Giving Up on Europe

Charles Paul Freund | June 1, 2005

WaPo biz columnist Steven Pearlstein has given up on European economic reform. "Over recent months," he writes, "the political and economic rhetoric in [Western Europe] has betrayed a widespread belief in a wide range of economic fallacies: that there is a fixed supply of and demand for labor, that competition is a zero-sum game, that trade is a race to the bottom and that prosperity depends largely on the welfare of producers, not consumers. What's particularly missing from the European economic debate is any appreciation of the centrality of innovation as the source of prosperity and growth."

His major example of what's wrong with European thinking is the reaction to Google's plan to make available 15 million scanned books from various academic libraries. The president of the French National Library has perceived this project as a threat involving Anglo-Saxon cultural hegemony, and has persuaded the EU to develop a non-profit rival to Google.

Pearlstein shrugs off the "cultural paranoia" of this reaction, and focuses instead on its economic assumptions. "[T]he Google search engine has a bigger market share in many European countries than it does in the United States," he observes, "even after the creation of the world's largest free-trade zone and the launching of the euro, which were supposed to spur development of home-grown champions." Pearlstein wonders, "Why is the first reaction to a strong foreign competitor to launch a government-protected, taxpayer-subsidized rival?"

More to the point, "why would government officials assume that they have such exquisite instincts that they can identify a huge, untapped market for a European-oriented service that European companies have completely ignored?" Pearlstein thinks the answers to such questions also explain "why free market capitalism has yet to take root in Western Europe."

Pearlstein debated his column with Post readers online. Transcript here.

Comments

|6.1.05 @ 1:14PM|#

Pearlstein thinks the answers to such questions also explain "why free market capitalism has yet to take root in Western Europe."

Perhaps next he'll take a crack at why free market capitalism has yet to take root in the United States.

|6.1.05 @ 1:15PM|#

Does the author know that you copied his entire article?

|6.1.05 @ 1:54PM|#

Hah. You don't get it do you... compared to France, and most western european countries, the US IS a free market. This is sad, but it is pretty true.

Honestly, libertarians need to get that. Compared to France and much of Europe, the US is looks like Galt's Gulch. The US could be so much worse. So much worse.

gaius marius|6.1.05 @ 2:01PM|#

"why free market capitalism has yet to take root in Western Europe."

sometimes americans forget that they invented that idea. so much for sanctimony.

and we further forget that we tried unrestricted capitalism in the 19th c -- and our forebears decided (with great evidence) it was destroying civil order and fuelling anarchism and communism, ultimately sparking the need for the fascist/keynesian "controlled enterprise" economies we now operate.

i agree with you, mr welch, that the non vote was irrationally selfish and probably economically unwise for the french and western europe. but are they supposed to ignore the social concerns of their decadent proletariat? are we, for that matter?

gaius marius|6.1.05 @ 2:05PM|#

The US could be so much worse.

indeed, mr toxic -- but the difference between euroland and america is really shades of gray, and fairly minor.

the vast majority of the difference between europe and america is the unwillingness of their central banking concerns to let the monetary spigot run wide open and run massive stimulatory government deficits -- in essence, debase the currency and sell the future for the moment, as we are. it's an experiment in differing philosophies of management that cannot be judged until after america is called on to pay its bills.

|6.1.05 @ 2:17PM|#

Yes, the US is economically freer than France, and most other European economies as well. But how much freer would it be, under our current two-party system, if:

1. All welfare state expenditures were paid for with taxes rather than treasury bond sales.

2. The voice of the majority was heeded on the issues of health care and free trade.

3. The Republicans couldn't distract their lower-class supporters with religion and war.

I think it wouldn't be long before that gap narrowed considerably.

|6.1.05 @ 2:30PM|#

and we further forget that we tried unrestricted capitalism in the 19th c -- and our forebears decided (with great evidence) it was destroying civil order and fuelling anarchism and communism, ultimately sparking the need for the fascist/keynesian "controlled enterprise" economies we now operate.

Are...are you high?

gaius marius|6.1.05 @ 2:46PM|#

forget the current ideology, mr mediageek, and read the history contemporary to the times. it's all there.

