Historian Timothy Snyder has an argument that (what became the EU) was a replacement for empire. I think he is right, but not in the way he thinks. He thinks it is an economic replacement because he thinks empire was economically beneficial.
This seems clearly wrong. Every imperial metropole got richer after it lost its empire. This is true whether they were part of (what became the EU) or not: the obvious example being Japan. Access to the US market and the US-led maritime order was much more valuable, and way cheaper, than empire.
It is not clear that even Britain made a “profit” from its Empire, once you consider military and administrative costs. Portugal had the largest empire (relative to the size of its metropole) for longest and is the poorest country in Western Europe. Compare that to land-locked Switzerland, which never had an empire.
I think (what became the EU) was an administrative replacement for empire. State apparats can colonise outwards (empire) inwards (welfare state) or upwards (internationalisation: EU, UN). Of the three, the welfare state has by far the best accountability.
The UN has basically become a completely unaccountable way to launder typically terrible ideas and give them a false patina of authority. The EU has a bit better accountability than the UN but it is still not great. If you think of it like that, you would expect it to be an “imperial bureaucracy” economic drag on its member countries. One that would tend to get worse over time. Especially as its role became more grandiose.
You might also expect it to increasingly alienate the least well-connected folk. That would be the working class, which increasingly votes national populist. The working class tends to be socially conservative and economically interventionist because they want social and economic stability/protection. (In the US, Trump has taken the Republicans back to where they started in the 1850s: a protectionist Party suspicious of foreign intervention relying on working class votes.)
Europe does migration really badly. Somewhat differently badly in different countries, but badly. In the UK, it has imported sectarianism and immiserated its working class by driving up rents. In the UK and France it has aggravated the internal provincial/metro splits. According to a Dutch study and Danish figures, Middle Eastern migrants are a net drain on the fisc in every age group. There is no way reason to think that is not also true in Sweden, France, the UK. (It takes real incompetence to import migrants who make your welfare state less sustainable.)
Migrants, especially those who are very culturally different, tend to swamp/break up local social connections. This matters to working class folk whose social capital is based on locality. Importing low skill migrants also discourages investing in productivity. It tends to suppress (not cut, but suppress) wages by suppressing the Baumol effect for local workers, transferring the benefit to the incomers. Cultural diversity makes it harder to coordinate to do things like provide infrastructure. It increases competition for attention, both in policy and public discourse.
You get a religious attitude to migration: migration does not fail, people fail migration. It becomes an elite marker: only bad/bigoted/ignorant/low class people complain about migration. You get rather elite-imperial favour-divide-and-dominate games (aka identity politics).
There is also a certain imperial arrogance to the EU across a range of issues. The recent annulling of the Romanian election because Russians might have been propagandising was notionally their local court but still looks rather elite-imperial. EU networking likely reinforces such elite arrogance.
I would also argue that 40 years in the EU reduced UK state capacity by both de-skilling the UK civil service and increasing its institutional arrogance. The new Starmer Govt is complaining bitterly behind the scenes how they can’t get the civil service to do anything. That Dominic Cummings is correct in his critique of the incompetent inertia of Whitehall.
In terms of Chinese history, they have moved from early-in-dynasty administrative competence to late-in-dynasty bureaucratic pathologies. Copying Chinese meritocratic entry by exam bureaucracy seemed a great idea. Perhaps they needed to look more at the patterns of such in China?
I suspect smaller countries can course correct better. Denmark and Sweden have both managed to shift migration policy dramatically, for example. The UK, not so much.
I still see the EU as a net positive, and I believe most British people regret leaving it. But I do agree that the EU has engaged in overreach, and would be better off focusing narrowly on free movements of goods, capital, and labor, not all those picky rules.
The primary housing problem in the UK is NIMBYism, not immigration. (Immigration may be too high for other reasons, but Britain needs to make it easier to build.)
Do you *really* believe “most British people” regret leaving it?
Or do you simply believe the far more likely to be true: “most British elites regret leaving it” and the almost as likely “the clear majority of Brits in the London area regret leaving it”?
Related, honest question: what percentage fits your definition of “most”? 50.1%? Or is it the 60%-70% people typically mean when they use that word?
I suppose if by “most” you only mean a bare majority, then it’s at least as likely as not that “most British people” regret Brexit; I don’t claim to know. But if it is the more common use of the term meaning “large majority” I doubt very much that your statement is true.
P.S. I’m not disagreeing with the rest of your comment.
But the line within: “As of late 2023, 31 percent of Britons wanted to rejoin the EU, while 30 percent merely wanted to improve trade relations and not rejoin either the EU or the single market.” makes it *far* less clear that clear majorities think it was the wrong decision, and suggest that it is much more likely that for many of the respondees “regret” means “have some regrets” as opposed to “wishes it had never occurred”.
And this is separate from my generic distrust for how reliable Statista statistics are. E.g. if this is based entirely on online voluntary “votes” as opposed to rigorous respectable polling techniques.
[If you have insight on this particular set of numbers, I would greatly appreciate knowing it, as it would change my views here substantially if in fact these numbers ARE the result of legit, representative polling samples using a clear question.]
Thanks for this. Unfortunately, YouGov does entirely self-selected online-only polling, so this not definitive to me either, as the folks most likely to do such an online poll would be disproportionately likely to have opposed Brexit.
But I do believe you that a *majority* of Brits would now prefer not to have done Brexit.
