The failure of the continental European model: France and Germany
I am reading "Muligheter for alle. Dynamisk vekst i en liberal markedsøkonomi" ("Opportunities for all. Dynamic growth in a liberal market economy") by Lars Peder Nordbakken. In the book, he mentions three different economic models: the Nordic model, the continental European model, and the Anglo-Saxon model.
The Nordic model is practiced in Denmark, Finland, Norway and Sweden, and it combines an inclusive publicly financed welfare system and a large degree of social security with a liberal view on competition and markets, and a somewhat flexible labor market.
The Anglo-Saxon model is practiced in USA, Canada, Australia, UK and Ireland, and it combines a limited social security net with a liberal view on competition and markets, and a very flexible labor market.
The continental European model is practiced in France, Italy, Spain and Germany, and it combines a somewhat high social welfare system with an interventionist-protectionist view on competition and markets, and an over-regulated and unflexible labor market.
These definitions are according to Nordbakken, page 261 of the Norwegian-language edition.
One year ago, France was in flames. Unemployed minority youth were rioting. It is now feared that this will happen again soon. I am not defending riots, but I think that it is a pretty obvious result of the French society.
The news I've been reading lately have been reporting about the new under class of Germany, which is said to be about 8% of the German population. Unemployed and poor people, with no hope for the future. Germany, which used to be the "Wirtschaftswunder" (entrepreneurial wonder) turned into an over-regulated society, and these are the results.
Regulations are worst for poor people. Regulations are often said to help poor people, but they do not. Regulations hit poor people. People who want to work, but cannot find work, and who eventually gave up.
Germany and France are clear examples of the fact that the continental European model is a failure. It's creating large problems, ethnic and social tensions, and an unsocial society.
This model needs to be abolished, badly. I do not know whether France will be in flames again this year, but I am pretty sure both France and Germany will be in flames again, eventually.
This is an example of how "the road to hell is paved with good intentions". The social security nets and the regulations to make it harder to fire people, and (at least in the German case) subsidies for building plants in areas with high unemployment, were not imposed by politicians who wanted to hurt people, but by politicians who wanted to help people, who wanted to give them security.
The problem is, you cannot have security through coercion. When you make it expensive to hire people, and difficult to fire those already employed, the effect is an excluding labor market. Those without jobs are having difficulties finding any. Those with jobs seems to be privileged, but this system makes them less secure than on an unregulated labor market, since the heavy burdens on enterprise will make businesses move to less regulated areas. Businesses move, and few new businesses are started. The jobs are leaving, with no new jobs coming.
There are some things I believe to be fundamentally true. One of these things is that you cannot have consumption without production. When production goes down, consumption will have to go down too.
Not only businesses leave, but people do, too. Engineers are leaving Germany for the USA. Skilled workers move to the UK, Denmark, Austria and Norway.
A British politician said, last year, when a French politician criticized the Anglo-Saxon model: "If your social system is so great, why is your country in flames?".
I second that opinion. De-regulate the economy, now, for the sake of the poor! Give them chances!
The Nordic model is practiced in Denmark, Finland, Norway and Sweden, and it combines an inclusive publicly financed welfare system and a large degree of social security with a liberal view on competition and markets, and a somewhat flexible labor market.
The Anglo-Saxon model is practiced in USA, Canada, Australia, UK and Ireland, and it combines a limited social security net with a liberal view on competition and markets, and a very flexible labor market.
The continental European model is practiced in France, Italy, Spain and Germany, and it combines a somewhat high social welfare system with an interventionist-protectionist view on competition and markets, and an over-regulated and unflexible labor market.
These definitions are according to Nordbakken, page 261 of the Norwegian-language edition.
One year ago, France was in flames. Unemployed minority youth were rioting. It is now feared that this will happen again soon. I am not defending riots, but I think that it is a pretty obvious result of the French society.
The news I've been reading lately have been reporting about the new under class of Germany, which is said to be about 8% of the German population. Unemployed and poor people, with no hope for the future. Germany, which used to be the "Wirtschaftswunder" (entrepreneurial wonder) turned into an over-regulated society, and these are the results.
Regulations are worst for poor people. Regulations are often said to help poor people, but they do not. Regulations hit poor people. People who want to work, but cannot find work, and who eventually gave up.
Germany and France are clear examples of the fact that the continental European model is a failure. It's creating large problems, ethnic and social tensions, and an unsocial society.
This model needs to be abolished, badly. I do not know whether France will be in flames again this year, but I am pretty sure both France and Germany will be in flames again, eventually.
This is an example of how "the road to hell is paved with good intentions". The social security nets and the regulations to make it harder to fire people, and (at least in the German case) subsidies for building plants in areas with high unemployment, were not imposed by politicians who wanted to hurt people, but by politicians who wanted to help people, who wanted to give them security.
The problem is, you cannot have security through coercion. When you make it expensive to hire people, and difficult to fire those already employed, the effect is an excluding labor market. Those without jobs are having difficulties finding any. Those with jobs seems to be privileged, but this system makes them less secure than on an unregulated labor market, since the heavy burdens on enterprise will make businesses move to less regulated areas. Businesses move, and few new businesses are started. The jobs are leaving, with no new jobs coming.
There are some things I believe to be fundamentally true. One of these things is that you cannot have consumption without production. When production goes down, consumption will have to go down too.
Not only businesses leave, but people do, too. Engineers are leaving Germany for the USA. Skilled workers move to the UK, Denmark, Austria and Norway.
A British politician said, last year, when a French politician criticized the Anglo-Saxon model: "If your social system is so great, why is your country in flames?".
I second that opinion. De-regulate the economy, now, for the sake of the poor! Give them chances!
Labels: economic models, the market, unemployment
posted by Johan R. Sjöberg at 2:52 PM
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