M1EK|6.1.05 @ 2:48PM|#

mediageek,

Are...are you high?

No, he's got a few history books on his bookshelf (NOT written by Ayn Rand, if you can imagine!)

|6.1.05 @ 3:06PM|#

Mediageek-
Do a Google for "Laissez-faire." Considering how vile 19th-century capitalism could be, we're lucky the whole damned world didn't go Communist.

|6.1.05 @ 3:23PM|#

"Considering how vile 19th-century capitalism could be, we're lucky the whole damned world didn't go Communist. "

Unfortunately, this is the product of our public schools. I remember it well, being taught that late 19th Century America was "laissez faire". Fortunately, I later learned the truth.

After the war of Southern Secession, there was no "laissez faire" economy - there was a mercantilist economy. That was the whole point of the war. The difference is VERY important, and necessary to understand why things were the way they were in that period.

And even then, the difference between now and then is such that it is hard to say which is really worse, once you account for the improved conditions wrought by technology.

gaius marius|6.1.05 @ 3:36PM|#

I remember it well, being taught that late 19th Century America was "laissez faire".

i think perhaps, mr quasibill, its more correct to say that britain was laissez-faire -- and as it ran the shipping lanes and managed the global currency, that made the world of trade as laissez-faire as it is ever likely to be, and it was europe who correspondingly suffered most from anarchism and communism.

i would agree with you that the united states has never been a free-trader along those lines, to its and the world's detriment. the developing world particularly has suffered for that fact, in a way it never did under the british administration of trade.

|6.1.05 @ 3:40PM|#

forget the current ideology, mr mediageek, and read the history contemporary to the times. it's all there.

Do tell, gm, you must have a list of sources close at hand and I do love to read.

No, he's got a few history books on his bookshelf (NOT written by Ayn Rand, if you can imagine!)

Um, so you've been over to gm's place? What are those references again?

Do a Google for "Laissez-faire." Considering how vile 19th-century capitalism could be, we're lucky the whole damned world didn't go Communist.

Well, here's exactly my problem with the course and tone of this discussion. Have we really come to the point where we solve all argument by google count? Really people, you're going to have to step up the quality of the dicourse or I'll have to go lurk elsewhere.

|6.1.05 @ 3:41PM|#

Duh,

Discourse

|6.1.05 @ 3:58PM|#

1)
I wasn't aware that Ayn Rand wrote history books.

2)
I may be incorrect here, but my perception has always been that the early 20th century economy of the United States was far more mercantilist/plutocratic than they were ravingly unfettered free market. Though I suppose an argument could be made that unfettered capitalism gives rise to plutocracy.

3)
GM states that early 19th century free markets evidently caused practically every worldly ill. Evidently capitalism is responsible for everything from anarchism (huh?) to the clap. I just have a hard time taking someone serious who argues by stating what he doesn't like, and then attributing every evil to it. *shrugs shoulders*

|6.1.05 @ 3:59PM|#

Quasibill-
I too was thinking more of England, which was the dominant power at the time. But I often wonder what would have happened in America if we didn't have such a huge chunk of uninhabited land (uninhabited in th sense that Indians didn't count) to absorb all the folks who couldn't cut it elsewhere.

M1EK|6.1.05 @ 4:38PM|#

The difference between a mercantilist and laissez-faire economy in a nation which did trade (and could only trade even in ideal circumstances) a pittance of its GDP compared to modern times is largely irrelevant.

Most of the products the 19th century American bought were American, and it wasn't mainly due to tariffs - it was due to high transportation cost.

|6.1.05 @ 5:01PM|#

Surely we can all agree that there were terrible abuses during the 19th Century; the question is the extent to which laissez-faire capitalism was responsible.

Company towns denied people the rule of law. We routinely denied immigrants their Constitutional rights. The police and state troops were often used as a private strike breaking force. People were driven off of their land to make way for railroads or to give away mineral and oil rights. Children were used as virtual slaves in mines and factories. These are the kinds of abuses you're describing g. marius, are they not?

