Europe’s Ailing Social Model: Facts & Fairy-Tales

This article was written by Martin De Vlieghere and Paul Vreymans.

On 23 and 24 March the European Council is meeting to discuss the future of Europe’s social model. The very essence of the welfare state is at stake. Europe’s present social model is unable to tackle the modern challenges of globalization, and has left Europe with gigantic problems: an unsurmountable public debt, a rapidly ageing population, 19 million unemployed, and an overall youth unemployment rate of 18%. The unemployment figures may easily be doubled to account for hidden unemployment. The untold reality is that Europe’s real unemployment stands at the level of the 1932 Depression.

A man-made Disaster

Europe’s social disaster is unfolding while the rest of the world is booming at its fastest rate in three decades. 2004 and 2005 were record years for China and India, which have double-digit growth rates, and for the USA, which fully enjoys the benefits of globalization. The world’s economy is booming at an average rate of over 4%, but Europe’s growth has stagnated at an inflated 1.5%.

Why is Europe performing so poorly? Europe’s deficient performance is incompatible with its huge potential as the world’s largest single consumer market. Its slow growth contradicts its unequalled industrial productivity and infrastructure, its outstanding education level and labour ethics, its favourable climate, “fair business” morality, and not in the least its tremendous potential provided by the opening of the iron curtain. Obviously Europe’s fairy-tale is not materializing. Nor are the inflated expectations prognosticated by Europe’s political elite at the launch of the Common Currency and the Lisbon Agenda.

Deficit Spending & Threatening Debt Crisis

The reality of Europe’s ailing economy contrasts sharply with its economic potential and with the massive resources employed to cure its ailing growth. The whole arsenal of Keynesian remedies has now been tried and has failed one by one. Massive deficit spending throughout the eighties and nineties has left Europe with a public debt unequalled in history. The size of Europe's monumental public debt is only surpassed by the hidden liabilities accumulated in Europe’s shortsighted pay-as-you-go public pension schemes.

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Unfunded pension liabilities now average some 285% of GDP [pdf], more than 4 times the officially published public debt figures. Total public liabilities now exceed assets in most EU countries, and are causing runaway debt service. Richard Disney calculates [pdf] that if social policies are kept unchanged, tax hikes of as much as 5 to 15 percentage points will be necessary over the next couple of decades merely to avoid the rate of indebtedness increasing any further.

Unfortunately, this will just kill growth completely. Europe’s present social model is unsustainable because it is based on robbery of future generations. Keeping the system in place would jeopardize the next generation’s future with an unbearable and uncompressible tax burden, and would seriously add to the risk of a total collapse of Europe. Moreover these expansionary social policies have not worked so far. In spite of the largest debt buildup in history Europe’s growth has remained weak anyway. Europe’s social model is built largely on credit to be paid back by its own children.

ECB Money Printing & Runaway Asset Inflation

The ECB’s expansionary monetary policy has failed as well. M3 money growth has been exceeding the real economic growth rate by an average 5% ever since the Euro was launched. Real Euro interest rates have been negative for several years now. The only obvious effect has been run-away asset inflation and an unprecedented speculative bubble. Today Europe’s bond prices have reached historical highs, and Euro-stocks’ earning ratios are at historical lows. Prices of building plots in Belgium have doubled and even tripled in some areas. In Brussels apartment prices rose by 50% over the last 12 months, driving many native Belgians out of their hometown because living in Brussels has progressively become an exclusivity affordable only for Europe’s privileged bureaucrats.

Obviously the Keynesian expansionary strategies are not working and the ECB’s money printing is only making things worse. Present policies are leading to an Argentinean-style debt crisis. The challenges of globalization and Europe’s rapidly ageing population call for an urgent fundamental policy change. The 19 million unemployed (that is the official figure, but 38 million is closer to the truth) no longer believe Europe’s “social” fairy tales and can no longer wait.

Faked Public Debate

In an effort to keep the dancing on the Titanic going, Europe’s catastrophic situation is systematically hidden from public opinion. Official unemployment data, debt figures, and poor growth performance are systematically and grossly underestimated. Thus the public debate and the whole democratic decision making process is being falsified by lies and wishful thinking. Even the best policy makers are making the wrong diagnosis based on the wrong statistics, and as a consequence prescribe the wrong remedies. Having accumulated such monumental debt through years of over-consumption, Europe can indeed no longer blame its ailing growth on slow consumer sales. It is the supply side that is failing. Policies aimed at boosting Europe's economy should therefore no longer be aimed at stimulating consumption but at stimulating the defaulting creation of wealth.

Bureaucracy & A Crippling Tax Burden

Europe’s production is failing because of bureaucracy and a paralytic tax burden. The reality on Europe’s work floor is that the workforce is demotivated, and that Europe’s personnel and managers are increasingly rebelling against the persistent confiscation of over 50% of the fruit of their labour. The excessive tax burden leaves Europe’s workforce too little to lead the standard of living they earn. Businesses are deprived of the resources needed to finance their innovative projects and to compete in the global markets, if foreign entities have not yet bought their assets.

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Europe’s well-intentioned model is not working because it does not pay to work after the taxman has taken his share. Europe is not innovating because it does not pay to innovate after the huge costs of complying with all the prescriptions, limitations and restrictions in all Europe's overabundant licences and autorisations. Demoralization is the real cause of Europe’s stagnation. Europe’s workforce is tired of being incessantly hindered in its task of producing wealth. Demoralization is the reasen why ever more engineers, scientists and entrepreneurs flee Europe’s tax misery. Paradoxically, the Old Europe of the West must now learn from the New Europe of the East, where after years of disastrous socialism, low and simple flat taxes are being introduced, luring investors from all over the world.

Scientific Evidence

In his research into the causes of growth differences between OECD economies the American economist James Gwartney irrefutably demonstrated [pdf] the direct relation between tax burden and economic growth. The higher the level of taxation, the lower the growth rate. The explanation is as logical as it is simple. The higher the tax level, the lower the incentives to make productive contributions to society. The higher the fiscal burden, the more resources flow from the productive sector to the ever more inefficient government apparatus.

