat global warming and a European-style government-run health care system. He even wants to copy Europe's high-speed rail network.

In short, Europe is the model. It therefore makes eminent sense to study Europe and see where this model might take us. One observer who has done exactly that is Alexander Benard, who wrote a recent piece in National Review Online entitled "Democracy in Europe" that is well worth reading. Benard repeats some common criticisms of Europe's health care system, notes problems with higher education and highlights the fact that Europeans are poorer than Americans (see the bottom of this post).

His most interesting observation, however, is the psychological impact of the European welfare state:
Far more pernicious than all of this, however, is the effect that these policies have had on the European psyche. The most recent example has been seen over the last few months, when countries around the world were debating how to respond to the collapsing global economy. In the United States, Americans greeted the passage of the stimulus bill in February with mixed feelings; the notion that federal government is best positioned to turn around an ailing economy is not yet universally accepted in the United States. In France, by contrast, hundreds of thousands of workers marched through the streets to demand that the government spend more money, create more jobs, and fund more programs to address the economic crisis. There is nothing in French DNA that makes them more likely to feel dependent upon the government for help in tough times. Rather, it is the cumulative effect on the French psyche of years of quasi-socialism.

The psychological impact of the welfare state is evident in other areas as well. When the German government was exploring the idea of imposing modest annual fees for students at universities, the students protested — at times violently. They viewed themselves as entitled to free university education and were unwilling even to consider the idea that fees might have positive effects (such as allowing universities to modernize their facilities and weeding out students who have no genuine interest in pursuing a higher education). Similarly, a German proposal to introduce a 10-euro ($13) co-pay for certain doctor visits was met with popular outrage. Once government creates the expectation that it will provide a service free of cost, it is almost impossible to reverse course.

The effect of all this is to stifle independent thought — precisely the kind of thought that results in a vibrant private sector, fueled by creative entrepreneurship. Such entrepreneurship becomes increasingly less relevant in the public’s eye as the federal government, not the free market, makes the critical decisions on which products, ideas, and projects merit attention and funding.
In short, the European welfare state isn't just bad for the economy but the very spirit of its people. Government benefits turn the people into wards of the state who look not to themselves but the government for their well being. It almost seems that most Europeans have reached the point where they literally cannot conceive of a system without an elaborate government "safety net", which explains the horror and disdain many of them have for the U.S. where they perceive that existence perennially resides on the knife's edge.

The European approach promotes a mentality in which life is a problem to be managed rather than an opportunity to be embraced. As Charles Murray argues, "Europe has become a continent that no longer celebrates greatness." I believe we can see this attitude translated onto the economies of both regions, where dynamism has seemed to suffer in Europe. Look at hot new industries such as biotechnology:
Aversion to risk, lack of management experience, limited funding and few incentives to find new drugs in Europe have kept the continent's biotech firms lagging behind their U.S. counterparts, executives say.
Or this Business Week ranking of the top 100 technology companies in the world, where 33 are American but a mere 13 from Europe.

Make no mistake, I don't revel in this or hold it up as the superiority of Americans. Indeed, much of the dynamism is fueled by immigrants, with foreigners accounting for 52 percent of all technology startup companies. It doesn't benefit the U.S. at all for Europe to be plagued by a stale and static economy. Few things would make me happier than to see a renewed and vigorous Europe building new monuments to human inventiveness.

The unfortunate reality, however, is that the vaunted safety net also serves as a spider's web, ensnaring those that try to get ahead. We should not be lured by this siren song, but should heed it as a warning of what may await us if we continue on the current path.

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