...It's not clear to me that these abuses were a function of laissez-faire capitalism. Fraud, theft, racial and religious discrimination, etc. aren't a necessary function of laissez-faire capitalism; they're a function of corruption, a breakdown in the rule of law, etc.

M1EK|6.1.05 @ 5:20PM|#

"Fraud, theft, racial and religious discrimination, etc. aren't a necessary function of laissez-faire capitalism;"

except that they have been everywhere laissez-faire has ruled.

Just like how Communism breaks down between theory and practice.

There is fundamentally no way to ensure the rule of law without a taxpayer-funded State; and yet the ideologues here would claim that such a State constitutes theft. Oops.

|6.1.05 @ 5:29PM|#

I'm not an anarchist M1EK.

I think the sole legitimate purpose of government is to protect the rights of its citizens. The government didn't do a good job of that for an awful lot of Americans in the 19th Century.

...For African-Americans and Native Americans, it hardly even tried.

R C Dean|6.1.05 @ 5:38PM|#

But how much freer would it be, under our current two-party system, if:

1. All welfare state expenditures were paid for with taxes rather than treasury bond sales.

Taxes would be higher. This is not "freer."

2. The voice of the majority was heeded on the issues of health care and free trade.

There would be socialized medicine and trade barriers. This is not "freer" either, and is an excellent example of why democracy is not a magic potion that brings liberty and freedom.

3. The Republicans couldn't distract their lower-class supporters with religion and war.

I suspect that these "low-class" supporters manage their own religious and national security opinions without Republican "distractions." Its just that the Republicans do a better job of matching their views to the views of these low-class citizens.

Nice condescension you got there, by the way. I think Eric II gets todays prize for most incoherent post.

|6.1.05 @ 6:53PM|#

And you get the prize for today's, if not this season's, most asinine retort. My question was a rhetorical one, as everyone else most likely noticed.

|6.1.05 @ 8:43PM|#

Re the 19th century: I don't think you can call a period of aggressive intervention by goverment on behalf of Big Business "laissez faire" or "unrestricted capitalism."

|6.1.05 @ 9:22PM|#

There is fundamentally no way to ensure the rule of law without a taxpayer-funded State;

Nope.

Nope.

Law predated the State.

Also, historically, in places where the State's power did not yet reach or was (is) ineffective or ignored, nope and nope and nope and nope.

And in the future, nope. (If that link doesn't work, here's the same thing as a PDF.

|6.1.05 @ 10:01PM|#

Hey, I just tried to post a comment with links to about eight documents refuting the assertion "There is fundamentally no way to ensure the rule of law without a taxpayer-funded State" and I got this message:

Your comment has been received. To protect against malicious comments, I have enabled a feature that allows your comments to be held for approval the first time you post a comment. I'll approve your comment when convenient; there is no need to re-post your comment.

What up with that? I've copied my original post text in case I need to repost it.

|6.1.05 @ 10:20PM|#

Corporations have demanded to be recognized as "individuals" for about a hundred and twenty years. Because of their size and immortality, they will dominate any kind of market, free or regulated.

Zap the rights of corporate personhood, and you might see a genuine free market flourish.

|6.1.05 @ 10:41PM|#

Oops, I see my original post has appeared.

Hey, has REASON/H&R instituted some kind of anti-spam measure that won't post a message with more than a certain number of hyperlinks in it, until after it has been reviewed?

My apologies for trying to post it twice, but the original response message didn't make sense, so I thought my post had just been swallowed in some kind of glitch.

|6.2.05 @ 10:10AM|#

Passingthru;
Corporations have never demanded anything, only the people at corporations have demanded things.

Corporations have no rights, only the people in corporations rights.

As such corporations should not have to pay taxes. Not saying that the people in corporations should have to pay taxes, but if there are any taxes on the profit earned by corporations it payed for by the people who work for the corporation, and of course by the people who purchase any product of the corporation.

|6.2.05 @ 10:12AM|#

By the way, I am late to this thread, but having read it I have learned two new words; plutocratica and mercantilist.