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Gwartney’s findings provide the final explanation why continental European economies, such as Belgium, no longer grow. The Belgian tax burden is 20% above the optimal tax level burden as calculated by Primo Pevcin [pdf]. It is 9 %-points above the OECD average and 15 %-points higher than the tax level in the US and Japan.

WorkForAll’s empirical study analyzing 25 plausible causes of economic growth in a comprehensive regression arrives at the same conclusions. The best way to spur growth is by reducing the tax burden and Europe’s languishing government sector, and by shifting taxes from income to consumption.

Adapting Europe’s Tax Structure for Globalization

With an excess proportion of direct taxes, Europe’s tax structure is totally unadapted to globalization. Direct taxes on profits, wages and capital increase the cost of domestic production, and in doing so have exactly the opposite effect of import duties. Direct taxes roughly double the cost of Europe’s domestic production, making Europe’s produce uncompetitive both in the home market and in global markets. Just as import duties cause protectionist distortions in world trade, direct taxes do the same, but in the absurd opposite sense. Globalisation therefore necessitates more urgently than ever a shift of the tax burden from production to consumption.

It is, indeed, a direct result of the trade distortions caused by direct taxation that is causing Western Europe to losing ever more rapidly its semi labour-intensive sectors to countries where productivity is lower than in Western Europe. This relocation from countries with high productivity to low productivity countries is a pure waste. It is not only disastrous for Western Europe’s employment. It is also harming worldwide development as Europe’s highly productive production apparatus and infrastructure are left idle. With Europe’s potential not being used to capacity, the direct-tax distortions are leading to less than optimal global labour division and wealth creation.

The success-story of the Irish alternative

Europe will only be able to maintain its prosperity and generous social system if it succeeds in generating a growth rate of 4 to 5% over the next couple of decades. This is not impossible. Ireland has shown us how to do it. The Irish economy has been booming at an annual growth rate of over 5.6% for over 20 years now. In barely 18 years Ireland has made the unbelievable jump from the 22nd to the 4th place in the OECD prosperity ranking.

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Ireland thanks its success to its clear-cut different tax policy. With 33%, the Irish overall tax burden is the most moderate of Europe. Ireland also has a unique fair-flat-tax structure, which fairly and evenly spreads the weight of the tax burden over profits, labour and consumption. This unique tax structure is the key to Ireland’s success. Contrary to the rest of Europe’s demoralizing tax structure, the Irish tax model provides a positive stimulus to participation, saving, investment and enterprise: the crucial factors which the rest of Europe lacks.

For 20 years now, the Irish social model has proven its effectiveness not only in creating wealth and jobs, but also in providing Irish authorities with ample resources for their wide range of cultural, environmental and social initiatives, as well as for the costs of ageing. The unequalled Irish success story proves that their alternative policies are reliable and realistically feasible within the current European framework.

Scandinavian Myths

Despite the overwhelming success of the Irish alternative, adepts of large state interference continue to plead in favor of a Scandinavian model. Nonetheless the outdated Scandinavian policies have proved to be particularly inefficient. The Scandinavian countries have gone through a long period of steady decline with poor growth and job creation. In 1970, Sweden’s level of prosperity was one quarter above Belgium’s. By 2003 Sweden had fallen to 14th place from 5th in the prosperity index, two places behind Belgium. According to OECD figures, Denmark was the 3rd most prosperous economy in the world in 1970, immediately after Switzerland and the United States. In 2003, Denmark was 7th. Finland did badly as well. From 1989 to 2003, while Ireland rose from 21st to 4th place, Finland fell from 9th to 15th place.

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Together with Italy, the Scandinavian countries are the worst performing economies in the entire European Union. Rather than taking them as an example, Europe’s politicians should shun the Scandinavian big-government recipes. If there is anything to be learnt from the Scandinavian experience it is that Scandinavia succeeds in making a more efficient use of public resources, through investment and innovation. Nevertheless even their most restrictive unemployment policies will never result in higher growth so long as they keep their Keynesian policies and excessive government in place. The best proof of the failure of the Scandinavian model may be that the Scandinavian countries themselves are increaslingly abandoning it.

EU Tax Harmonization

Europe’s many high-tax and very-high-tax regimes view Ireland’s success with envy. They fear that less greedy and more efficient governments will develop Irish style reconstruction initiatives. Such a trend could lead to “tax competition” which would force them to improve their own public efficiency. In contradiction of all EU-Treaties guaranteeing full autonomy in fiscal affairs to the member-states, Europe’s high-tax regimes are now trying to prevent Irish-type reconstruction initiatives from developing in other countries. Fearing competition from less greedy and more efficient governments they are trying to impose their high-tax-regimes on other EU-members through a new directive.

In the same sneaky way as the EU’s devastating savings directive was introduced, a tax-base harmonization scheme is now being proposed, obviously as a first step toward imposing a back-door harmonization for corporate tax rates also. Despite the severity of Europe’s high-tax disaster Europe’s high-tax-regimes obviously still refuse to see the unsustainability of their high-spending high-debt high-tax policies. These Keynesian policies have failed.

Curing the symptoms no longer helps. It is time to tackle the real and ultimate cause of Europe’s stagnation, namely the total discouragement of Europe’s work force. It is time to free Europe from its bureaucracy and its crippling tax burden. Failing this Europe will continue to lag behind ever further and its current relative impoverishment will soon turn into absolute pauperization, ultimately resulting not only in economic, but also in cultural and moral decline. If the economy is sick, it is because democracy is ill as well.

to Gorm

It is indeed very tragic: blinded by the image they have created of themselves ... narcism. The outcome is predictable. I think this whole European summit is one narcistic orgasm. And who has to pay for it?