I remain unconvinced that “most” (equals 60%+) would even in hindsight prefer that Brexit never happen, and your Statista link provides substantial evidence for that position.
A very interesting comment to a very interesting analysis. In my view, the "EU" administration (EEC and the other treaties with a very limited purpose) was rather slim in the first 40 years or so (hence, the EU did not start as an administration replacement of any of the few empires that were active in Europe before WW2). But the EU administration became massive and anti-business over the past 25 years.
The idea of having a larger market with uniform rules (this is intrinsically linked with the free movement of goods, services, people) was meant to aggregate people with similar cultures but with small economies. That, it did.
The problems appeared when the EU administration became massive, entirely left leaning and only in favor of that business that was funded / supported by it (green).
I agree with you that migration reaps the fabric and values of the European society. Especially when the massive inflow is from a completely different culture (Islam).
On the other hand, the Romanian elections: the only "imperial" thing there is the actual Russian influence, documented in detail (I am from Romania and I follow closely this matter; Russia tried to impose a friendly person as a viable candidate; the speeches and personal history of that person over the past 10 years are very clear). Of course, this came on a background of dissatisfaction of a large part of Romanians, especially from the working class, who see a Romanian state getting more massive every year, paying ever larger salaries and pensions to its administration.
In the 1850's U.S., the Republicans were the pro-urban industrial party of the North and the Democrats were the rural agricultural party of the South. Today, the constituencies are virtually the opposite: the Republicans are the rural low-education party while the Democrats are the urban high-education party.
Given that, your claim below is dubious:
"Trump has taken the Republicans back to where they started in the 1850s: a protectionist Party suspicious of foreign intervention relying on working class votes."
In the 1850's, there was a rural / urban political divide. Today, there is a rural / urban low vs. high education political divide. And I doubt that protectionism ever had much influence on that tribal conflict.
An obvious issue for Japan and a lot of Europe is age of population. Overtime is harder to do when you get older. (No bitter personal experience goes into this observation!;))
I think work ethic erosion due to redistribution does occur. I was just listening to John Early talking about income inequality(or rather the overstated case about it) in the US. He points out that in the US only one third of work-age adults in the bottom quintile have a job. Back when Johnson started the war on poverty, two-thirds of them did. That points to relative decline within the US with the expansion of wealth distribution. While it might show work ethic erosion in the US, I have to confess I’m not sure if it says anything about relative wealth of US vs. Europe. US labor force participation would be in the bottom half of European countries.
You need to be careful with that sort of data. Are some of those college or grad students? Not saying you are wrong, but it might be overstating things. The unemployment rate is only 4.2% right now.
Good question. It’s clear there are more college and grad students around today, but my quick search now hasn’t turned up comparisons of the distribution of the bottom quintile today and 1960.
It seems your last sentence would invalidate the entire point? As a whole isn’t Western Europe much more redistributive? Which in theory should make them have lower participation rates than to US?
Europe is far more redistributive, and Europeans work far fewer hours than Americans. That's what theory predicts. I don't see the problem you are referring to.
Were you replying to me? I was referring to the fact that US labour force participation is less than Europe. Not hours. Employment to working age population is lower.
My point was that the theory predicts less labor supply. Europe has less labor supply. The theory doesn't predict at which margin the reduced labor supply occurs. Thus even if you are correct about labor force participation rates, it would not change my view that redistribution is reducing total labor supply in Europe.
But yes, I should have made that clear. I see why you would find my previous reply to be inadequate.
Does it? It seems to me that if employment to working age population numbers are higher, Europe has more labour supply. Sure, hours per worker may be lower, but there's more of them actually working (at least in legal, paid employment!). It would seem to me that to the extent taxes/more regulation is having an effect, it might be more towards the effort to be more productive with that time spent working.
Sorry about the gaps between replies, I don't check my Substack super regularly.
Interestingly, most people who defend European economic performance do so by claiming that European productivity is close to American levels. They reach that conclusion by assuming far lower labor supply. They say European GDP is lower due to far lower labor supply. You seem to be doing the opposite, claiming European productivity is far lower than American productivity.
It seems to me that total hours worked is the best way to measure total labor supply. That's total number of workers times average hours per worker.
If you held all other variables constant between the US and European labor markets, then it would invalidate my point. But, I believe, as Scott says here as well, current theory predicts that increasing redistribution lowers labor force participation. I assume that theory is based on studies that try to account for all those other variables.
I ran a search and a word I couldn't find is energy. The cost of energy in Europe is ridiculous in comparison to both US and China - thanks to a climate change cabal. Can it be ignored as a significant contributing factor to the matter at hand? This plus wrong kind of immigration as was mentioned already (and the massive numbers of wrong immigrants of course).
So you did, but it was missing in this post or in other comments.
It's not enough though. Only a complete fool or a traitor will work on destroying its own country's existing power sources before introducing new reliable ones. What various Greens and, worse, all major political parties did in Europe is inexcusable. Closed coal, closed nuclear, enforced path away from FF with substantial subsidies towards intermittent supply and threats and mandates to stop using oil and gas. They have destroyed the industry which already faced a massive competitive pressure from China and affected a significant part of agriculture. There is no fast fix.
An anecdote: how unhealthy it is when buying retail steel (say, screws/bolts etc.) or extruded aluminium profile from Aliexpress delivered to the UK is cheaper than buying either in the UK or in Europe.
