Tuesday, January 3, 2012

What's Wrong With Europe and What Needs to Be Done About It

By CanSpeccy

Europe has three key problems, debt, unemployment and immigration, all of which derive from the 1994 GATT agreement, which opened the way for global wage arbitrage and unrestricted free trade.

Off-shoring of jobs drove up unemployment and welfare costs, while driving down tax revenues, thus creating public sector deficits.

Cheap imports of both goods and services kept inflation low even as interest rates were reduced to counter deflation. Cheap credit created a Ponzi economy in which credit drove asset prices, mainly houses, and asset prices drove credit demand.

As with all Ponzi schemes, the trajectory of growth in debt and asset prices reached its apogee and set off a vicious cycle of declining prices and debt default which destroyed bank capital, squeezed consumption and drove unemployment even higher.

Mass immigration is just another aspect of wage arbitrage: bringing the cheap labor in, rather than sending the work out.

As Cambridge University economics Professor Ha-Joon Chang explained (1):
If there were free migration, most workers in rich countries could be, and would be, replaced by workers from poor countries.
What that means is that immigration creates unemployment among the indigenous population.

Let me say that again: European governments deliberately pursue immigration policies that displace their own people from gainful employment by importing people from elsewhere who are more competitive than the least productive members of the indigenous workforce.

And let those "tolerant" middle-class liberals living in leafy white suburbs, who love diversity and call Emma West a racist remember, it could be their job next, for if it pays to rob the lowest paid of the opportunity to work, how much more profitable would it be to do the same to university professors, engineers, doctors, and most public sector employees.

Understanding this last point might go a long way toward pricking the bubble of political correctness that so distorts perception and prevents intelligent discussion of European immigration policies.

But how are European states handling the triple crisis of debt, unemployment and mass immigration?

With the usual combination of stupidity, short-sightedness and brutality that characterizes "liberal" democracies fronting for globalist corporate oligarchs.

With declining revenues and the need for bank bailouts to avoid economic chaos, government deficits have massively increased, taxes have been raised, welfare benefits cut, the unemployed left to r(i)ot, and mass immigration, both legal and illegal, facilitated to drive wages even lower.

The net result?

A reduction in GDP, living standards, and workforce skills and the progressive destruction of the racial and cultural identity of the European peoples.

What should the European states do instead?

There are only two ways to deal with debt.

One is to quit borrowing, spend less, work harder, create a surplus and repay the loan.

The other is to borrow from Peter to pay off Paul, while ripping off all your creditors with haircuts, payment in debased coin, or outright default.

Sloughing off the debt by money printing and negotiating haircuts is already in progress. It will leave Europe poorer, demoralized and internationally less competitive.

The route to repayment requires two things.

First, massive cuts in government spending to liberate resources to repay debts. Program cuts should focus on reducing the size of the public sector, bringing public sector wages back in line with private sector wages and eliminating benefits for the the middle and upper classes such as  grants for higher education, and subsidies for windmills that don't work just when you need the juice.

Second, getting the unemployed off the dole and into jobs where they contribute to the creation of wealth and acquire skills that enhance their productivity and hence market worth.

Th problem of unemployment cannot be solved as long as (a) welfare pays as well or better than the minimum wage, (b) the wage an employer must pay exceeds the value -- in a globalized market -- of the available labor, and (c) the state permits mass legal and illegal immigration of those who will displace the least competitive indigenous citizens from the workforce.

To make the unemployed worth employing at a living wage will require a wage subsidy scheme such as I've discussed elsewhere.

Briefly, employers would compete for subsidies through a public auction in which the higher the winning bids, the lower the subsidies.

Such a scheme, in the absence of mass immigration, would make virtually every able-bodied adult employable and would gives employers a level playing field upon which to compete internationally.

The cost of a wage subsidy scheme will be largely offset by the savings in welfare spending (including the indirect costs of unemployment such as elevated rates of crime, prison incarceration, and mental illness) that will result from bringing tens of millions of Europeans back into the workforce. It will also increase GDP, as off-shored work is brought home; improve the balance of payments through import substitution; increase corporate profits and hence government revenue; enhance workforce skills; create the surpluses necessary for the repayment of both private and public debt; and not of least importance, end the genocidal program of mass immigration to among the most crowded nations on Earth.

(1)Ha-Joon Chang. Things they don't tell you about capitalism. Bloomsbury Press. 2010.

See also:
The Euro: A Weapon of Economic Mass Disruption

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