Prof. John Gray

Seems to me the professor is a typical LSE leftie. Some things never change and the LSE establishment is one of them.

He sees a globalised world dominated by laisse faire capitalism. If only......

The reality is world wide protectionism and the biggest protectionist organisation and hindrance to free trade is the E.U.
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Gray was in Thatchers inner circle

John Gray is conservative and was a member of Thatchers inner circle untill he discovered, what she was doing: Her attempt in breaking down all existing institutions with a Friedman-bible in her right hand. Like Friedman she was an advocate of what in Russia is known as "Robber Capitalism". That was too much for an intelligent person like Gray.
After the breakup of the Soviet Union the West forced Russia to adopt these economic principles as a condition for taking up loans in the West. In the early nineties Russia had much sympathy for Europe and the USA, but that has changed to an atmosphere of scepticism and hostility toward the West. The economic experiment with Russia failed.

Gray goes against the flow

Gray was once a classical liberal. Although Gray did not start off as a classical liberal, he apparently moved in that direction during his thirties. For years he contributed to the intellectual refinement and social cause of classical liberalism. He wrote books on Mill, on Hayek, and on the history of liberalism. The back cover of Beyond the New Right (1993b) states: "For over a decade [Gray] has been associated with the ideas and think-tanks of the New Right." He worked with libertarian liberal organizations including the Institute for Humane Studies (in Palo Alto, California and later Fairfax, Virginia), the Cato Institute (in Washington, D.C.), Liberty Fund (in Indianapolis), and the Social Philosophy and Policy Center at Bowling Green State University in Ohio. In Britain he worked with the Institute of Economic Affairs, which, in 1989, published his classical-liberal booklet, Limited Government: A Positive Agenda. But Gray's work had early shown a definite discomfort with classical liberal ideology, and that discomfort evolved into severe denunciation.- The Ways of John Gray:
A Libertarian Commentary, Daniel B. Klein

So whereas most move to the right with age, Gray goes left against the flow.
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Francis Fukuyama

Funny you should mention Fukuyama. I have a couple of his books. He has really changed horses. When Bush came into office Fukuyama was Bush´ personal prophet. Neoconservatism par exellence. Down with all instutitutions but his second last book is about state building and how to build strong state institutions. He has turned 180 degrees. And one cannot blame him after what happened in Russia. Back then it was Friedmans "Horse and Sparrow" theory which is why Bush gave the biggest tax cuts to the rich: If you feed the horses well some of the oats will spill over and feed the sparrows. Thats the essence of the theory. The difference between Gray and Fukuyama is probably, that Fukuyama discovered the flaws in neoconservatism much later than Gray.


- ...Fukuyama was Bush´ personal prophet.
No kidding. I was told that was Karl Rove. Either way, Fukuyama is fast gaining a reputation as "the David Gergen of geopolitics". His credibility is now right up there with the likes of "Michael Bellesiles, Micah Wright, ...", et al.

- ...Bush gave the biggest tax cuts to the rich...
He did? All by himself? IIRC, Congress passes tax law changes like that.

No matter, in 2005 the larger cuts went to lower income individuals, who got a 27% reduction, on average. The 'rich' got an average 13% cut.

And even if the "tax cuts for the rich" myth were true, it would make more sense anyway. "In 2002 the latest year of available data, the top 5 percent of taxpayers paid more than one-half (53.8 percent) of all individual income taxes, but reported roughly one-third (30.6 percent) of income." And "Taxpayers who rank in the top 50 percent of taxpayers by income pay virtually all individual income taxes"!

And finally, this strategy is working just fine in the U.S., where indigenous corruption is not so much a part of the culture as it is in, say, Russia. Presently, the stock market is pretty much at an all-time high and as of last year, the U.S. collected the highest amount of corporate taxes, well, ever. Translation: business is booming and 'rich' corporations are paying more taxes than they have EVER paid.

Then, they don't seem to be covering these sorts of details in media like The New York Times, whose stock has pretty much tanked. Bummer for them.


Perhaps I should have been more specific and have said that Fukuyama was Karl Rowes personal prophet/philosopher. The fact is, that he, Fukuyama, had a significant influence on The White House and a republican congress.

Not Specific

I don't think you lack anything in the specificity department, however, you might want to consider some sort of documentation and/or links, you know, proof to these various specific claims. Especially when starting sentences with "The fact is...".

Try this one

Fukuyama is a brilliant empericist but knows very little about human nature. And that is the problem (or was) with the neoconservative project. Here they have much in common with Marx, Hitler, Pol Pot and others who believed, that you can create a society - create history. Gray, on the contrary, knows, that human nature is unpredictable. If the neoconservative had had just a little insight into arab-human-nature, they would probably never have invaded Iraq.
But I´m afraid we are a little off track in regards to the above article.

And here is a little bit about history:

Call me un-pre-dictable

Gray, on the contrary, knows, that human nature is unpredictable. If the neoconservative had had just a little insight into arab-human-nature, they would probably never have invaded Iraq.

You mean they would have predicted unpredictable chaos and factional violence?

Bob Doney

Lenin and Trotzky

The big controversy between the two was, that Lenin thought that he could make people predictable and create an ideal state/society from above, whereas Trotzky maintained that the human being is unpredictable. The latter therefore advocated the permanent revolution. The brutality under communism can only be understood in this light, ie. to shape and make people predictable. This is why Gray calls the "neoconservative project" for "mutated trotzkyism". The neoconservatives have, according to Gray, taken up this project of permanent revolution. M. Thatchers undermining institutions to fuel progress has to be seen in this context. Bush has clearly stated, that he wanted to start a revolution in the Middle East. Iraq was/is to be the bridgehead. But we must not forget that Iraq sits on top of the worlds second largest oil reserve. 9/11 was like an orange falling into the turban for the neoconservative. What people in the West often forget is, that our democracy is built on top of greek culture and roman jurisprudence and has developed through centuries. How do you develop democracy out of Sharia? I think this is something people in the West didn´t take serious enough. Thats where the predictable unpredictability comes into the picture.