Given your framework of 'civic virtue' driving the successful adoption of neoliberal policies post-1980, and observing the current divergence in economic performance and government spending between the US and parts of Europe, is it possible that we are witnessing a second-order effect of civic virtue – not just in adopting free-market policies, but in maintaining fiscal discipline and adapting those policies over time in the face of evolving global economic realities and political pressures? Could the US's current outperformance, despite its own rising fiscal concerns, be partly attributed to a higher degree of 'fiscal civic virtue' that allows for more agile adjustments to spending and priorities compared to the more politically gridlocked systems you describe in countries like France?
I hope you are right, but it's hard to be optimistic given the recent sharp decline in American civic virtue. Our politics increasingly resemble that of a banana republic.
Has Denmark changed? I attended a talk at Heritage maybe a decade ago and the speaker described it as a fundamentally socialist polity with outright communists being elected. A right wing party was basically a less socialist party. Something also about DIY vs hired work absurdity too. He was I believe a businessman and former politician.
If you look at the Heritage economic freedom index as of 2005, Denmark was arguably the freest economy on Earth outside the category of government spending. Even firefighting was done by private firms.
I think you’ve raised one of the most slept on issues in economics. Gariconi is right and European labour regulations make it a nightmare to do business in those countries. Government has a finite resource of state capacity and if they try and solve every problem for individuals they don’t have enough left to do big things well. (Example: it’s hard for most European countries to to increase defence spending to 3% so they can kick Russia out of Ukraine, because they are already really stretched covering their welfare state obligations). State capacity libertarianism is looking very good right now.
Agree about the need for more effective governance (and SCL is looking better every day), but I don't think it's the 3% figure that's keeping the EU from going to war over Ukraine; I think it's fear of nuclear war. Right now, Ukraine plus Nato could easily defeat Russia in a conventional war (I'm NOT recommending it, BTW.) Russia is struggling to defeat Ukraine, which is a Poland-size country (and much poorer than Poland.) I'm not sure Russia could defeat Poland, much less the entire Nato alliance
There are so many factors in the malaise it's hard to know where to start. In the UK a bad Brexit was one for sure, but relatively minor in the greater scheme of things and the EU carries a lot of downside risk given its out of control, unaccountable, anti-capitalist, bureaucracy.
A bigger background factor for all malaise-ridden countries is the takeover of all humanities including economics by statist sociological thinking. It has eliminated almoat all pro-capitalist thinking in academia and now pervades the zeitgeist: in the UK this means the Civil Service almost all political parties, Labour, Greens, Liberal Democrats and most of Conservative Party.
And then as the expanding state inevitably fails to deliver a corrosive, tax evading, school-skipping, faudulently-welfare claiming, even creeping corruption, cynicism grows, leading to a downward spiral.
Still, we broke out of it in the 1980s, maybe again, perhaps we can be inspired by the successful example of the US? Singapore and Switzerland certainly won't.
Maybe, but doesn't the "bad Brexit" suggest the EU wasn't the real problem? If it was, why hasn't governance in the UK improved? Keep in mind that both Denmark and Greece are in the EU, and they are about as far apart on free markets as any two developed countries on Earth. Greece is the most statist (or at least was in 2005), and Denmark is the least statist.
The EU (ex-UK) has been as poor a performer as the UK, suggesting Brexit wasn't the problem. Cherry-picking Denmark within the EU is like comparing Cambridgeshire to England.
Scotland is similar in population size to Denmark but has been even worse-performing than UK as a whole despite much semi-independence. It's been run by an extreme form of the zeitgeist: soft welfare-statism, anti-capitalism, anti-excellence in education, woke'ism, green politics. Result: misery. Denmark isn't woke, has a sceptic-run welfare system, believes in educational excellence - ie anti-capitalist sociologists haven't taken over.
Scott do you still consider ECB policy to be excessively tight? I would have agreed in the 2010s but currently they seem to be too expensive like everyone else during/after COVID.
“Why are relatively capitalist countries like the US, Singapore, and Switzerland doing somewhat better than marginally less capitalist areas like the EU and Japan”.
At the end of the day I think most problems are correlated with high regulation and too much redistributionist policies not followed by more pro-market and industrial policies. Why? Because as you said politcs is downstream of culture and in several EU countries a lot of people prefer going to retirement soon than open a business.
Besides that, another good question to ask IMO should be: why in spite its undeniable economic success the US are deep polarized with a rising ultrapopulist political mouvance? I mean, anti-establishment and populist parties are everywhere in EU as well, but they don’t look like to be able to gain enough consensus to govern. Even RN in France surely gained a lot of votes in last decade but when they seem posed to win they eventually fail. A bit like the Communist Party in Italy before the fall of Berlin Wall
1. The far right is still gaining ground in much of Europe, including France. I hope I'm wrong, but Le Pen still might eventually gain power.
2. The US is different due to our two party system. If a group with only 1/3 of the vote (say the populists) can control one of our two parties, they can win. Lots of Trump voters would have preferred DeSantis. In addition, Trump's had some success having it both ways--both populist and corporate tax cutter.
Your definition of "neoliberalism is the same as mine but apparently different from the general understanding which leaves out the redistribution. I also like to distinguish "sidewise" redistribution between people in different circumstances (age sickness unemployment, child rearing), "social insurance" from reducing inequality of consumption between income groups.
I thought the genius of "neoliberalism" was to cleanse market interventions from their consumption level redistributive elements leaving only externalities and information asymmetries. [EITC rather than minimum wages.]
