What Can America Learn From Europe’s Problems?

This blog post is largely excerpted from a speech made by Václav Klaus, the President of the Czech Republic in a speech given to a group of Americans in Berlin on 11 June 2011.

Mr. Klaus sees Europe’s problems as an economic structural problem, which has embraced social permissiveness, anti-market practices, and a principle of money redistribution. Europeans have believed that the most favorable form of government is one of weakened nation-states with the concomitant strengthening of supranational institutions. He pointed out that only within states can democracy function effectively. The unification of Europe in the “Euro zone” was intended to accelerate economic growth, reduce inflation, and protect member states against external economic disruptions—it has failed in all three goals. Europe’s developing social democratic system with its generous social benefits, weakened motivation, shortened working hours, and lowered retirement age, have all diminished the labor supply and resulted in decreased productivity.

He said, “…we have witnessed a gradual shift away from liberalizing and removing barriers and towards a massive introduction of regulation from above, an ever-expanding welfare system, new and more sophisticated forms of protectionism, and continuously growing legal and regulatory burdens on business. All of these weaken and restrain freedom, democracy, and democratic accountability, not to mention economic efficiency, entrepreneurship and competitiveness.

“Europeans today prefer leisure to performance, security to risk-taking, paternalism to free markets, collectivism and group entitlements to individualism. They have always been more risk-averse than Americans, but the difference continues to grow. Economic freedom has a very low priority here. It seems that Europeans are not interested in capitalism and free markets and do not understand that their current behavior undermines the very institutions that made their past success possible. They are eager to defend their non-economic freedoms—the easiness, looseness, laxity and permissiveness of modern European society—but when it comes to their economic freedoms, they are quite indifferent.”

In conclusion, he pointed out that “…the way your American government has been going, you might be able to catch up with us—in terms of our problems—very soon. But you are not as far along, yet. So, maybe seeing Europe’s crisis today will at least help you in America turn back toward freedom.”

I would observe that our American system with its increasing regulation and taxation of business and its promotion of moral laxity is well on the way of adopting Europe’s problems.