Not very persuasive

Fukuyama is a hack and a hypocrite who blows with whatever prevailing wind maximizes his book sales. When Reaganomics contributed to the fall of the USSR, he jumped on that bandwagon with End of History. When American sentiment was mobilized against islamofascist terrorism, he signed this letter, which included the following:

"...any strategy aiming at the eradication of terrorism and its sponsors must include a determined effort to remove Saddam Hussein from power in Iraq. ...American forces must be prepared to back up our commitment to the Iraqi opposition by all necessary means."

There is no ambiguity in that statement. Just like the Joint Resolution, it clearly sanctions war.

But now that the truth-challenged mainstream media's relentless anti-war (read: anti-Bush) propaganda has borne fruit in the form of cooked opinion polls, Fukuyama now lies, "I was never persuaded of the rationale for the Iraq war." How convenient. He was certainly persuaded back in 2001. I guess he was for the war before he was against it.

Fukuyama's criticism of the adminstration's handling of the war - after the fact - reflects nothing more than a desire to ingratiate himself with the establishment epitomized by the New York Times Book Review. It's worked, after a fashion, but even the NYT qualifies their back-handed recommendation with recognition that Fukuyama is the last person who can criticize the Bush administration over Iraq with any credibility:

"...neither his old arguments nor his new ones offer much insight into ... the problem of murderous ideologies and how to combat them."

Re: Not very persuasive

This is what I love and hate about the web/internet: other people who write better and more clearly than I. Nice job.

Francis Fukuyama

is a fraud who simply jumps on whatever he thinks is cool & new. The End of History, huh?

And the reason the rich get the biggest tax refunds is they pay the most in taxes. I don't know about European countries, but in the US, "the top 10 percent of U.S. taxpayers earned more than 46 percent of the adjusted gross income in 2000. These same households paid 67 percent of federal personal income taxes" (src).

fear for change

But, the American Religious Right, the European "Religious" Left, The Middle Eastern Islamists... the all have so much in common it's funny. Or not.

Yes indeed they have a lot in common: fear for change and violence. I have fear too for the future of Europe. Part of it is not rational, the other part is founded. Much of this founded fear can be read about on this site.

I also liked the reference to Prof. John Gray:
I agree that all this globalization stuff has been pushed too far too fast, just as the European integration was. The Western ‘Christian’ culture has taken over large parts of the world too fast with some ugly consequences: 9/11 etc. I fear the Islamization of Europe too. However, I disagree with Gray’s statement that globalization needs to be stopped. It is unstoppable. It will take a long long time. I see how the local dialect of my hometown is slowly disappearing. I see local customs disappearing and new not so local ones coming up. Good. It took 40 to 50 years for just a couple of small steps. But they were unstoppable. Change is unstoppable but it should be done at a human pace. And the good crumbs need to be kept.

One-sided view of Europe

I live in Denmark and have followed the cartoon row at close hand. What scares me as much as the islamic fanatics is the one-sided focus on economy. Things are going well on the economic front but what scares me is that mony has become the measure for the meaning of life. That is what a lot of muslims object to in regards to the european way of life which since 1945 in a way has become a retarded model of the american. Europes strength lay in the cultural sphere, in the great thinkers and artists. The pursuit of the american model and by whose standards we built the measuring rule of wellfare (read economic) will cause Europe to fade away. In the cultural pursuit we are pro´s - in the economic we are amateures. Wellfare without sufficient culture is nothing but consumer existence. We need to look at ourselves from a much broader point of view. It is the one-sided view of wellfare in the article that I object to.

Fear not Pronnie.

The American way where there seem to be now higher truth than the almighty dollar will never happen here in Europe.
Just look at American and European design.
There is a distinct difference.


One-sided views

Culture has always been a function of material wealth. The great cultures were also very rich. I note that you disapprove of "the American model". What in particular? The fact that most of the world's greatest universities are American? That their best galleries and museums are equal to any? That they have some of the best symphony orchestras? A flourishing theatre? Hollywood? Great writers?

And Europeans are not amateurs in economic matters. Britain almost single-handed created the Industrial Revolution, and London is still the financial capital of the world (sorry, Jacques!). Germany is absolutely world-dominant in exports of manufactures. Airbus, Nokia and many many others are world-class companies. Blimey, even France has got some good, technocratic businesses - and super food. Two of the oil giants are British and Dutch.

Europeans should not be afraid of the future. It's there to be grasped. But the world doesn't owe us a living - we have to work and work and work. Then we can enjoy the good things of life.

As for the Muslims, the more we can encourage them to make money, the greater the stake they will have in our society - and the more opposed they will be to the mad, frustrated jihadists that want to bomb and kill us.

Bob Doney

Hi Bob Doney

Please understand this the right way.
Europe can learn a lot from the US and have to, in terms of efficiency and free entrepreneurs and there’s – to my knowledge - absolutely no anti-American sentiments here in Scandinavia – on the contrary.
We just want more out of life than economic efficiency.


  Hi Jim,   I’d call


Hi Jim,


I’d call this so called think tank’s views uninformed and toting along with a huge burden of biased ignorance.

I’m a bit of a news junkie and monitor Norwegian, Swedish, Danish, German, English and American
news channels on a daily basis so I’d be a fairly disappointed if someone would
claim that I don’t know what’s going on in my neighbouring countries.


I can with a certain confidence claim that the economy in all the Scandinavian countries is strong and healthy and with absolute assurance claim that the economy in Denmark is booming.






RE: Gorm

With the exception of Iceland – that seemingly is at the brink of overheating their economy ;-)

I don’t object to the fact that Scandinavian countries are doing very well – but so are countries like Ireland and the Baltic countries and they make economic sense!

As fare as I know NO economist have jet been able to explain what makes the Scandinavian economies perform so well – but especially after the major setbacks for big European economies – the Scandinavian model has once again inspired economists around the world to engage in new studies to unlock the “dark secrets” of Scandinavian economics.

