Europe’s Eclipse of Intelligence – Economy

Most European societies have been living above their means for decades, stifling their economies at the same time. Too much state, and too little freedom.

After the overview intro to this series, it’s time to dig deeper into Europe’s eclipse of intelligence. The notion of lack of intelligence highlights that the decline of Europe is not inevitable or natural, but on the contrary, could have been avoided - and can be remedied - through the application of intelligence broadly defined.

The relative difficulties of European societies come from a sickness that has multiple causes. It is therefore difficult to stem and treat; but the first step is of course to recognize it; too many people are still politically asleep. There are many overlapping and interconnected causes to the problems of Europe, some that go back many decades. But the fundamental problems are, as so often, economic.

The relative difficulties of European societies come from a sickness that has multiple causes. It is therefore difficult to stem and treat; but the first step of course is to recognize it more generally; too many Europeans are still politically asleep. There are many overlapping and interconnected causes to the problems of Europe, some that go back many decades. But the fundamental problems are, as so often, economic.

European Economic Self-flagellation

The stifling economic conditions that Europeans have decided to live under are hindering their economic - and thus their social - development. There a kind of collecting self-satisfied self-flagellation going on. Europeans are deluding themselves economically - to varying degrees depending on the country -, because they have been drinking the Kool-Aid of socialist welfare policies for so long. Now reality is catching up.

Most European societies have been living above their means for decades, using ballooning public debt and a loose fiscal policy. The average Euro area debt is a mind-boggling 85% of GDP, a number that unfortunately does not shock many Europeans - though it should.

As taxation levels have risen over time in order to cater to ever increasing social spending and ever greater state bureaucracies, it seems that a limit to what can be tolerated is now being reached in most European countries. It is hardly possible any longer, politically, socially or economically, to raise taxes much further, even for the blind-sided Europeans. In other words, the previous tax-and-spend model, which is based on kicking the can down the road and providing ever more “social rights” by increasing tax revenues, is becoming obsolete. There are signs some Europeans are waking up, but do they understand the underlying causes?

What worked before to stimulate growth is now over (even if some EU politicians are still trying to proposal to tax the public), and this is frustrating decision-makers and worrying voters, even though they lack the necessary economic education in freedom.

Despite the stimulus medicine at ECB level that has been injected for years, the GDP growth in all of Europe is just sluggish. The economic ECG is almost flat…

The EU’s largest economies showed very modest growth, with Germany, traditionally the region’s economic driver, even posting negative figures.

For those who understand the consequences of coercive state interventionism, as opposed to the unhampered market economy, this degradation process going on in Europe is no surprise.

Getting Less for More

It seems hardly to have occurred to the European elites (or they are being awfully quiet about it) that even from an economic point of view, fiscal levels are probably far beyond the optimum of the Laffer curve now; meaning that lowering taxes, in some areas and in many countries, might probably even increase public income.

 

In France for instance, even a government website is asking how it can be that social spending is increasing year after year, while social services just get worse and worse. Yet no political candidate in France (since F. Fillon a decade ago) is willing to explain this decay from the obvious perspective of statism and lack of reform.

 

The elites of Europe are too imprisoned in their existing interventionist ways in order to think out-of-the-box or to propose anything new to the electorate. Indeed, truly classically liberal programs to reform bloated bureaucracies and kickstart moribund economies through liberalization are almost nonexistent in European politics. This is worrying in itself. Yet in many countries there is a clear free-market anti-globalist electorate that is up for grabs for European politicians who still have a spine.

Beware of Germany

Additionally, Germany under the new chancellor Merz, who was the only big EU economy that had its federal budgets somewhat in order, has recently blown up its debt ceiling in order to embark on the same disastrous Keynesian economic policy as its neighbors (though this is not as simple as it sounds).

 

Now, even the Germany and the other so-called “frugal” North Europeans are feeling tempted, or forced, to loosen their economic policy (and as usual, it is Putin’s fault.)