"Neoliberal" Milton Friedman was often maligned as anti-utilitarian. But he was the original guy promoting the negative income tax! That was Friedman's genius: illustrating why many well-intentioned government interventions like the minimum wage failed the cost/benefit test.
Ayn Rand rejected utilitarianism, didn't she? Is that why she disliked Friedman? Ayn Rand justifications for free markets are a lot less persuasive than Friedman's utilitarian arguments for them.
Yes, I agreed with much of Freedman, but differ in wanting more up down and sidewise redistribution. And Friedman never grappled (AFAIK) with Pigou taxation of externalities, in particular CO2 accumulation in the atmosphere.
It's becoming increasingly unacceptable to make this sort of comment, when you can simply type "milton friedman on pigovian taxes" and AI overview immediately tells you that Friedman supported them.
Scott is totally correct that I was being lazy in just going on my memories rather than doing even a GPT Chat "research: on Friedman's position on Pigou taxation. It is too bad we do not have Friedman's take on taxation of net emission of CO2. I suspect he woud be a very effective advocate.
I'm sort of computer illiterate, so perhaps someone can explain this to me. I noticed a few months back that when I'd simply type a phrase or short question into the address bar, "AI Overview" would come up and explain the concept. Is that related to ChatGPT, or a different AI?
Yes, I did ask it, but the answer was sort of vague.
Is it actually true that France is a lot more "polarized" than, say, Sweden? Or it the root of the problem that France has a lot more veto points that get in the way of majority rule (France has a Senate, President AND Prime Minister, etc)?
In the U.S., it's always seemed to me that the natural state of affairs is polarized ideological coherence. But that was scrambled by World War II and gradually undone by Civil Rights in the 1960's. The fact that there were tons of conservative Democrats and liberal Republicans back then seems like an anomaly that was unsustainable. I'm pretty sure that situation ain't comin' back! :)
France is polarized but not more than the US. It looks more polarized than before perhaps. First that is due in part by the populist nature of the far left (LFI) and the far right (Le Pen). Second, the strong majority building electoral system implemented with the 5th Republic works well with 2 opposite political blocks. What Macron created with his centrist party in 2017 is an opening of Pandora’s box. This emptied the left’s right and the right’s left which joined Macron’s party. That in turn created a movement toward the extremes which benefited LFI and Le Pen. Consequently France now has 3 blocks of relative equal size. And the political system devised by de Gaulle to avoid just that is now jammed.
Add to that the effect of globalization on the French economy (de-industrialization, concentration of economic activity in urban areas, oligarchic rent seeking elites at the wheel, stagnating wages negatively impacting the middle and working classes) and yes eroding work ethics originating from long-lasting slow growth and you’ve got a very difficult situation for a country who has a hard time accepting its medium power status.
I agree that polarization is worse in the US. I think people overrate the role of globalization. It's mostly due to automation, as industrial employment is falling almost everywhere, even in countries with trade surpluses.
I also have a hard time accepting the idea that "polarization" is in and of itself a bad thing. When voters enter the booth, their available options should be MORE clear, not less. Voting should be like picking boxes of cereal. They mostly know what they're going to get. But if the left has a right and the right has a left, then the choice for voters is ambiguous. We should CHEER for that ambiguity to go away.
Yes, choice is a good thing. The problem occurs when each side hates the other, and cannot work together constructively to solve problems. They refuse to even socialize with each other. That's what I mean by polarization.
You cite "polarization" as the reason the parties "cannot work together constructively to solve problems." I think you're citing the wrong cause. The U.S. has too many veto points in its political system. THAT's the reason: the incentive for the minority to stymie majority rule. Is it really a good thing we have a Senate? A filibuster? A President rather than a Prime Minister? That virtually the only remedy against Presidents committing crimes is 2/3rds of the Senate voting for impeachment? I doubt it.
So many people observe the results of the minority taking advantage of veto points, wave their hands vaguely, and complain that the root of the problem is "polarization." No it is not. The root of the problem is the original design of the U.S. system of government and its flaws that have been exposed over time.
You describe "3 blocks of relative equal size." Apologies but it's not obvious to me why that's a bad thing. The middle bloc should be able to form a majority coalition with other parties. If it doesn't, is that really due to "polarization"? Or could it be due to excess veto points in the system that empower minority rule?
Thinking about U.S. history more, the original polarization was between the industrial north and the agrarian south. Today, that polarization is exhibited by the contrast between highly-educated urban areas and less-educated rural areas nationwide.
Historian Timothy Snyder has an argument that (what became the EU) was a replacement for empire. I think he is right, but not in the way he thinks. He thinks it is an economic replacement because he thinks empire was economically beneficial.
This seems clearly wrong. Every imperial metropole got richer after it lost its empire. This is true whether they were part of (what became the EU) or not: the obvious example being Japan. Access to the US market and the US-led maritime order was much more valuable, and way cheaper, than empire.
It is not clear that even Britain made a “profit” from its Empire, once you consider military and administrative costs. Portugal had the largest empire (relative to the size of its metropole) for longest and is the poorest country in Western Europe. Compare that to land-locked Switzerland, which never had an empire.
I think (what became the EU) was an administrative replacement for empire. State apparats can colonise outwards (empire) inwards (welfare state) or upwards (internationalisation: EU, UN). Of the three, the welfare state has by far the best accountability.
The UN has basically become a completely unaccountable way to launder typically terrible ideas and give them a false patina of authority. The EU has a bit better accountability than the UN but it is still not great. If you think of it like that, you would expect it to be an “imperial bureaucracy” economic drag on its member countries. One that would tend to get worse over time. Especially as its role became more grandiose.
