Tuesday, July 05, 2005

G8 Blogging. British Prime Minister Tony Blair is a thoughtful and brave man. He proved that by supporting the U.S. in Iraq despite the strong opposition of France, Germany and Russia. He is proving it again. On the first day of that England held the presidency of the European Union, he called for the leaders of the European Union nations to debate the European social model. This is the equivalent of the U.S. President asking the governors of all 50 states to convene and debate the model of federalism and free enterprise.

Blair employed understatement when he said "Obviously it is taking something of a risk to go right to the heart of the issue of the social model, but I think it is sensible to do it. "Everybody knows that that is the debate that is going on in Europe, so let's have it."

The European social model is about quality of life and linkage of countries to provide it. Europeans normally have six-week vacations. You might remember Chirac refusing to return from his vacation while old people were dying right and left in last year’s heat wave.

Europeans only work 35 hours per week. That is fun for the worker, but has led to reduced productivity. That should be an obvious result, but it was evidently not anticipated.

Europeans also like high taxes, social security, “free” healthcare and all the other liberal utopian ideals that Hillary wants to bring to our fair land. The American model, in contrast, favors low taxes, economic growth, less regulation of the economy and a smaller entitlement program.

The question is what happens in the long run under both models.

The European model is manifesting its flaws. Europe has a small workforce that is declining due to welfare and very low birth rates that are the result of population control philosophies. The economies are stagnant or growing slowly compared to America. Meanwhile, the U.S. economy keeps growing, China is exploding, India is forging ahead, and most of Asia has a better economy than most of Europe.

Europe, notably France, criticizes the American model. But Europe has 20 million unemployed people, falling productivity rates and other problems. Education is one of the other problems. Blair points out that India produces more science graduates than all of Europe. Of the top 20 universities in the world, only two are in Europe. Research and development are suffering.

Another problem of Old Europe is that it is old. The ratio of the retired to the workers is currently 24 percent. But it is expected to double to 50 percent by 2050. Europe needs the robot from Lost In Space to walk about saying “Danger, Chirac, danger”. This unbalanced population will lower economic growth rates one percent per year greatly increase the cost of pensions and healthcare.

The rejection of the EU constitution by France and The Netherlands indicates the hard road ahead. No one wants to give up their benefits. But, Europe will benefit itself to death if it does not change.
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