I just thought you all should know that.

gaius marius|6.2.05 @ 12:17PM|#

I suppose an argument could be made that unfettered capitalism gives rise to plutocracy.

voila.

I just have a hard time taking someone serious who argues by stating what he doesn't like, and then attributing every evil to it.

cart before horse, mr mediageek. i have reservations because many evils can be attributed convincingly to unfettered capitalism, and don't advocate it for that reason -- not the other way round.

Just like how Communism breaks down between theory and practice.

thank you, mr m1ek. the obsession with abstract ideology to the ignorance of reality has become as much a feature of american dialogue as it was of the russian and german in the late 19th/early 20th.

I don't think you can call a period of aggressive intervention by goverment on behalf of Big Business "laissez faire" or "unrestricted capitalism."

mr darkly, the cooption of government by business wasn't institutionalized until the rise of fascism as a response to laissez-faire (and communism). individuals in government were bought and sold, its true, but that is not the same as having a stated aim of cooperation and intervention on behalf of -- which became much more common after that transition in the 1930s.

the question remains, how might such purshased influence be denied? i don't think it can. money buys influence easily when government is staffed from the bourgeois and proletariat and the sense of duty and morality has run out for something more self-oriented.

|6.2.05 @ 2:49PM|#

Mr. Marius, I don't know about how "institutionalized" it was or what that necessarily means, but I've read about massive gov't subsidies to the railroads in the 19th century, for example.

Once on another forum, I was arguing with a Greenie and she threw the 19th century Haymarket Massacre at me as an illustration that "laissez faire capitalism has been tried and can't work" -- nonsensically, since that incident was about government cops busting up a meeting of union leaders.

How can government intervention in the marketplace be denied? The Left says we should limit the amount of money people can accumulate, and limit how much money they can give to politicians. I say it's better to minimize the amount of power that politicians have to sell in the first place.

|6.2.05 @ 2:56PM|#

kwais,

"Corporations have no rights, only the people in corporations rights."

You'd think so, wouldn't you? But under a ruling from the late 1800s, corporations are legal persons, and therefore have the rights of persons under the law. This why the boards of directors and executive officers of corporations are immune from legal and civil penalties imposed for the corporations' behavior.

gaius marius|6.2.05 @ 3:49PM|#

I've read about massive gov't subsidies to the railroads in the 19th century

some railroads were exceptionally good at purchasing influence -- i don't think anyone can say that the power of government was not used to aid certain companies. but it was, more often than not, for certain companies against certain others; not, as it were, for all companies. rockefeller was brilliant at destroying enemy oil companies with government help. when the troops were called out for pullman, it was for pullman and not the tranportation industry. ultimately, the complaint against men like them was that their unfettered-capitalism-come-plutocracy thereby suppressed healthy economic development -- greed in excess becoming destructive.

that, i would argue, is a far sight from, say, invading middle eastern countries to secure drilling concessions, or instituting national trade policies for the benefit of entire industrial sectors -- where the beneficiary is not standard oil but the american oil industry, not adm but the american agricultural industry. that is the essence of the corporate-government institutional compact that is at the heart of fascism as a system of social management: turning the power of government to the cooperative control of national industry as a means of combatting both capitalist monopolies (by more or less evenhandedly fostering entire regulated industries) and communist unions (by denuding them of their creative impulse through regulation).

that is something quite apart from laissez-faire, of course, which is what britain tried to enforce internationally prior to ww1 under the auspices of their commericial empire.

gaius marius|6.2.05 @ 3:53PM|#

communist unions

i realize that, strictly speaking, this is something of a reductive oxymoron. it would be better to say "anarchism and communism (which had taken root in unions)".

|6.2.05 @ 9:34PM|#

"Corporations have never demanded anything..."

Oh yes they have. Look up the case Santa Clara County vs. Southern Pacific Railroad, 1886. According to the railroad company's lawyers, it was a violation of the 14th Amendment to tax a company differently from an individual person.

|6.3.05 @ 1:29PM|#

"'why free market capitalism has yet to take root in Western Europe.'
sometimes americans forget that they invented that idea. so much for sanctimony." (posted by gaiusmarius, june 1)

Adam Smith?