You might also expect it to increasingly alienate the least well-connected folk. That would be the working class, which increasingly votes national populist. The working class tends to be socially conservative and economically interventionist because they want social and economic stability/protection. (In the US, Trump has taken the Republicans back to where they started in the 1850s: a protectionist Party suspicious of foreign intervention relying on working class votes.)
Europe does migration really badly. Somewhat differently badly in different countries, but badly. In the UK, it has imported sectarianism and immiserated its working class by driving up rents. In the UK and France it has aggravated the internal provincial/metro splits. According to a Dutch study and Danish figures, Middle Eastern migrants are a net drain on the fisc in every age group. There is no way reason to think that is not also true in Sweden, France, the UK. (It takes real incompetence to import migrants who make your welfare state less sustainable.)
Migrants, especially those who are very culturally different, tend to swamp/break up local social connections. This matters to working class folk whose social capital is based on locality. Importing low skill migrants also discourages investing in productivity. It tends to suppress (not cut, but suppress) wages by suppressing the Baumol effect for local workers, transferring the benefit to the incomers. Cultural diversity makes it harder to coordinate to do things like provide infrastructure. It increases competition for attention, both in policy and public discourse.
You get a religious attitude to migration: migration does not fail, people fail migration. It becomes an elite marker: only bad/bigoted/ignorant/low class people complain about migration. You get rather elite-imperial favour-divide-and-dominate games (aka identity politics).
There is also a certain imperial arrogance to the EU across a range of issues. The recent annulling of the Romanian election because Russians might have been propagandising was notionally their local court but still looks rather elite-imperial. EU networking likely reinforces such elite arrogance.
I would also argue that 40 years in the EU reduced UK state capacity by both de-skilling the UK civil service and increasing its institutional arrogance. The new Starmer Govt is complaining bitterly behind the scenes how they can’t get the civil service to do anything. That Dominic Cummings is correct in his critique of the incompetent inertia of Whitehall.
In terms of Chinese history, they have moved from early-in-dynasty administrative competence to late-in-dynasty bureaucratic pathologies. Copying Chinese meritocratic entry by exam bureaucracy seemed a great idea. Perhaps they needed to look more at the patterns of such in China?
I suspect smaller countries can course correct better. Denmark and Sweden have both managed to shift migration policy dramatically, for example. The UK, not so much.
I still see the EU as a net positive, and I believe most British people regret leaving it. But I do agree that the EU has engaged in overreach, and would be better off focusing narrowly on free movements of goods, capital, and labor, not all those picky rules.
The primary housing problem in the UK is NIMBYism, not immigration. (Immigration may be too high for other reasons, but Britain needs to make it easier to build.)
Do you *really* believe “most British people” regret leaving it?
Or do you simply believe the far more likely to be true: “most British elites regret leaving it” and the almost as likely “the clear majority of Brits in the London area regret leaving it”?
Related, honest question: what percentage fits your definition of “most”? 50.1%? Or is it the 60%-70% people typically mean when they use that word?
I suppose if by “most” you only mean a bare majority, then it’s at least as likely as not that “most British people” regret Brexit; I don’t claim to know. But if it is the more common use of the term meaning “large majority” I doubt very much that your statement is true.
P.S. I’m not disagreeing with the rest of your comment.
I mean that I believe that 56% of Brits think it was the wrong decision, 31% think it was the right decision, and 13% don't know:
https://www.statista.com/statistics/987347/brexit-opinion-poll/
Thanks for that.
But the line within: “As of late 2023, 31 percent of Britons wanted to rejoin the EU, while 30 percent merely wanted to improve trade relations and not rejoin either the EU or the single market.” makes it *far* less clear that clear majorities think it was the wrong decision, and suggest that it is much more likely that for many of the respondees “regret” means “have some regrets” as opposed to “wishes it had never occurred”.
And this is separate from my generic distrust for how reliable Statista statistics are. E.g. if this is based entirely on online voluntary “votes” as opposed to rigorous respectable polling techniques.
[If you have insight on this particular set of numbers, I would greatly appreciate knowing it, as it would change my views here substantially if in fact these numbers ARE the result of legit, representative polling samples using a clear question.]
I'm also generally distrustful of polls, so I don't want to push this too far. But FWIW, here's a Yougov poll:
https://www.aljazeera.com/news/2023/7/18/number-of-britons-regretting-brexit-hits-new-record-high-survey
Thanks for this. Unfortunately, YouGov does entirely self-selected online-only polling, so this not definitive to me either, as the folks most likely to do such an online poll would be disproportionately likely to have opposed Brexit.
But I do believe you that a *majority* of Brits would now prefer not to have done Brexit.
I remain unconvinced that “most” (equals 60%+) would even in hindsight prefer that Brexit never happen, and your Statista link provides substantial evidence for that position.
The Common Market was a good thing.
A very interesting comment to a very interesting analysis. In my view, the "EU" administration (EEC and the other treaties with a very limited purpose) was rather slim in the first 40 years or so (hence, the EU did not start as an administration replacement of any of the few empires that were active in Europe before WW2). But the EU administration became massive and anti-business over the past 25 years.
The idea of having a larger market with uniform rules (this is intrinsically linked with the free movement of goods, services, people) was meant to aggregate people with similar cultures but with small economies. That, it did.
The problems appeared when the EU administration became massive, entirely left leaning and only in favor of that business that was funded / supported by it (green).
