I know I cover this subject quite a bit, but I do so because it’s critically important to the future of our world. Fareed Zakaria has a very astute piece on Europe’s continuing decline. Zakaria points out the usual litany of problems: an aging population, a stagnant economy, and cultural decline. Anne Applebaum also piles on at Cato Unbound. She writes:
I was reminded of a recent conversation with a friend, another American Europhile, now resident in East Asia. Sadly, we agreed that the Europeans who bash “wild†Anglo-Saxon capitalism, who believe America is an unregulated jungle, and who feel smug and safe within their secure welfare states are deeply, deeply deluded. They haven’t yet realized that the economic and social challenge presented by the successful societies of Asia is hundreds of times more dangerous to their way of life than the caricature they’ve created of the challenge presented by the United States, a country which is nearly as over-regulated as their own. If the rise of China continues apace, I’m afraid Dr. Dalyrymple’s final phrase—that Europe is “sleep-walking to further relative decline—might even be too mild. At some point, it’s also possible that Europe’s decline, for all the reasons he listed, might even cease to be relative.
Why do I keep bringing up this topic? For the reason that in a globalized economy, if Europe declines, we all lose. Secondly, because Europe is a warning to us. We can see the liberal social experiment as they would have it in Europe. Europe is what they would like us to become, and it is becoming quite clear that experiment is failing there. If we fail to learn from the mistakes of others, Europe’s problems will soon be our own – and in some ways, we’re already facing some of the same problems they are.
We can’t expect to follow the same path as Europe and avoid the same results, and should we try our larger population and greater diversity will only mean our fall will be harder and faster. Already we’re seeing a push for more isolationism even though the supposed horrors that would befall us if we passed NAFTA never materialized. We’re seeing an increasingly restrictive regulatory environment that is binding our society in a web of red tape. While Hispanics aren’t as alienated from our societal values as Arab immigrants are alienated from European societal values, we cannot ignore the fact that unchecked illegal immigration threatens our economy and society as well. Europe’s bleak future could well become our own if we’re not careful to avoid it.
It is not too late for either Europe or the US to stray from the road to serfdom and start the necessary and vital task of reform. Margaret Thatcher already created a new renaissance in the UK, and her economic legacy continues on despite Tony Blair’s Europhile meddling. The Irish economy has gone from sickly to strong under the leadership of Bernie Ahern. The “center-right” is surging in European politics with victories in Portugal in Germany. In statist France, reformist candidate Nicolas Sarkozy’s political fortunes look strong for next year’s elections. Yet none of these leaders have quite the political will that the Iron Lady did.
Eventually, Europe will have to reform, just as we will. The great question which hangs over all of us is how bad things will get before that happens, and whether it will be a case of too little, too late.
“even though the supposed horrors that would befall us if we passed NAFTA never materialized.”
Guess it’s a matter of who you ask. Considering the statistics I presented a couple of weeks ago showing that unfavorable opinions on free trade nearly doubled between 1999 and 2004 among even high-income Americans, it would seem as though you’re stuck in your usual bubble on this issue. If people weren’t being negatively impacted by NAFTA free trade, they wouldn’t be changing their minds about the issue and opposing it.
“We’re seeing an increasingly restrictive regulatory environment that is binding our society in a web of red tape. ”
You’ve gotta be joking. Only four years after Enron and WorldCom fiascos robbed the country of billions, you’re already back to the strawman that we’re overregulated. Those who don’t learn from history are doomed to repeat it…..over and over and over again.
“we cannot ignore the fact that unchecked illegal immigration threatens our economy and society as well.”
Closing in a rare moment of agreement, this is the one point in your diatribe where I’m inclined to agree with you.
“You’ve gotta be joking. Only four years after Enron and WorldCom fiascos robbed the country of billions, you’re already back to the strawman that we’re overregulated. Those who don’t learn from history are doomed to repeat it…..over and over and over again.”
Misdirection and bogus conflation. Enron and WorldCom are not examples of underregulation, they are examples of _crime_. The laws and regulations which they (and Anderson) broke are well established and uncontroversial. Neither did they escape undetected. The participants are on trial and the companies (incuding Anderson) received the death penalty.
These companies did not steal from “the country”, but from their employees and shareholders (frequently the same people).
There are serious debates to be had about regulation, e.g. the external costs of environmental polution vs the drag on growth presented by environmental regulation; property rights vs the economic benefits of urban planning, etc. The case against regulation, and the case for it, must be reasoned and scientific, even allowing that the science is inexact.
Mark’s comment contributes nothing to this debate.
“Enron and WorldCom are not examples of underregulation, they are examples of crime.”
They are examples of crime that were made possible by underregulation.
“Neither did they escape undetected. The participants are on trial and the companies (incuding Anderson) received the death penalty.”
Sure they did….after the crimes were committed. The push by Jay and other conservatives to further roll back business regulations will simply more retroactive “corrections” from government regulators and more pain to the economy incurred by underregulated business barons playing their usual “instant gratification” game.
“These companies did not steal from “the countryâ€, but from their employees and shareholders (frequently the same people).”
The corruption-fueled bankruptcies of Fortune 500 companies have a huge impact on the economy….and on consumer confidence. You’re not seriously suggesting that Enron and WorldCom exist in a bubble are you?
“The case against regulation, and the case for it, must be reasoned and scientific, even allowing that the science is inexact. ”
Fair enough. But I don’t see anything “scientific” about your rebuttal that attempts to discredit my unscientific analysis. Per your own rhetoric about “scientific reasoning”, you merely cancelled out my argument rather than one-upped me.
“They are examples of crime that were made possible by underregulation.”
Unsupported assertion. The burden is not on me to disprove it, but on you to support it.
“Sure they did….after the crimes were committed.”
Department of Pre-Crime? Un-original suggestion.