At the same time Ireland and others also show good economic performance – and their progress can be well documented by standard economic theory.

A just question would probably be: why try to follow a Scandinavian model that jet remains undocumented – when there are other well documented models that provide the same or better economic performance?

Hi Jensen,

You’re right. It seems to defy all economic theories. How is it possibly to maintain an expensive welfare system, the world’s highest taxation level - up to 62 % here in DK – high salaries and wage rates in a global economy? I don’t know and don’t quite understand it either, but fact is that the Danish economy is running flat out on ALL cylinders.
Science now understands why the bumblebee can fly so I think it should be possible for economist to explain why this is doable.

I don’t think there are any simple answers to the question, but part of the answer could be that the economies in Scandinavia are very open economies with no protectionism what so ever combined with a very flexible and efficient labour market.

I agree with the article stating that “France is dying” and it’ll probably take another ten years of street rioting while she fight her longing for former greatness before she realizes her long overdue need for changes.
If I told a Frenchman that every year 30 % of the workforce in Denmark changes job, he’d either faint or go out torching a few cars.
The French “Economic patriotism” is damaging Europe and France immensely. Recently the French and Italian shoe lobbies have managed to introduce an EU-duty on all shoes from China, in order to protect their own backward and inefficient shoe industries and hereby damaging the free competition in the entire EU-region with these artificial prize-levels.
Another resent example is a German company which wanted to take over a French electricity company (I think it was) This was of course blocked by France?

It pains me immensely to see

It pains me immensely to see how badly the German economy is performing but at least there is a legitimate excuse for it as I see it. They took on the immense financial burden of bringing the former East Germany on par with the rest of Europe and their trade unions have become waaay too strong and making it almost impossible for companies to lay of staff – hence their reluctance to take on new staff.

France is the sick woman of Europe and her longing for former greatness, eg. disguised in an EU-resolution, where she want the EU to become the most prosperous part of the world lead by France – obviously - will be her downfall. None in Europe will want to be lead by France and definitely NOT the Scandinavian countries.
France has no counter against the small modern nimble and agile economies of the prosperous Scandinavia.


Spiritual vacuum?

What worries me is, that we in many ways repeat whats going on in the US. I don´t want to sound religious, because I am not a very religious person, but as the book says "man lives not of bread alone." The dominance of the religious right in the US is, in my opinion, a reaction to a couple of centuries of extreme pursuit of wealth in the U$. It´s like a pendel: if it swings too far to one side so it will equally swing to the other and we have lost the capacity for holding the balance.
I am also very concerned about the number of people suffering from stress and depressions here in Denmark and I don´t think it´s any different anywhere else in the West (but I don´t know for sure). Globalization is becoming a prostitute that everybody uses to whip up sentiment for more quantative growth and fear of not being able to compete in the future. We have had a fairly good educational system here i DK but our government is permeated with marxist thinking under the illusion, that you can create a society from above. Pol Pot, Marx, Hitler etc. tried that (Prof John Gray, London School of Economics). What they are creating reminds me of an assembly line from kindergarten to college all in the name of Denmark surviving economically in the future. The concept of wealth needs to broadened to include spiritual/cultural wealth as well.

Religious right

"The dominance of the religious right in the US is, in my opinion, a reaction to a couple of centuries of extreme pursuit of wealth in the U$."

My impression of the religious right in the USA is that they are completely obsessed by money. Any resemblance between them and Jesus's camels and eyes of needles is very tenuous. I would be interested to know what some of the American contributors think about this.

As for the educational conveyor belt, just look at the number of graduate engineers being produced by China and India every year, and be afraid, be very afraid!!

Bob Doney

RRight in the US

- I would be interested to know what some of the American contributors think about this.

It's been my experience with most religious institutions in the U.S. that they're indeed obsessed with money, but no differently than any person or organization that depends upon money for its sustenance.

Some institutions, like the catholic church I recall from my youth, depend on charitable donations and weekly contributions from parishioners. If the question is "are they materialistic", however, then the answer surely varies from institution to institution.

As far as the so-called "religious right" is concerned, one needs first to recognize the reality of the stereotype created by the media that criticize it as well as those (few) media, like Pat Robertson's 700 Club, that are owned by it. The former portray this group as a bunch of fanatics - the 'moving force' behind the Republican party. The latter portray themselves as savvy, sophisticated - monied - 'players' with God on their side and lots of social influence. Neither of these portrayals is accurate. The religious right is far less influential than either the mainstream media OR the evangelical media would have people believe.

That said, it's my observation that the evangelical Christian ministries - the ones often associated with the 'religious right' - are materialistic once you scratch the surface of their organizations. And more to the original question, I don't believe they offer an alternative to the materialistic attitudes pronnie sees as emblematic of American culture. In fact, their ministries are somewhat orthogonal to that materialism, that is, you can own a million dollar estate in Palm Springs and you're cool as long as you accept Jesus Christ as your personal savior. Just ask Hal Lindsey. :-)

The Religious Left or "youra lefty"

Uber moral euro lefty who thinks the religious right "dominates" in the U.S. is not paying very close attention.

The 2000 Presidential election...
The 2005-2006 Supreme Court selection procedures...
The almost-daily attempts by local school boards to install "intelligent design" science cirriculums, then being taken to court and laughed at (Penn.) or being voted out of their positions (Oak.)
State laws being signed "banning" abortions, in direct defiance of Roe v. Wade...

If you knew what you were talking about (not you Bob, the other guy) instead of doing the euro lefty soap box moralizing against those money hungry devils from the great satan, you might understand some things that the BBC and Le Monde don't tell you.

That the US is a completely polarized society via the "cultural" (e.g. religious) political issues, that the "religious right" is laughed at in the US as much as it is followed, and that every time some idiot like Pat Robertson says we should nuke Venezuela, those "good 'ole boys in them thar red states" (religious right) loose more and more influence over their political Republican puppets.