I agree with you that migration reaps the fabric and values of the European society. Especially when the massive inflow is from a completely different culture (Islam).
On the other hand, the Romanian elections: the only "imperial" thing there is the actual Russian influence, documented in detail (I am from Romania and I follow closely this matter; Russia tried to impose a friendly person as a viable candidate; the speeches and personal history of that person over the past 10 years are very clear). Of course, this came on a background of dissatisfaction of a large part of Romanians, especially from the working class, who see a Romanian state getting more massive every year, paying ever larger salaries and pensions to its administration.
Lorenzo,
In the 1850's U.S., the Republicans were the pro-urban industrial party of the North and the Democrats were the rural agricultural party of the South. Today, the constituencies are virtually the opposite: the Republicans are the rural low-education party while the Democrats are the urban high-education party.
Given that, your claim below is dubious:
"Trump has taken the Republicans back to where they started in the 1850s: a protectionist Party suspicious of foreign intervention relying on working class votes."
In the 1850's, there was a rural / urban political divide. Today, there is a rural / urban low vs. high education political divide. And I doubt that protectionism ever had much influence on that tribal conflict.
An obvious issue for Japan and a lot of Europe is age of population. Overtime is harder to do when you get older. (No bitter personal experience goes into this observation!;))
Good point. You also have older people that are "stuck in their way" of doing things--low productivity.
I think work ethic erosion due to redistribution does occur. I was just listening to John Early talking about income inequality(or rather the overstated case about it) in the US. He points out that in the US only one third of work-age adults in the bottom quintile have a job. Back when Johnson started the war on poverty, two-thirds of them did. That points to relative decline within the US with the expansion of wealth distribution. While it might show work ethic erosion in the US, I have to confess I’m not sure if it says anything about relative wealth of US vs. Europe. US labor force participation would be in the bottom half of European countries.
You need to be careful with that sort of data. Are some of those college or grad students? Not saying you are wrong, but it might be overstating things. The unemployment rate is only 4.2% right now.
Good question. It’s clear there are more college and grad students around today, but my quick search now hasn’t turned up comparisons of the distribution of the bottom quintile today and 1960.
It seems your last sentence would invalidate the entire point? As a whole isn’t Western Europe much more redistributive? Which in theory should make them have lower participation rates than to US?
Europe is far more redistributive, and Europeans work far fewer hours than Americans. That's what theory predicts. I don't see the problem you are referring to.
Were you replying to me? I was referring to the fact that US labour force participation is less than Europe. Not hours. Employment to working age population is lower.
My point was that the theory predicts less labor supply. Europe has less labor supply. The theory doesn't predict at which margin the reduced labor supply occurs. Thus even if you are correct about labor force participation rates, it would not change my view that redistribution is reducing total labor supply in Europe.
But yes, I should have made that clear. I see why you would find my previous reply to be inadequate.
Does it? It seems to me that if employment to working age population numbers are higher, Europe has more labour supply. Sure, hours per worker may be lower, but there's more of them actually working (at least in legal, paid employment!). It would seem to me that to the extent taxes/more regulation is having an effect, it might be more towards the effort to be more productive with that time spent working.
Sorry about the gaps between replies, I don't check my Substack super regularly.
Interestingly, most people who defend European economic performance do so by claiming that European productivity is close to American levels. They reach that conclusion by assuming far lower labor supply. They say European GDP is lower due to far lower labor supply. You seem to be doing the opposite, claiming European productivity is far lower than American productivity.
It seems to me that total hours worked is the best way to measure total labor supply. That's total number of workers times average hours per worker.
If you held all other variables constant between the US and European labor markets, then it would invalidate my point. But, I believe, as Scott says here as well, current theory predicts that increasing redistribution lowers labor force participation. I assume that theory is based on studies that try to account for all those other variables.
I ran a search and a word I couldn't find is energy. The cost of energy in Europe is ridiculous in comparison to both US and China - thanks to a climate change cabal. Can it be ignored as a significant contributing factor to the matter at hand? This plus wrong kind of immigration as was mentioned already (and the massive numbers of wrong immigrants of course).
In the past I've discussed two big unforced errors in Europe: Opposition to fracking, and opposition to nuclear energy.
So you did, but it was missing in this post or in other comments.
It's not enough though. Only a complete fool or a traitor will work on destroying its own country's existing power sources before introducing new reliable ones. What various Greens and, worse, all major political parties did in Europe is inexcusable. Closed coal, closed nuclear, enforced path away from FF with substantial subsidies towards intermittent supply and threats and mandates to stop using oil and gas. They have destroyed the industry which already faced a massive competitive pressure from China and affected a significant part of agriculture. There is no fast fix.
An anecdote: how unhealthy it is when buying retail steel (say, screws/bolts etc.) or extruded aluminium profile from Aliexpress delivered to the UK is cheaper than buying either in the UK or in Europe.
Given your framework of 'civic virtue' driving the successful adoption of neoliberal policies post-1980, and observing the current divergence in economic performance and government spending between the US and parts of Europe, is it possible that we are witnessing a second-order effect of civic virtue – not just in adopting free-market policies, but in maintaining fiscal discipline and adapting those policies over time in the face of evolving global economic realities and political pressures? Could the US's current outperformance, despite its own rising fiscal concerns, be partly attributed to a higher degree of 'fiscal civic virtue' that allows for more agile adjustments to spending and priorities compared to the more politically gridlocked systems you describe in countries like France?
