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Sunday, August 14, 2011

Riots in Europe; economic debates in the USA

Riots as we saw in England this week are not new. Brixton in South London, for example, had extensive disturbances in 1981. Metropolitan Paris had them in 2005 and 2007.

Recent cuts, or proposed cuts, in social services for the poor have exacerbated their feeling of hopelessness that arises from persistently high unemployment and under-employement. Even if the European social fabric will continue to meet the essential needs of the poor despite cuts, it neither assures nor adequately facilitates upward mobility of the poor -- who see consumptive lifestyles constantly promoted in advertisements and get understandably hostile, while also experiencing discrimination because of race, religion, or national origin.

I saw an intervew with one London rioter carrying away a large-screen TV. He paused to shout "I'm redistributing the wealth." Government programs to redistribute the wealth have not satisfied the appetite for redistribution -- if, indeed, it can be satisfied. However, there is only so much wealth to be redistributed; clearly there is less wealth today than in 2007. Current owners of the remaining wealth oppose further encroachment into their pockets and argue, with some justification, that if the wealth remains available to fuel capitalism, private enterprise is more likely to expand the size of the pie and thereby improve the lot of the poor without requiring additional redistribution.

Some countries in Europe -- Germany, Switzerland, and Sweden for example -- are not without social tensions, but they are less likely to erupt in strife. Their economies are so strong that the poor do have a perception of upward mobility or at least the ability to earn a living better than being on a government dole. Of course, these countries are vulnerable to an in-flux of additional poor.

All this reminds me of the ongoing debate in the USA about our ability and willingness to sustain, reduce, or expand the somewhat thinner social fabric that we provide -- while we run huge deficits and also spend a much larger proportion of income on national defense than the Europeans do. Some propose raising taxes; others propose cutting expenses (either the social fabric or the Pentagon). At least those are workable suggestions. What I don't like hearing is that the USA will simply grow our way out of the problem, so there is no reason to do anything; or that the USA can continue borrowing hundreds of billions of dollars every year from the rest of the world, so there is no reason to do anything. Both of those are dangerous fallacies.

By the way, this is an opportune moment to set aside the inaccurate views that many Americans have of Europe. There is crime in Europe: not the gun-enabled homicides that we have in the USA, to be sure, but your chances of being pick-pocketed, being held up on the street at knifepoint if you stray into a bad neighborhood, or having your hotel room or residence broken into are non-negligible. There is social unrest. There is dishonesty and incompetence in government. There is poverty, there is drug and alcohol abuse, and there is racism. That said, Europe is a wonderful place to visit and to do business; my point is that Europe is not heaven on earth.