America's European Past and Future

Review of Samuel Gregg's Becoming Europe: Economic Decline, Culture, and How America Can Avoid a European Future. (Encounter Books, January 2013) Hardcover, 384 pages; $25.99.

Thomas Carlyle called it "the dismal science," but for many Christians, economics is more delusional than dreary. The Catholic Monarchist is convinced that the restoration of the Hapsburgs or Bourbons will bring back the wealth and prestige of another era. You're too polite to mention his lack of blue blood, and the likely serfdom of his forefathers. The Distributist straightens his framed portrait of G.K. Chesterton before detailing his plan to give every banker, lawyer, and engineer three acres and a cow. His friend, equally and endearingly utopian, The Guildmaster, hopes to keep globalization out of his town by writing a guild charter, recruiting apprentices, and designing heraldry. Similarly optimistic is the Christian Libertarian, who casts his boat on the waves of the market, hoping to sail leisurely through the culture war's straits, while ignoring the utilitarian rocks nearby.

Literate in economics and philosophy, Samuel Gregg is a trustworthy guide through European economic policy and culture, charting a course to keep the New World from repeating the mistakes of the Old. Becoming Europe: Economic Decline, Culture, and How America Can Avoid a European Future may be read as an Applied Economics companion text for his earlier work On Ordered Liberty and The Commercial Society. It also serves as a refreshing reminder to American readers that champions of economic liberty exist beyond Milton Friedman and Frederich Hayek with an introduction to the valuable contributions of men like Wilhelm Roepke and Jacques Rueff.

If America is becoming Europe, how did Europe become European? Gregg quickly brings readers through 150 years of European political, economic, and cultural history. The aforementioned guilds shaped a "Social Europe" of mutual aid and support, protective localism, agrarian idealism, and stability. The Scholastics of Salamanca, and Adam Smith and the Scottish Enlightenment gave early form to a "Market Europe" that became exceedingly rich. The horrors of two World Wars brought a convergence in policy between Market Europe and Social Europe. Over the latter half of the 20th century, the center-left and center-right regularly came together for gentlemanly political compromise: Faintly tweaking a labor regulation here, and imperceptibly reducing an agricultural subsidy there, meanwhile the metastasizing bureaucracy takes another four weeks of paid leave in Monaco.

Gregg makes it clear; the dominant European political posture, Social Democracy, is neither. On the former, Europe is increasingly anti-social. Despite generous maternity benefits, government health care, and mandated leisure time, birth rates are going out all over the continent. We shall not see them lit again in our time. Recalling George Gilder on Men and Marriage: "The health of a society, its collective vitality, ultimately resides in its concern for the future, its sense of a connection with generations to come." The demographic disaster in Europe reveals that the chief problem with the modern welfare state is not the waste of money, but the waste of human capital.

Gregg cites a 2004 survey of French adults under the age of 30 that "indicated that more than 70 percent would prefer to work as state employees."Out of honor and duty, they once left their youth in Flanders fields. Now they want nothing more than a desk job and a pension. Innovation and entrepreneurship are a natural economic adventure for the young, energetic, and educated. But as a guild culture gave way to a bunker mentality, Gregg finds that such adventures are neither encouraged, nor welcome in Europe. "In Germany, for instance, entrepreneurs are actually taxed on the equity they invest in a start-up."

While Israeli, American, and Indian teenagers learn how to code and create, European young laborers want what their parents have: sinecures in a civil service ministry with above market wages, gratuitous holidays and paid leave, 35-hour work weeks, and generous fully funded pensions. Sclerotic labor markets can successfully stabilize life for current employees, but Gregg is rightly skeptical about the effects on generational integration. "How such arrangements of permanent jobs for life (which inhibit young people from acquiring full-time employment) promote solidarity (a phrase endlessly evoked by European trade unions) is eminently difficult to explain." Nor is it easy to see the social benefits of a system that produces regular revelations of outright corruption. American banks and automakers enjoy a too cozy relationship with our government, but actions like those taken by Volkswagen officials to create "a slush fund to buy off employee representatives (through means such as bribes, paid-for shopping, and even visits to prostitutes) suggests a greater deterioration in the morality of European political and economic life."

Civilized society is built on trust, and an economic culture that encourages falsehood is anti-social. Large legacy companies, Europe's "national champions," are given transfusions of government capital, and defended by protectionist regulations and tariffs. Moral hazard is abundant as emergency interventions are endlessly repeated without any change in management, organization, or operations. These corporations are often nothing more than a distribution channel for the welfare state; the employer receives subsidies and pays out generous benefits and compensation to employees. It is a materialist misunderstanding of human satisfaction to offer workers compensation that far outstrips their productivity. It assumes individuals can live rich and fulfilling lives in an unreality in exchange for material comfort.

Adam Smith

Europe is also increasingly anti-democratic. The quest for cosmic, or social justice has weakened Europe's approach to formal justice. EU leaders routinely affix their signatures to resolutions without any party intending to abide by the terms of the agreement. As R.R. Reno has argued, the threat from Europe isn't socialism. Calls for nationalization are nostalgic, empty threats by play-acting politicians. Europe, like the American Democratic Party, knows that markets work. Social Democrats simply promise to make fast moving commercial markets more sensitive to those unable to keep the pace. But zero-sum fallacies are good politics and so they create a lucrative political market in which everyone outside the political class loses. Political power accrues to a political class, set apart early through education at one of the grandes écoles. These elites, described by Larry Sidentrop, "for whom political and administrative careers are increasingly bound up together, [have] become an ever more coherent, selfconscious and relatively small group, well-known to each other."

In Brussels, the EU elites continue to concentrate their political power. Gregg has saved his readers the unenviable task of reading reams of cornea-drying EU laws and regulations. (One wonders how many EU politicians have bothered to do the same.) A single example should suffice: "Different tariffs are applied to citrusbased non-orange, non-grape fruit juices with added sugar; and to citrus-based non-orange, non-grape fruit juices without added sugar." But for Social Democrats, the contradictions are glaring. Pious invocations of solidarity are meaningless when your policies force citizens against immigrants, the young vs. the old, the political class apart from non-privileged outsiders, Western over Eastern Europe, or the EU away from European nonmember states.

Many of these problems are unique only in degree, not kind, to the United States. Our own tax code is nearing 4 million words with labyrinthine twists built piecemeal by an infinity of lobbyists. Under George W. Bush and Barack Obama, political power continued to concentrate inside the Beltway, while other power brokers are confined to Charles Murray's insular "SuperZips." Our politicians and their consiglieres flit back and forth between prestigious government posts and lucrative private sector directorships. We still have babies but not as many as we once did. Our spending and debt is just as politically untouchable and economically ruinous. Our student-loan laden graduates are not as magnetically drawn to government jobs, but the too common and too vague preference for work at a "non-profit organization" is a very European attitude.

With low growth, lower birth rates, and exploding debt, Europe doesn't produce or save for the next generation. But that may be a feature, not a bug, since Europe has also declined to reproduce the next generation. Dr. Gregg's warning for America is clear. Europe is our past; she may be our future.

Stephen Schmalhofer is a graduate of Yale University. He lives and works in Manhattan.