I hope you are right, but it's hard to be optimistic given the recent sharp decline in American civic virtue. Our politics increasingly resemble that of a banana republic.
Very interesting analysis. Many thanks!
Scott,
Did you get to read marginal revolution today? Could u write something addressing the criticism on ngdp futures by chat gpt?
I left a comment over there, and also did a post today at Econlog. The policy it commented on is not the one that I'm proposing.
Has Denmark changed? I attended a talk at Heritage maybe a decade ago and the speaker described it as a fundamentally socialist polity with outright communists being elected. A right wing party was basically a less socialist party. Something also about DIY vs hired work absurdity too. He was I believe a businessman and former politician.
If you look at the Heritage economic freedom index as of 2005, Denmark was arguably the freest economy on Earth outside the category of government spending. Even firefighting was done by private firms.
Excellent analysis thanks!
I think you’ve raised one of the most slept on issues in economics. Gariconi is right and European labour regulations make it a nightmare to do business in those countries. Government has a finite resource of state capacity and if they try and solve every problem for individuals they don’t have enough left to do big things well. (Example: it’s hard for most European countries to to increase defence spending to 3% so they can kick Russia out of Ukraine, because they are already really stretched covering their welfare state obligations). State capacity libertarianism is looking very good right now.
Agree about the need for more effective governance (and SCL is looking better every day), but I don't think it's the 3% figure that's keeping the EU from going to war over Ukraine; I think it's fear of nuclear war. Right now, Ukraine plus Nato could easily defeat Russia in a conventional war (I'm NOT recommending it, BTW.) Russia is struggling to defeat Ukraine, which is a Poland-size country (and much poorer than Poland.) I'm not sure Russia could defeat Poland, much less the entire Nato alliance
There are so many factors in the malaise it's hard to know where to start. In the UK a bad Brexit was one for sure, but relatively minor in the greater scheme of things and the EU carries a lot of downside risk given its out of control, unaccountable, anti-capitalist, bureaucracy.
A bigger background factor for all malaise-ridden countries is the takeover of all humanities including economics by statist sociological thinking. It has eliminated almoat all pro-capitalist thinking in academia and now pervades the zeitgeist: in the UK this means the Civil Service almost all political parties, Labour, Greens, Liberal Democrats and most of Conservative Party.
And then as the expanding state inevitably fails to deliver a corrosive, tax evading, school-skipping, faudulently-welfare claiming, even creeping corruption, cynicism grows, leading to a downward spiral.
Still, we broke out of it in the 1980s, maybe again, perhaps we can be inspired by the successful example of the US? Singapore and Switzerland certainly won't.
Maybe, but doesn't the "bad Brexit" suggest the EU wasn't the real problem? If it was, why hasn't governance in the UK improved? Keep in mind that both Denmark and Greece are in the EU, and they are about as far apart on free markets as any two developed countries on Earth. Greece is the most statist (or at least was in 2005), and Denmark is the least statist.
The EU (ex-UK) has been as poor a performer as the UK, suggesting Brexit wasn't the problem. Cherry-picking Denmark within the EU is like comparing Cambridgeshire to England.
Scotland is similar in population size to Denmark but has been even worse-performing than UK as a whole despite much semi-independence. It's been run by an extreme form of the zeitgeist: soft welfare-statism, anti-capitalism, anti-excellence in education, woke'ism, green politics. Result: misery. Denmark isn't woke, has a sceptic-run welfare system, believes in educational excellence - ie anti-capitalist sociologists haven't taken over.
UK Vs Denmark in other ways...
Religion Distribution
Roman Catholics 8.7%
Anglicans 11.2%
other Christs 15.7%
Hinduists 1.3%
Muslims 6.7%
Jews 0.4%
nondenominational 52.0%
Sikhs 0.4%
other 3.7%
Religion Distribution
Buddhists 1.0%
Lutherans 80.0%
Baptists 1.0%
Orthodoxes 1.0%
Roman Catholics 3.0%
Jehovah's Witnesses 1.3%
Muslims 4.0%
Scott do you still consider ECB policy to be excessively tight? I would have agreed in the 2010s but currently they seem to be too expensive like everyone else during/after COVID.
No, I should have been clearer. I was just referring to roughly the decade of 2008-2017, not recent policy.
“Why are relatively capitalist countries like the US, Singapore, and Switzerland doing somewhat better than marginally less capitalist areas like the EU and Japan”.
At the end of the day I think most problems are correlated with high regulation and too much redistributionist policies not followed by more pro-market and industrial policies. Why? Because as you said politcs is downstream of culture and in several EU countries a lot of people prefer going to retirement soon than open a business.
Besides that, another good question to ask IMO should be: why in spite its undeniable economic success the US are deep polarized with a rising ultrapopulist political mouvance? I mean, anti-establishment and populist parties are everywhere in EU as well, but they don’t look like to be able to gain enough consensus to govern. Even RN in France surely gained a lot of votes in last decade but when they seem posed to win they eventually fail. A bit like the Communist Party in Italy before the fall of Berlin Wall
Two points:
1. The far right is still gaining ground in much of Europe, including France. I hope I'm wrong, but Le Pen still might eventually gain power.
2. The US is different due to our two party system. If a group with only 1/3 of the vote (say the populists) can control one of our two parties, they can win. Lots of Trump voters would have preferred DeSantis. In addition, Trump's had some success having it both ways--both populist and corporate tax cutter.
