So, I’m reading an article in Townhall’s Finance News. It’s an article about how the EU has spent hundreds of billions of euros rescuing its banks, but, they’re clueless as to where to go from there. Now, mind you, I’m not picking on the Europeans, we’re in a very similar boat.
I’ll give some excerpts……
“We saved the banks but are running the risk of losing a generation,” said Martin Schulz, a German socialist who has led the European Parliament, the EU’s only directly elected institution, since January last year.
“One of the biggest threats to the European Union is that people entirely lose their confidence in the capacity of the EU to solve their problems. And if the younger generation is losing trust, then in my eyes the European Union is in real danger,” he told Reuters in an interview.
Yes, the old problem solving EU. Can anyone really point at a problem the EU has solved?
Figures released last week showed 57 percent of Greeks aged 15 to 24 are out of work, and a similar scourge is tearing apart the fabric of Spain, where some university graduates in their 30s have never had a job.
One of the proposed solutions?
There are plans for a “youth employment guarantee”, which would ensure that people under 25 receive either an offer of work, further education or work-related training at least four months after leaving education or being employed.
Failure to learn from mistakes isn’t really confidence inspiring. One of the huge problems many places in Europe faces is the guarantee of a job. The reason why France has such a hard time attracting industry? Because once you hire them, you can’t get rid of them regardless of the financial conditions. So, industry doesn’t build there. So, where would the guaranteed jobs be? Why government jobs, of course! Apparently Mr. Schulz doesn’t remember that was a huge problem in Greece and one of the reasons why they went broke. But, never mind that, they’ve got ideas!!!
Like many socialists, Schulz can identify a problem but not realize an answer or even the errant ways a problem had been dealt with. Here’s something Americans can readily identify with……
Schulz, 57, who finished high school but did not go to university and began his career as an apprentice bookseller, said he had recently taken part in a debate where he was challenged by a Spanish woman over the issue of young people being abandoned for the sake of rescuing wealthy banks.
“She effectively raised the question: ‘You have given 700 billion euros for the banking system, how much money do you have for me?'” he said. “And what is my answer?
This is the great thing about economics. In a comment a while back, I stated that while economics isn’t a “hard” science, it does have rules which are immutable. Still, it is also a social science, which regards behavior. In my post noting a differentiation of Keynes from Keynesians, I also noted Lawrence Reed and his 7 principles. His 4th one is……
If you encourage something, you get more of it; if you discourage something, you get less of it.
Around the globe untold fortunes have been spent rewarding failed banks. This didn’t solve a problem, it prolonged and encouraged more similar events. We rewarded aberrant behavior. We will get more aberrant behavior. In anything worthwhile, failure must be allowed to operate. In many ways, failure is not an end result, but, rather a function. It has a winnowing affect. It discards failures and allows better entities to replaces them. Mr. Schulz continues……
“We are world champions in cuts, but we have less idea … when it comes to stimulating growth.”
That one made me laugh! No, they’re not champions of cuts. Had the necessary cuts been made at the appropriate time, the suffering would have subsided by now and the nations in trouble today would have been well on their way to recovery. Instead of cuts, the socialists of Europe did what all good socialists do. First, they raised taxes. Here’s Schulz’ version of being “world champions of cuts“.
But, he is right when he says they have less of an idea about stimulating growth. And, sadly, he’ll never get an idea about stimulating growth until he addresses reality. What the IMF and ECB did was a double pronged attack on growth in the troubled nations. Now, I’m no fan of government spending, but one has to recognize that much of the employment in the various nations of Europe is from the government. So, if a nation is broke, they have to cut spending, so there will necessarily be less government jobs. The idea would be that the private sector would hire them. But, they didn’t allow for the private sector to grow, they punished them with higher taxes. (refer back to Reed’s 4th principle above) So, what they did was take government money out of the economy and to compensate for that, they took much more money out of the private sector. Taaaa-Da!!! It was a massive stroke of genius by the Eurocrats if they wanted to ensure more and extended misery, poverty, defaulted loans, joblessness, and decreased government revenues. Mission accomplished!
Let’s look at some more of the backwards thinking which is prevalent in Europe and the US which has caused us harm…….
Over the past 40 years, rising incomes in countries such as Spain, Greece, Italy and Portugal have allowed working class families to invest ever more in education, with the expectation that their children would be better placed as a result.
The ability of young people to study and work anywhere in Europe as part of the EU’s single market ideal was also supposed to deliver vastly improved opportunities for all.
“Greece, Spain and Italy have perhaps the best educated generations they have ever had in their countries, their parents invested a lot of money in the education of their children, everything they did was right,” said Schulz.
In spite of the movie”Field of Dreams” it simply isn’t true that because you increase a capacity that the capacity would be filled. The same is true with education. If we were to suddenly train and graduate a bunch of electrical engineers, what would we have? A bunch of electrical engineers flipping burgers. Their knowledge and expertise is great, but, we only have use for so many. Don’t believe me? Ask a network computer science graduate from about 1997-2003. It was the wave of the future. Everyone was going to need one! So we churned them out like no ones business! We imported talent from all around the world! Literally millions of people wandering the US and other nations with great talent and knowledge. Guess what? We exceeded the need! Technology changed and improved and further depreciated the need. But, those are just two examples of education and training which could serve a useful purpose. But, that’s not what we’re churning out!
Simply going to college doesn’t mean one is educated in anything particularly useful. Basket weaving equivalence probably does a lot more harm than good. Poor kids graduate with no skills anyone wants, but, we’ve spent a fortune to get them there. There’s much more to say on this, but this post is lengthy enough.
Lastly, I want to cover something Schulz stated. Schulz does something amazing. He recognizes reality! At least part of it.
Asked how he would tackle the issue, the Socialist party leader said it was in part about cutting through bureaucracy and putting money to work directly where it was needed.
He gave the example of Greece and investment in solar energy. If traditional methods are followed, a decision is made in Brussels, money is mobilized somewhere else, an investment program is drawn up, the money is disbursed to the central government in Athens, then goes to several ministries, and finally ends up with a local or regional authorities to invest.
“By that time, we are much older,” he said.
Now, from here, I’ll recognize reality. I’ve never once met a socialist who would or could cut through a bureaucracy. It simply isn’t in their nature. I’ve never seen one and I don’t believe one exists. Schulz fails to mention another reality. It isn’t just time that is lost in the process. The money is lost in the process. Every time a government “investment” is done in such a manner, each time the “investment” moves from one bureaucracy to another, money must be allocated for the processing. The more institutions it touches the less money available to the end focus. Again, even if Schulz sees this, he’s personally powerless to alter it. He’s a socialist, they are engrained to build bureaucracies, not tear them down. It’s more than their thoughts, it is part of them which makes them what they are. And so it is for the EU in its entirety. Indeed, the EU is nothing but a large bureaucracy intent on redundantly doing what the national governments have been doing for centuries.