“For years, Germany and its austerity-loving allies were Europe’s fiscal buzzkills.

Their motto was simple: No joint debt, no budgetary free-for-alls and absolutely no blank checks for Brussels.

Together, this coalition of rich northern nations — Austria, Denmark, Sweden, Finland and the Netherlands — held the European Union’s purse strings tight, outmaneuvering Southern Europe in marathon budget battles.”

Creating the Perfect Economic Storm

A perfect storm is brewing now, from a combination of several factors that ultimately the political and financial elite in Europe is responsable for:

1.      Letting millions of subsidy-loving and unemployment-prone immigrants settle in Europe, while costs for state pensions rise as the Europeans get older (in particular France which is a ticking time bomb for both social security and pension system debt).

2.      Europe’s companies are now uncompetitive on the international market, not least due to Europe’s self-defeating energy sanctions imposed on Russia from 2022 and the massive push for the “green” transition, both of which are adding hugely to the cost of industry in Europe. In an act of utter self-punishment, Germany now even wants to make sure the still intact gas pipeline of Northstream II can never be used again…

3.      This situation has been further exacerbated by the economic globalization of the last decades and new competition from nations of the Global South that are moving up the value-chain, at the same time as Europe’s regulatory zeal is reaching new heights driven by the EU center.

On this last point: the progressive reduction of world trade barriers over many decades and the development of the Global South should have been anticipated and even welcomed by Europe with the enhancement of free trade. It should actually have spurred policies to enhance competitiveness in Europe through a return to the kind of economy that worked so well before the suicide of European in the form the Great War (WWI). But the exact opposite has happened.

But the response to this situation is of course not protectionism. The progressive reduction of world trade barriers over many decades and the development of the Global South should have been anticipated and even welcomed. It should actually have spurred policies to enhance competitiveness in Europe through a return to the economy that existed before the European suicide in the form the Great War (WWI). But the exact opposite has happened.

In most European countries and also at EU level, there is a refusal by the ruling elites, at least publicly, to accept this reality. The idea from the ruling oligarchy is simply to do more of the same; namely massive public spending to grow the European economies artificially, according to the Letta and the Draghi plans. The plan is for this to happen at the EU level in order to reap “mutualization” benefits and not impact negatively national euro interest rates.

An extra unspoken benefit is of course that this plan allows for the more concentration of power in Bruxelles. The desperation is such that more and more voices are being raised within the European elite for dipping directly into the savings of sheepish European citizens (savings which, incidentally, have already been taxed!).

The Solution is Freedom

Anything except suggesting the obvious: deep reforms of the state and liberalization of the European economies, which is what Europe really needs (although the situation and the remedies vary somewhat from country to country).

Indeed, Europe’s economic problems could be solved with massive, albeit belated reforms. Even if drawn-out over time they would unfortunately be painful for many Europeans who have never known hardship. This means a sharp reduction of red tape both at national level and EU level, a drastic decrease of the fiscal burden for both individuals and companies. This must also naturally be accompanied by massive decentralization applying fully the already existing concept of subsidiarity.

This must be accompanied by a dramatic reduction of public spending to a level going back to the heyday of European economic, social and scientific life, i.e. 1890-1910, epitomized by the Exposition Universelle of 1900 in Paris:

 

The 1900 World's Fair in Paris was one of the most grandiose and renowned events in Europe at the beginning of the 20th century. It attracted more than 50 million visitors to the French capital over 212 days.

This means a progressive but dramatic culling of the welfare state, in order to liberate the entrepreneurial powers that clearly are being throttled in many European countries, while letting cuddled Europeans take more responsibility for their own lives. But there is currently little if any recognition among the political mainstream or among the public at large, that more economic freedom is key for Europe now. It seems, therefore, that Europe will thus continue to decay for the foreseeable future until a massive crisis will finally awaken the Europeans from their stupor.