Your definition of "neoliberalism is the same as mine but apparently different from the general understanding which leaves out the redistribution. I also like to distinguish "sidewise" redistribution between people in different circumstances (age sickness unemployment, child rearing), "social insurance" from reducing inequality of consumption between income groups.
I thought the genius of "neoliberalism" was to cleanse market interventions from their consumption level redistributive elements leaving only externalities and information asymmetries. [EITC rather than minimum wages.]
"Neoliberal" Milton Friedman was often maligned as anti-utilitarian. But he was the original guy promoting the negative income tax! That was Friedman's genius: illustrating why many well-intentioned government interventions like the minimum wage failed the cost/benefit test.
Ayn Rand rejected utilitarianism, didn't she? Is that why she disliked Friedman? Ayn Rand justifications for free markets are a lot less persuasive than Friedman's utilitarian arguments for them.
Yes, I agreed with much of Freedman, but differ in wanting more up down and sidewise redistribution. And Friedman never grappled (AFAIK) with Pigou taxation of externalities, in particular CO2 accumulation in the atmosphere.
It's becoming increasingly unacceptable to make this sort of comment, when you can simply type "milton friedman on pigovian taxes" and AI overview immediately tells you that Friedman supported them.
Don't be lazy!! :)
Is artificial intelligence limited by the old computer maxim, "Garbage in garbage out?"
touché!
Scott is totally correct that I was being lazy in just going on my memories rather than doing even a GPT Chat "research: on Friedman's position on Pigou taxation. It is too bad we do not have Friedman's take on taxation of net emission of CO2. I suspect he woud be a very effective advocate.
I'm sort of computer illiterate, so perhaps someone can explain this to me. I noticed a few months back that when I'd simply type a phrase or short question into the address bar, "AI Overview" would come up and explain the concept. Is that related to ChatGPT, or a different AI?
Yes, I did ask it, but the answer was sort of vague.
Is it actually true that France is a lot more "polarized" than, say, Sweden? Or it the root of the problem that France has a lot more veto points that get in the way of majority rule (France has a Senate, President AND Prime Minister, etc)?
In the U.S., it's always seemed to me that the natural state of affairs is polarized ideological coherence. But that was scrambled by World War II and gradually undone by Civil Rights in the 1960's. The fact that there were tons of conservative Democrats and liberal Republicans back then seems like an anomaly that was unsustainable. I'm pretty sure that situation ain't comin' back! :)
"Is it actually true that France is a lot more "polarized" than, say, Sweden?"
That's certainly been true during most of my lifetime. I believe it is still true, but am not certain.
France is polarized but not more than the US. It looks more polarized than before perhaps. First that is due in part by the populist nature of the far left (LFI) and the far right (Le Pen). Second, the strong majority building electoral system implemented with the 5th Republic works well with 2 opposite political blocks. What Macron created with his centrist party in 2017 is an opening of Pandora’s box. This emptied the left’s right and the right’s left which joined Macron’s party. That in turn created a movement toward the extremes which benefited LFI and Le Pen. Consequently France now has 3 blocks of relative equal size. And the political system devised by de Gaulle to avoid just that is now jammed.
Add to that the effect of globalization on the French economy (de-industrialization, concentration of economic activity in urban areas, oligarchic rent seeking elites at the wheel, stagnating wages negatively impacting the middle and working classes) and yes eroding work ethics originating from long-lasting slow growth and you’ve got a very difficult situation for a country who has a hard time accepting its medium power status.
I agree that polarization is worse in the US. I think people overrate the role of globalization. It's mostly due to automation, as industrial employment is falling almost everywhere, even in countries with trade surpluses.
I also have a hard time accepting the idea that "polarization" is in and of itself a bad thing. When voters enter the booth, their available options should be MORE clear, not less. Voting should be like picking boxes of cereal. They mostly know what they're going to get. But if the left has a right and the right has a left, then the choice for voters is ambiguous. We should CHEER for that ambiguity to go away.
Yes, choice is a good thing. The problem occurs when each side hates the other, and cannot work together constructively to solve problems. They refuse to even socialize with each other. That's what I mean by polarization.
Prof. Sumner,
You cite "polarization" as the reason the parties "cannot work together constructively to solve problems." I think you're citing the wrong cause. The U.S. has too many veto points in its political system. THAT's the reason: the incentive for the minority to stymie majority rule. Is it really a good thing we have a Senate? A filibuster? A President rather than a Prime Minister? That virtually the only remedy against Presidents committing crimes is 2/3rds of the Senate voting for impeachment? I doubt it.
So many people observe the results of the minority taking advantage of veto points, wave their hands vaguely, and complain that the root of the problem is "polarization." No it is not. The root of the problem is the original design of the U.S. system of government and its flaws that have been exposed over time.
Parliamentary systems > Presidential systems
Adam Gurri: "A Realist Defense of Legislative Supremacy"
https://www.liberalcurrents.com/a-realist-defense-of-legislative-supremacy/
You describe "3 blocks of relative equal size." Apologies but it's not obvious to me why that's a bad thing. The middle bloc should be able to form a majority coalition with other parties. If it doesn't, is that really due to "polarization"? Or could it be due to excess veto points in the system that empower minority rule?
Thinking about U.S. history more, the original polarization was between the industrial north and the agrarian south. Today, that polarization is exhibited by the contrast between highly-educated urban areas and less-educated rural areas nationwide.
“Perhaps redistribution doesn’t immediately erode the work ethnic”
Freudian slip?
LOL, I fixed it.