Don´t polarize Gordonz

Please don´t turn this thread into personal attacks. If anything I said below disturbs anyone I am very willing to listen to sound arguments against my viewpoints. I lived in the US for 20 years and still have family over there and I do read NYTimes Internet Edition and many others every day.
You might want to have a look at this article by Prof. John Gray. Not because I regard him as an oracle or a prophet, but because he is very keen on uncovering certain aspects of globalization mostly overlooked especially by economists:

Gray theories

...Prof. John Gray. Not because I regard him as an oracle or a prophet, but because he is very keen on uncovering certain aspects of globalization mostly overlooked especially by economists

Which economists do you have in mind, and what are they overlooking?

And it seems a bit harsh to blame "globalisation" for the attacks on New York and Washington. It seems to take "blaming the victim" one step too far for my liking. Does the professor think that Mr Bin Laden should have his Caliphate, no question?

So, to sum up, we should tolerate intolerable regimes and we should leave the poor and disenfranchised of the world at the mercy of corrupt governments. We should not use the proven tools of economic development to help people to get a square meal, fresh water and jabs for their diseased children. We should carry on subsidising French agriculture at the expense of third world producers. We should stop having holidays in Vietnam. And we should not intervene in Darfur (which now threatens death and destruction to Chad).

The good professor seems a bit light on practicalities, and to be dreaming of a return to the good old days of the nineteenth century when America let in millions of immigrants (it still does), when Europe was ravaged by wars, and the natives knew their place, but were allowed to practise their quaint old customs undisturbed by the Enlightenment - would this include cannibalism, I wonder, or only such things as slavery, feudalism and genital mutilation.

Bob Doney

Technological/Scientific Progress has become a Religion

One of Grays`points is that our technological/scientific yearning for progress has itself become a religion. And as he points out: Science and technology are accumulative ie. others can build on top of the existing knowledge iow. it isn´t lost. But ethics are not accumulative. He (not in the article referred to) further points out, that the abolition of slavery was one of the great acchievements of the Enlightenment, but it was reintroduced in the 20th century: Stalin, Hitler etc. How many prostitutes are working as slaves right now here in Europe and other parts of the world? There is an imbalance here. This deficit is what the imams use to get a foothold in Western society with their advocation of old midlleage law-religion. We in the West foster great scientific and technological minds but does moral and ethic developement follow pace? These noble human traits do not grow out of our body chemistry - they have to be learned through the cultural life of a society. By our exagerated focus on monetary wealth through scientific and technologic progress we are creating a vacuum - an imbalance. A strong cultural/ethical Europe must also be a part of our definition of wealth. Otherwise we will become more and more vulnerable for those religious impulses that want to define our behavior and daily life through decrees written down in a book.
And an answer to Bob: One of the economists in mind and who has had a tremendous influence on 20th century economic thinking is Milton Friedman: Anarcho Capitalism. The only commendable thing I see in his work is the system of vouchers in public education which treats public and nonpublic schools on an equal basis.

Basically, To Hell With Zealots

Nothing personal intended. My apologies to one and all.

But, the American Religious Right, the European "Religious" Left, The Middle Eastern Islamists... the all have so much in common it's funny. Or not.

And thanks for the link. Good stuff.

" American Religious Right,

" American Religious Right, the European "Religious" Left, The Middle Eastern Islamists... the all have so much in common"

Like what in particular? I am not even aware of a European "Religious" Left, only a secularist one.
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"Religious Left" = Socialist welfare state... get it?

They all claim a mandate from some “God” type figure.
They all claim morality as their own.
They all know “what's best for you."
They all like making decisions for everyone because the “common people” just don’t understand.
They all fear and loathe the "individual."
Anyone or thing they don't control is "greedy" or "evil."
They all censor media and only let you hear news in ways that furthers their agenda.
They all feed on ignorance with superstition or dogmatic "social theories"...

In the end, the are always exposed as pompous, weak and doomed to failure.

There's some for starters...

Re. Gordonz

"If you knew what you were talking about (not you Bob, the other guy) instead of doing the euro lefty soap box moralizing against those money hungry devils from the great satan, you might understand some things that the BBC and Le Monde don't tell you."

I don’t think it’s a mere coincidence it’s called Fox News :-)

All against all

As for the educational conveyor belt, just look at the number of graduate engineers being produced by China and India every year, and be afraid, be very afraid!!

Well that is in a way my whole point. If the strong focus on globalization is seen through economic glasses only, we are indeed headed for an all against all type of war. Everybody wants to be a winner, which is impossible. There will only be a few winners with the progress of technology in perspective. What are we going to do with all the loosers? And how are the loosers going to behave? You see - Bob - we don´t need the loosers in the productive sphere but we need them as consumers to consume the products of the socalled winners. And that is where the distribution of money plays a great role. How do you turn a looser into a selfsupporting consumer without totally destroying the environment?
The whole conceptual way of economic thinking is born out of english imperialism and the american pioneer spirit of territorial expansion in the 18th and 19th, ie. there was plenty of land to expand into. Science and technology have advanced tremendously in proportion to economic thinking because most of the economic thinking of today is still rooted in 18th/19th century thinking. In this era of globalization we have to think holistic, but economists, with few exeptions, think abstract.

Winners and winners

Everybody wants to be a winner, which is impossible.

Oh no it isn't! Economic development isn't a zero sum game. Most of the people of the world are better off now than they were, say, 40 years ago. And the threats to the environment are one very good reason why we need MORE engineers.

And by the way, there is still plenty of land to be "grabbed". For example most of the land in the UK is under-utilised, and we pay our farmers NOT to farm a lot of it.

Bob Doney

or maybe...

just read the NY Times once in a while... you know, just to get a "perspective."

Fascinating clash of viewpoints

I don't mean "clash" as in a violent or even uncivil disagreement. Just that I expect only one is correct. From the article:
 "Europe’s catastrophic situation is systematically hidden from public opinion."

