Europe’s Unenviable Welfare States: “Solidarity” That Delivers Division

EspañolIf there is any region throughout the world that serves to demonstrate the negative effects of redistributionist policies through the so-called “welfare state” — as touted by President Michelle Bachelet of Chile this week — it’s Europe.

These effects are visible within both economic and policy metrics; as authors such as Tom Palmer have demonstrated, the welfare state is directly responsible for the loss of productivity, low growth rates, and declining competitiveness in most European countries. Further, the impact becomes undeniable when one confronts the fiscal crisis throughout the continent. The level of debt that European states maintain to support the growing cost of public spending for social programs is the principal cause of this crisis and why it persists over time. Spain is a leading example, as is France, which grasps for ever more tax revenues amid sky-high unemployment.

However, these negative effects run even deeper. The debt, apart from generating financial problems, is also a reflection of a particular way of thinking: the current generation of citizens in Europe not only spend the resources they produce in the present, they are mortgaging themselves to what may be produced in the future. In other words, as Michael Tanner of the Cato Institute has stated, the welfare state is a pyramid scheme.

These decisions proceed under the misguided justifications of “social rights” or “social advancement.” By categorizing these giveaways as “rights,” the welfare state has the necessary pretext to grow without limits.

This pyramid scheme, along with the complementary interventionist policies that come too (business regulations, fixed prices, and the like), results in a growing, intergenerational conflict. European citizens of the future are committed, without having even been born yet, to a system that ensures they will never enjoy the fruits of their own labor.

In this regard, it is curious to say the least, that many of the same advocates of welfare states and the wasteful spending of today that will be paid tomorrow also advocate for so-called “sustainable development.” That is to say, they blame capitalism — and seek to regulate and further intervene — because capitalism supposedly generates a tendency toward a waste of resources and loss of natural wealth for future generations. What a paradox.

Welfare state logic, at its core, ignores the inescapable reality of limited resources — as it advocates redistribution of income as a cure-all, even to the extent of taking from people not here to defend themselves. Apparently, some groups deserve to be compensated — for some metaphysical reason — over others.

Instead of trying to solve the natural scarcity of resources through innovation and the market economy, with the cooperation of individuals and division of labor, the welfare state relies on the supposed good intentions of a central authority. Unfortunately, these only divide society and generate conflict, as evident in so many electoral campaigns.

When it comes to elections, there is a rising preference among European voters for extreme-nationalist and nativist political parties. Last Sunday in France, for example, the National Front Party (FN) — recognized for policies that foment perceived demographic conflicts — obtained, for the first time in its history, broad representation at the local level. These results may validate the prediction in the Economist a few months ago that parties like the FN could improve their representation in the European Parliament in the next election. Far from socialist harmony, they pose a threat to European integration.

Unwilling to accept the unsustainable dynamics of the welfare state, these political groups scapegoat foreigners and reject immigration. The logical inference is that immigrants are a problem because, supposedly, they are eager, not to work, but to take advantage of the collective resources. However, as the fiscal crisis worsens, one will not even have to wait until the next European elections for moves against immigration to spread across Europe.

In February, for example, the people of Switzerland approved a referendum to invalidate free movement between their country and the rest of the European Union. In March, the German government proposed a new regulation to exclude immigrants, including other Europeans, from unemployment benefits provided by the welfare state. Similarly, in Spain there have been several cases, some involving violence, of people attempting to repel the massive influx of immigrants from Africa.

Oh the irony, a set of policies whose supposed justification was to promote — by obligation — generosity and solidarity, has become a threat to the living standards of all citizens and a source of intergenerational conflict, across states and within them.

Unfortunately, Europeans do not seem to recognize this reality and to continue to defend these policies. Even worse, many Latin-American politicians dream of importing this model to their own countries. While economists and shrewd observers have already learned these lessons, I wonder, will our governments ever learn them as well?

Translated by Guillermo Jimenez.

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