What to Learn From Europe

The election of the new Socialist President in France's recent election and the rejection of the two leading parties in Greece could prove to be a turning point for Europe. The French President, Hollande announced that,"The real enemy of the world is finance," while Communists and Neo Nazis have managed to obtain 15 to 17% of the voters in Greece, meaning the enemies of freedom are now significant players in the Greek parliament. For the French, the war on capital has begun.

Southern Europeans have decided that they will jump over the cliff into the abyss as politicians are no longer serious about getting their financial house in order as long as Germany is willing to keep financing them.

Many of these countries essentially saw conditions imposed upon them by unelected bureaucracy deciding their fate and the European Union no longer respecting national feelings or local governments. The European experiment was always doomed for failure since to make it work meant that a soft despotism would be required to force Europeans to the dictate of Brussels. As Wall Street Journal editors noted, what Greece needed was not just the budget cuts but a supply side revolution. Austerity combined with high tax rates not only brings instant pain, but it also drives the entrepreneurs out.

Arthur Herman wrote, “Three times in the last century America had to step in to save Europe from itself — in World War One, World War Two, and the Cold War. Now we’ll have to do it again, as Europeans stumble dazed and broke from the rubble created by their EU bureaucrats, politicians, and unions. But this time it won’t be American soldiers, or arms, or even a nuclear umbrella that comes to Europe’s rescue. It’ll be American ideas and policies based on free markets, economic growth, and individual freedom.”

Europe is dying with much of its vitality gone and nowhere to turn. Europe has been under the influence of fascism and Nazism to be followed by communism. The present attempt to try a social democracy and mixed economy evolved into a continent of a bureaucratic state. What Europe became was a large planned economy with benefits provided from cradle to grave. While Europe did prosper initially, the eventual collapse is now occurring. The political ideas that have become the basis of the modern day Democratic Party, is now evaporating in Europe.

So what of America? The failure of the European model is a warning to American voters today. America has the potential to revive itself with abundant sources of energy, along with a wireless and high-tech innovation industry that is still world leader. We need to learn the right lesson from Europe.

The first lesson is to understand that Europe has gone through a stimulus similar to Obama since 2008 and like Obama’s experiment, it has failed. The austerity program has yet to be truly tried and for the past several years, government spending has actually gone up even in conservative governments like Sarkozy's France, Cameron’s Great Britain, and the new Spanish government. Tax hikes were instituted without any benefit in reducing the budget.

The second lesson is not just run as a conservative but govern as well. The temptation for any Republican government is to engage a grand compromise that might include increased taxes, in particular, increased tax rates upon the wealthy, but these compromises rarely hold up since the spending continues unabated or simply returns to previous levels. There is a bipartisan readiness to reform entitlements, have tax reforms with lower marginal tax rates and to reduce government spending so Republicans don’t need to raise marginal tax rates on the wealthy but actually lower them as part of tax reform.

Herman concluded, “Who knows. Maybe at the end of all this, Europeans will discover their own culture buried under two centuries of socialist and Marxist garbage: the Europe of Adam Smith and Tocqueville, of von Mises and Hayek, of Aristotle and Aquinas. Maybe they’ll realize their birthright as the original home of liberty and freedom, at long last.” Maybe this election, America will rediscover the wisdom of its founding fathers.

The final lesson for the political class is that the failure of the political class will lead to rise of extremism on both sides as Greece has shown. In France, Marie Le Pen is positioning herself as the leader of the right with her anti EU, anti-free trade and anti- immigration stance. In the United States, the Occupy movement is a sign that on the left, radicalism and street violence are just simmering underneath the surfaces. In the United States, the hard left has taken over the party and the more centrist Democrats are being driven from the Party leadership. In the last Canadian election, the more moderate Liberal has been replaced as the main opposition to the conservative by the harder leftist Party. Radicalism is rising on the left.

On the right, the Tea Party is a grassroots movement working to reduce government spending, and American conservatives, with few exceptions, have rejected radical ideas afflicting the right in Europe. This election is a referendum on the Obama’s administration but it is also judgment on the political class. The European social democracy model is collapsing at a time we have a President whose economic ideas are based on a failing model.