From Gorm:
Every week the newspapers here in Denmark print articles, prognoses
and reports about how strong the Danish economy is [...]  Some are actually seeing the cartoon crisis as an advantage, as it will help cooling down the economy a bit.

Must do better

The E.U. is a disgrace. What other organisation is allowed to go on year after year with no audited accounts?

Democraphically disaster looms. Not enough people to pay for pensions because of falling indigenous birth rate. Immigrant alien Muslim minority growing. apace demanding more and more.

Time to call it a day.
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Island mentality

"The E.U. is a disgrace."

Yeah, and soon you’re going to tell that the Spitfire still is the world’s greatest figtherplane.
Please wake up from your “island mentality” and realise what makes the world of today tic!


tic toc tic toc

Please wake up from your “island mentality” and realise what makes the world of today tic!

So it's OK that the EU can't get its accounts certified by the auditors?

And what's wrong with an "island mentality" if you live on an island? You learn that you can't really rely on anyone else!

Bob Doney

The Scandinavian model is the way ahead for Europe!

I’m afraid I can’t recognise this bleak picture the three authors are trying to paint of the European economy.

Every week the newspapers here in Denmark print articles, prognoses and reports about how strong the Danish economy is – huge surplus on all accounts, our foreign debt will be gone by the end of the year, the unemployment rate has never been lower and is now so low that the deficit of labour in several sectors is severe and the economy is close to overheating.

Some are actually seeing the cartoon crisis as an advantage, as it will help cooling down the
economy a bit.




Gorm, a Reality Check if you will

My dear fellow,

You must get a grip on the economic facts.
Germany has a 1.1%-2.0% growth rate and a 12%-15% Unemployment rate. Germany is paying out FAR more than it is taking in, despite the overweening and highly burdensome tax rate, which is confiscatory by any rational economic standard.
France is actually in the red (negative economic growth) economically and has an unemployment rate worse than Germany's!
The Burocrats of the EU want to raise taxes even more, thereby devastating the European economies even more.
Please take the time to compare the economy of Ireland with that of any Continental or Scandanavian country (apples to apples). You will find that the lower tax rates in Ireland, coupled with an incentive to actually work (rather than a system devoted to putting people on the public dole and crippling businesses), has created the envy of all Europe.
The Scandanavian countries on the other hand, have public debts which are close to killing their economies, more people not working than working (factoring in the legal and illegal immigrants), and a muslim population (like most of the rest of Europe) which REFUSES to integrate to any reasonable degree.

My dear fellow, take a look at the facts, put emotion aside and you will find that the paradigm espoused by Sweden, Norway, and Finland, have went the way of the Dodo economically, and for those countries economies, unless they abandon the cradle to grave model, they will end up with the Dodo as well-kaput.

Thank you for reading this post!
Ave´ Caesare´ salutamus morituri te!!!

Denmark has no foreign debt.

This seems to be the top story here in DK today.
Unfortunately I haven’t been able to find anything in English yet.
Udlandsgælden er pist væk!

The speed of the Danish debt repayment has surprised most economists. From 1988 where our foreign debt was 50% of GNP till today where the debt is paid back completely.
Denmark can now join the small and very exclusive club of countries with no foreign debt namely Norway and Switzerland.

Who said the Scandinavian model didn’t work?
Was it Martin De Vlieghere and Paul Vreymans from this so-called think tank?


Public Debt is there and it is *H*U*G*E*

Victorious titles such as "Denmarks debt is gone" are those tipical slogans destined to keep the jolly dance on the Titanic going. Rather than reading such pamphlets in the Copenhagen Post, Gorm should look at figures of reliable sources such as the OECD.

As allways, WorkForAll checked and doublechecked data before publication. Those data show that Denmark's debt is all but gone: Denmarks Financial liabilities in 2005 were 49,7% of GDP.
see: tab GrossFinancialLiabilities

Adding to this the 264%GDP pension liabilities on basis of present pension regulations and contributions allready paid,
this adds to 314%GDP total Public Liabilities. Het figure of 264%GDP pensionliabilities was calculated in 2003 by the ABN_AMRO Study “Desire to retire: The European Pension Problem” see this pdf-document page 13.

An earlier study of the OECD estimated Denmarks pension liabilities at 234,5%GDP. see: page15

In the last few years Denmark did remarkable efforts to remedy the desasters left by decades of socialist policies. Denmark reduced its government Spending from 60%GDP in the early nineties to 54%in 2005. However Denmarks crippling tax burden is still 7% abouve EU-average and 14% above the OECD-average. Denmarks Cyclically-adjusted government balances in 2003, 2004, and 2005 averaged +2,266%GDP.

At this pace it will take over 138 years to pay back the 314%GDP liabilities. Denmark should look at the Irish way to solve its problems, and Europe should not follow Denmark, but Ireland. read the ideas of some leading thinkers from across the EU here.

The foreign debt is N*O*N*E existing!

And please don’t twist my words to fit into your agenda – the talk was about FOREIGN debt.
And fact is that the foreign debt is gone(tabel headings in English), whether you or this self-proclaimed, so-called think tank like it or not.

Perhaps a link to those who actually write the Copenhagen Post would be regarded less of a pamphlet.

I don’t dispute the fact that Denmark has a huge domestic debt, but with the upcoming welfare reform, which probably is the biggest and most profound and compressive reform this country ever has gone through , Denmark will be well prepared and equipped for the challenges of next few decades

Note: Your referral to “Desire to retire: The European Pension Problem” clearly states on page 14 “Table 4: State pensions debt (percentage of GDP) – net present value of the public
pensions debt built up by 2050, based on unchanged policies

Despite what this so-called think tank is touting, the Scandinavian model is actually a strong, healthy, human and very viable interpretation of liberalism.

But thank you for the interesting link "Beyond the European Social Model"


Domestic debt is **GIGANTIC **.

