Falling on hard times
The basic choice for the G20 ‘Recovery and New Beginnings’ summit of major economies starting in Toronto tomorrow can abundantly be found in Charles Dickens. Back in the 19th century, when the idea of a European bloc was a beguiling fairytale, Dickens was writing about themes that would resonate with the grossly deficit-ridden, overly welfarist European Union of today. From Hard Times through to Little Dorrit, he wrote about debt, the hardships of the working class and the need to pay your way to prosper. “Minds, like bodies, will often fall into a pimpled, ill-conditioned state from mere excess of comfort,” Dickens observed in Barnaby Rudge as far back as 1841.
Today’s Europe is nothing if not “pimpled” and “ill-conditioned”. It has itself to blame. It spent the years since the last great war luxuriating in its sense of self as a lifestyle superpower, defiantly distinct from that military superpower, the US, and the economic superpower, China. For nearly two generations, Europeans were brought up to regard early retirement, free public healthcare and generous unemployment benefits as fundamental rights. With this sense of entitlement came a comfortable lightness of being, something Dickens might almost have been categorising when he wrote: “Any man may be in good spirits and good temper when he’s well dressed. There aint much credit in that.” That was in Martin Chuzzlewit, a story about selfishness and greed.
Fifty years of post-war European “good spirits and good temper” were fuelled by public spending crazily high on steroids without heed to that big downer — who pays the bills and how. The result is that Europe’s big four — Britain, France, Italy and Germany — arrive at the G20 grotesquely “ill-conditioned”, indeed positively liverish. Italy’s public debt is about 115 per cent of gross domestic product. Britain is currently running a budget deficit of nearly 12 per cent of GDP, one of the largest in Europe. France has not produced a balanced budget for more than 30 years. And Germany is struggling to balance its books.
The challenge is immense — and stark — for a Europe so in love with its supremely comfortable life and style of charming cities, good food and wine, exquisitely preserved cultural history, politically correct employment regulations, generous welfare provisions and till-recently unconquerable football teams. Europe has to wean itself off addictive milk — the belief that each has the right to excessive consumption irrespective of productive achievement.
In effect, this would mean that adolescent, school-dropout, out-of-work British mothers could no longer presume upon their right to have more children in the expectation that the state would pay to keep the entire family forever clothed, fed and housed. In the UK, housing and disability benefits have been rising year on year and Britain now spends more on housing subsidy than on police and universities combined.
Ballooning dole pay-outs across Europe have meant governments achieved no more in 50 years of welfarism than generously subsidising a disincentive to work rather than providing a safety net for those genuinely unable to work.
Rugby-tackling this mindset is Europe’s greatest challenge. It was well said that the only European countries — Latvia and Ireland — to have accepted real cuts in wages and pensions had “experienced real poverty in living memory” and knew that the last few years of massive and unsustainable booms were”a bit unreal”.
Not so the rest of Europe, which has, for too long, put its metaphorical feet up on a hypothetically solid table fashioned out of the profits of industrialisation and a generous, if unsustainable social conscience.
Nearly half a century ago, Ayn Rand would rail about the promise of an impossible “right” to economic security for all. This Russian Jewess, who fiercely held to the individualist and laissez faire capitalist beliefs of her adopted American homeland, denounced the “right to economic security” as an infamous attempt to abrogate the concept of rights. She argued that it could mean only one thing: a promise to enslave the men who produce, for the benefit of those who don’t. In Capitalism: The Unknown Ideal, she wrote, “If some men are entitled by right to the products of the work of others, it means that those others are deprived of rights and condemned to slave labour.”
Rand, controversial though she is, might be half the prophet Europe needs today. Her outright rejection of the philosophy that “needs, not achievement” dictate reward makes increasing sense in a continent living beyond its means as it struggles to provide the same living standards for all, irrespective of productivity. All these years, Europe has existed as a lifestyle superpower on an ample supply of credit. Hitting the financial wall would be ignominious, with all the attendant horrors of sovereign debt defaults, collapsing banks and shaky triple-A credit ratings.
But with every recent effort to chip away at government spending, European governments have run into the sort of trouble that would erupt in the developing world over contentious religious issues. Riots in Greece, unrest in Spain, Thursday’s trade union resistance in France are harbingers of an “ill-conditioned” people fighting to retain a temporary bequest as an immutable inheritance. Perhaps for Europe, a comfortable lifestyle is a religious issue. Faith in a generous state is challenged at the state’s peril. But Dickens may offer a solution: “There is nothing so strong or safe in an emergency of life as the simple truth.” And that is the choice between unsustainable debt and a pay-as-you-go lifestyle.
