Monday, June 11, 2007

Back to the Future Again

A few days ago, in a post titled Robbing Peter to Pay Paul, I said:

I think those who worry about the poor rising up and causing problems because of inequality of income are worrying about the wrong thing. What happens when the rich finally tire of paying the tab?

Well, it seems this is already happening in Europe:

Wealth gap grows and solidarity fades as rebellion of rich spreads across EU

That's a headline from the UK Guardian and it's not really a fair depiction of what I was referring to, but I think the principle is the same. The article is more about the rich regions of Europe who are upset about subsidizing the poorer parts. Northern Italy produces more wealth than Southern Italy and the northerners are pretty ticked about sending their tax dollars south. Or folks from Munich are tired of paying the freight for eastern Germans.

I find it disturbing that a large percentage of the US population wants to emulate the "European Social Model" when it is clearly not working very well. We just debated an immigration bill that would have made our policies closer to Europe's even though Europe is facing major problems because of that policy. The problem, on closer inspection though, is not the immigration policy. I favor a more liberal immigration policy in the US. I believe immigrants are enormously important to our economy and should be embraced. But only if we also maintain a liberal economic policy. And I don't mean liberal in the usual American sense, but in the classical economic sense. Low taxes, free trade, minimal government interference in the market and access to capital are critical if we are to liberalize our immigration policy. Otherwise, we will find ourselves in the same boat as our friends across the pond. A generous welfare state, rigid employment policies and high taxes mixed with open immigration resulted in a large part of the Paris suburbs in flames. Certainly, economic policy has consequences in the social arena.

Besides, the French are now trying to change the system by electing Sarkozy and now electing his party to Parliament in a landslide:

PARIS, June 10 — President Nicolas Sarkozy’s center-right camp was on course to win a landslide victory in Parliament today after the first round of France’s legislative elections, cementing his power to implement reforms in Europe’s third-largest economy.

I am not prepared to praise Sarkozy on economic policy yet, as he hasn't accomplished anything and it wouldn't be surprising if he bails on reform when the strikers hit the rue. But at least he seems to recognize the problem. Economic policy is the key to solving the problems of the Muslim immigrants in the Paris suburbs. Let's hope our politicians don't repeat the same mistakes as the Europeans.

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