The Copenhagen Post's title "The Debt is gone" is misleading because Denmark still has a huge domestic debt of some 314%GDP. This slogan gives the wrong impression of comfort to hasty title-readers, and help to keep the dancing on the Titanic going.

Furthermore Danish welfare reform goes in the wrong direction by focussing too much on diminishing the counter of the fracture Debt/GDP, and for the purpose of the matter will have to reduce social expenditures either by lowering social benefits or by progressively hardening eligibility rules to those benefits. These policies will have deflationary effects and cannot but affect growth negatively. Moreover at the pace Danes started it will take over 138 years to pay back the 314%GDP liabilities.

Irish Policies on the other hand are dynamic and reduce debt by focussing on increasing the denominator of the fracture public Debt/GDP. Irish policies are conceived at boosting the economy (GDP) through tax cuts, giving prospects to their citizens; boosting morale and entrepreneurship. The historical and scientific evidence in favour of such policy is overwhelming. Such production-stimulating policies have simply worked everywhere where they were applied. That was the case in the U.S. under Reagan, that the case in Iceland under Oddson, this is the case in Ireland now, and even German's "Wirtschaftswunder" under Erhard was a model of production stimulating policy characterized by robust tax cuts. One is blinded by ideology if one denies the 20 YEARS of overwhelming Irish success and relative Danish decline.
Read the ideas of thinkers from across the EU on the matter on their book " BEYOND THE EUROPEAN SOCIAL MODEL "

Or read WorkForAll's empirical research into the causes of Growth differentials here.

Think tank's lack of knowledge is**TITANTIC **.

The real demagogs here are this so-called "think tank" and the editor of this site.
While the storm of the globalization rages over Europe, old Europe is seeking shelter behind “economic patriotism” while the Scandinavian countries are erecting thousands of wind turbines.

The old, brutal and primitive liberalism this so-called think tank is promoting with its obsolete data will be the downfall of it and its proselytes.

Taxation is the cost of civilisation.


Denmark retains its leading position

The Economist Intelligence Unit on business environment rankings:

So how will you explain this Poul Vreymans? Taxation doesn’t seem to be a problem and I’m tempted to say, rather the reverse.

"Denmark retains its leading position, with a comfortable margin, despite the impact and appreciable risks associated with the country's involvement in the recent cartoon controversy with the Islamic world. The country stands out for the successful balance that it appears to have struck between the state and market. Product markets operate efficiently and labour markets are flexible (with low non-wage labour costs and few restrictions on hiring and firing). Denmark's top rank appears to belie the claim that globalisation is forcing countries to engage in a "race to the bottom" by slashing taxes. Companies' investment decisions are motivated by more than tax differentials. Furthermore, Denmark compensates for its high tax burden with the quality of its public goods, notably infrastructure and higher education."

Your problem seems to be that you want to apply your orthodox, fundamentalistic economic theories and knowledge on the Scandinavian countries – this won’t work.

And how will you explain this?
All the heavily taxed Scandinavian countries in top 10???

Growth Competitiveness Index rankings

Country Rankings 2005-2006
1. Finland
2. USA
3. Sweden
4. Denmark
5. Taiwan
6. Singapore
7. Iceland
8. Switzerland
13.United Kingdom
16. New Zealand


What is wrong with those Competitivenes indexes?

Since 1984 Danmark has the lowest growth of the EU 15. Much lower than Ireland, Luxemburg, Greece and Spain. Look at this graph

Still Danmark ranks high on the competitiveness indexes of both The Economist Intelligence Unit and the World Economic Forum. Fast growing countries like Ireland, Luxemburg, Greece and Spain and even China (rank41!!!) rank low on the competitiveness indexes and drop fast on these rankings.

What is wrong with these rankings? In the case of the 'Global Competitiveness Report' we found the problem. Long ago they defined 'competitiveness' on basis of a set of criteria such as penetration rate of broadband internet, number of mobile phones, patents per capita, etc. These indexes based on 70 to 90 criteria are surely measuring SOMETHING, but it definately is NOT COMPETITIVENESS they ar measuring. How else could one explain that countries ranked high on the index perform weak in terms of wealth and jobs? But they cannot change the definition since then their annual report would loose its frame of reference.

After all, a potential invester in Denmark is not interested in how many mobiles the kids have, nor how how Danes percieve the efficiency of their government (another of the criteria), but wether their investment will yield reasonable return. The prime factors determining profitability are productivity and taxes. Denmark performs weak in both factors. Look at this graph

Poor productivity and high taxes deter investors, and without those investors there will be no sustainable economic growth and jobs. The Scandinavian countries are still performing badly - almost as bad as Belgium.

Therefor Danmark nor Scandinavia are not likely candidates as a model for the future of Europe.

A better EU would mean a better world

I have a number of "EU refugee" co-workers at my job in the US. They are obviously bright and talented. It is a shame that the abilities of smart people in Europe are allowed to atrophy, that energy efficient manufacturing in Europe stands idle and so on. Please put these resources to use! For the good of the wider world!
In the format of an article it is not possible to expand on all elements of the argument. And this article is certainly lengthy and full of interesting details. Still, for people who do not read daily Euro newspapers, getting more detail/documentation behind the assertion of manipulation of the news would be useful. ("Europe’s catastrophic situation is systematically hidden from public opinion.").
Certainly we see that in the US, with left publications frequently forced to admit to glaring mistakes, always mistakes which benefit one side of the debate.

Global Information Technology Report 2005-2006

Interview on the Global Information Technology Report 2005-2006
1. US
2. Singapore
3. Denmark
4. Iceland
5. Finland
6. Canada
7. Taiwan
8. Sweden
9. Switzerland
10. UK
11. Hong Kong
12. Netherlands
13. Norway
14. Korea
15. Australia
Country Rankings

Huh – France at the twenty-second place?
Poor President Jacques Chirac – another assault on his narcissistic self-image and French pride.