“The corruption-fueled bankruptcies of Fortune 500 companies have a huge impact on the economy….and on consumer confidence. You’re not seriously suggesting that Enron and WorldCom exist in a bubble are you?”
The debate right now about economic growth is whether it is sustainable or inflationary, i.e. whether the Fed must make an enemy not just of inflation (1 more hike) but of growth itself (2 or more hikes).
Employment is such right now that more good news (stronger employment figures) consitute bad news (more Fed rate hikes). There is a developing consensus that we are reaching full employment (I don’t buy into this completely, but nonetheless that is the consensus).
Consumers continue to spend everything they earn, the equity in their homes, and then some. The concern about the consumer is not so much a lack of confidence as a lack of caution and prudence (non-existent savings rate).
All this despite Enron, World Com, Katrina, etc.
Mark, your assertions are not bourne out in the data. Once more it seems you martial rhetoric in the service of politics, rather than reason. If anything, the “Enron effect” stole from shareholders in that it depressed equity prices, which have since recovered.
(N.B If there is a substantial case to be made that over-regulation is a contrived “boogieman” it might lie in the very economic data I’ve cited…)
The confidence of the shareholder will not be restored by regulation, but by a faith in the sobriety and honor of the median executive. It was not confidence in regulation which was shaken but confidence in business ethics. Something of a witch hunt followed, and rightly so – the concern being not the existence of the cancer (which was no particular surprise – crime exists – shocking) but uncertainty as to how far it had spread. In order to really follow this story you had to be watching CNBC, reading the WSJ, etc, to feel the genuine nature of the hot wrath generated.
If everyone believed as Mark apparently does, that businessmen constitute a “robber baron” class seeking “instant gratification” restrained only by the regulatory power of the Leviathan, then nobody would own shares at all. I certainly would not.
No, they weren’t. Cooking the book was already illegal when Enron and WorldCom were doing it. The Economist put it best:
“The trouble with Sarbanes-Oxley is that it was designed in a panic and rished through in a blinding furvour of moral indignation. This is not to say that the problems it addressed were imaginary… But it would be difficult to argue that mere bookkeeping was the main thing.”
Apparently the Department of Pre-Crime has failed us once again…
Except that’s not the way things worse. Overregulation increases corruption by increasing the opportunity costs for following the rules. If you’re a multi-billion dollar organization, it’s a hell of a lot easier for you to skirt the rules and grease the palms of a few politicians then it is for Ma and Pa’s small or medium sized business to do the same. And of course, the more regulations, the more opportunities for loopholes that are presented.
And the market did what markets do, correct themselves. The problems appear when polticians, eager to make a name for themselves, arrogantly interject themselves into situations and create public policies based on kneejerk reactions which only further tilt the playing field more towards the ultra-rich – which is exactly what Sarbanes-Oxley does.
Then try this one on for size. The regulatory costs of Sarbanes-Oxley far, far outweigh any benefits that will come from it. The problems were concentrated in a few companies (mainly Arthur Andersen clients) who were cooking their books. Which was already illegal at the time. Yet Congress, in their infinitely density, decided to punish all corporations with a set of regulations that are exceptionally burdensome and ensure that even trivial errors can expose corporate workers to jail time.
As far as I’m concerned, fairness only dictates that the government should be accountable under the same rules as corporations are under Sarbanes-Oxley. Any amount of fraud, waste, book-cooking, or any other impropriety real or percieved should amount to jail time for those responsible all the way up the chain of command.
Of course, were that to happen one would have to fence off the entire DC metro area and turn it into a giant prison camp, but then again that might be one of the healthier things done to this Republican in quite some time.
And damn, I was beaten to the punch on the Pre-Crime reference. Well played… 🙂
“I was beaten to the punch on the Pre-Crime reference. Well played… :)”
Damn. I didn’t realize people this ignorant existed. Since you suggest that corporate book-cooking should not qualify as illegal until after its committed, I’m wondering if you guys believe this standard should apply to every offense we currently consider a crime. Should we wait until after murder is committed to decide whether it qualifies as a punishable crime? Or only if the murder is committed by someone with an income above $200,000 per year perhaps?
“Employment is such right now that more good news (stronger employment figures) consitute bad news (more Fed rate hikes).”
So what’s your point? Should we invite more corporate scandals as a means of raising unemployment and cooling down the “overheating economy” and its 1.1% quarterly growth?
“Consumers continue to spend everything they earn, the equity in their homes, and then some. The concern about the consumer is not so much a lack of confidence as a lack of caution and prudence (non-existent savings rate).”
You’re right about this. How it applies to the business regulation debate I don’t quite understand, though.
“If everyone believed as Mark apparently does, that businessmen constitute a “robber baron†class seeking “instant gratification†restrained only by the regulatory power of the Leviathan, then nobody would own shares at all. I certainly would not.”
History seems to validate my position. Unbridled free enterprise ushers in the excesses of self-interest and instant gratification every time we “put our faith in the market” and turn our backs on common sense and human nature. Obviously, there is a danger of overregulation, but considering the size of the paychecks coming out of the high rollers in the American business community, it’s pretty hard to make a case that our cigar-chomping, country club set is being ground into dust by regulation.
“And the market did what markets do, correct themselves.”
I guess that’s true….at least as far as 9-11 was a “correction” on our lackluster efforts to thwart terrorism back in 2001. Strangely though, the GOP has taken a fierce “preventative maintenance” approach to Islamic terrorism, but wants us to believe that the crimes of their party’s corporate campaign contributors should continue being dealt with through “market-based corrections” rather than preventative maintenance.
“Damn. I didn’t realize people this ignorant existed. Since you suggest that corporate book-cooking should not qualify as illegal until after its committed…”
And here’s where I stopped reading. Talk amongst yourself.