You Can’t Change Only One Thing

Liberals in America love to point to Europe with its socialistic policies and tell us what a good example this or that European country is. Sweden allegedly has the greatest government retirement system, so let’s “learn from their model.” France is said to have the greatest government healthcare system, 65% approval rating; let’s “learn from the French model.” Germany we’re told has the greatest government educational system, let’s adopt the German model. And so on.

What the liberals don’t tell us, of course, is that all those “admirable” government systems for this and that are running huge deficits, are flawed on numerous levels, produce very low quality of services, and never seem to improve.

But what is more important, our own American socialists never mention that the Europeans themselves admit their whole social system is an economic failure, and they look at the US as an example of a successful economic system to be studied and followed.

No, I am not talking only about the average people on the streets of Europe. European governments themselves admit their policies have failed. The highest level of such confession was the Lisbon Strategy. In March 2000, leaders from all the member-states gathered in Lisbon and made history by officially acknowledging what everyone knew but never said publicly: Europe has a stagnating economy with low productivity and lack of entrepreneurial spirit. They specifically compared Europe to the US and found Europe lacking.

They vowed to create a ten-year plan for Europe to catch up with the United States. (Khrushchev and Brezhnev before them each vowed to catch up with the US within two five-year plans; curious, isn’t it?). That plan was called The Lisbon Strategy.

I’ll avoid the lengthy verbiage of the document and summarize the two main points of the Strategy:

1. Encourage entrepreneurial spirit; and
2. Preserve the “European social system.”

In other words, the European leaders wanted to change only one thing—to make Europeans as productive and entrepreneurial as Americans, but not change the heavy bureaucratic system of entitlements and “safety nets” for the population. They thought they could have the fruits of the American way of life without paying for them with more responsibility, self-control and possibility for failure.

Five years later none of the European governments could show anything that would count as visible progress toward the goal of “catching up with America.” Some national politicians started talking about deregulation and lower taxes as a way to achieve the goal, but they were shouted down. In 2005, the European leaders gathered again and revised the Strategy; the revision practically negated the original goal of “catching up” and only focused on the good old Keynesian goals of “creating jobs.” Entrepreneurship was abandoned as a goal.

It’s now 2009, one year before the envisioned completion of the Lisbon Strategy. Almost no one in Europe talks about it anymore.

When American liberals look to Europe for their social examples, they make the same mistake with the opposite sign: They believe they can preserve the initiative, the entrepreneurial spirit of America while placing on her the heavy bureaucratic, regulative, and taxation burden that exists in Europe. All socialists believe that the productivity of an economy is a constant irrespective of what the government does to people and their businesses. So, they believe, you can increase the burden, and wealth and creation of wealth will remain the same, except that now you will be able to redistribute it. Wealth is like a flowing deep river with no real source. All you need to do is take a big bucket and go and draw as much as you can.

Nothing could be further from reality. The health of an economy depends on one thing: The willingness of the economic participants to apply their time, labor, and resources to invest and produce economic value. They may decide to invest their time, labor, and resources, and they may decide not to invest them, or they may decide to squander them. And since they are all humans, they usually invest when they know that they will get their investment back, plus much more.

People are motivated to invest when there is personal profit involved; they are not motivated by government programs. Every entrepreneur wants to see the profit in his pocket; no entrepreneur will be excited to risk his resources because if he makes a profit, it will go to the government for government projects.

When we change an economy from a free market, free choice economy to a government regulated economy, the quantity and the quality of economic action in the economy will fall. Fewer people will be willing to risk time, money, and labor to get a profit if they know that the profit isn’t going to be theirs. Fewer people will be entrepreneurs, and the economy will stagnate. It is as simple as that. The source for the river will disappear.

So when you are listening to liberals promote this or that European socialistic plan, keep in mind that socialism comes at a cost. The cost is fewer people working, fewer entrepreneurs, and eventually less wealth in the society. Reality is not fragmented; it is interrelated. Anyone who analyzes only one thing and never talks about all the others is a utopian dreamer. You can’t change only one thing. If you want European socialism, you must be prepared to get the European stagnation and poverty as well.