THE OSTRICH POSITION
Was also published in opinionjournal on 10/17/202 - this source / link is no longer available, but the article can be located on the internet.
October 17, 2002
Wall Street Journal
By Paul Johnson
LONDON--Americans have been angered by the hostile attitude of some Europeans to U.S. efforts to take the war against terrorism to its countries of origin in the Middle East--a recent example of which was the suggestion, by Nobel jurors, that Jimmy Carter deserved the Peace Prize for his opposition to war with Iraq. They are puzzled by European irrationalism and weakness. They wonder, too, how the Continental economies can sustain double-digit unemployment for years on end. But the causes for all this are deep-rooted. There is no longer a "sick man of Europe." The whole of Europe is sick.
We have to remember that twice in the 20th century, Europe came close to committing suicide by wars that in retrospect seem senseless. These were followed by a Cold War that imprisoned much of Europe in a cage of fear. In this process, Europe, a collection of vigorous peoples who pushed forward the frontiers of civilization for a thousand years and created the modern world, learned to opt for a safety-first existence in which comforts and short-term security became the object of policy. They sought a cozy Utopia, with risk and pain eliminated. [italicize mine]
Fifty years ago, the drive to unite Europe was seen as a daring adventure, not only burying ancient enmities but creating a new kind of enterprise society that would bring unparalleled prosperity. The project has degenerated into a defense of cradle-to-grave social-security system whose demands take priority over the market.
Under the EU's constant demands for "social protection," European societies have become a paradise for bureaucrats, trade unionists, centrist politicians and those businessmen who prefer to work under government protection. They offer little to original minds and risk-taking entrepreneurs. The fundamental assumptions of the drive to unite the continent are now half a century out of date and the EU's rigid, ultraconservative structure makes it incapable of taking in new ideas or even dumping such manifest archaisms as the Common Agricultural Policy.
France, Germany, Italy and Spain, the big four of Continental Europe, did exceptionally well in the third and much of the final quarter of the 20th century, while the global economy was expanding steadily. But we are now discovering that Europe cannot cope with recession. In its quest for comfort and assurance, it has forgotten that capitalism is Janus-faced--it brings astonishing growth and prosperity but at the cost of periodic and often violent adjustments when sufferings must be borne and profited from in order for the advance to be resumed. Risk, ruthlessness and fortitude are inescapable requirements of successful capitalism. There is no such thing as "Safety First" in a dynamic market.
Many Europeans know nothing of American history. But it has much to teach them. For instance, why did the Great Depression in the U.S. last so long? When the stock market first collapsed in 1929-30, Treasury Secretary Andrew Mellon gave President Hoover good advice, perhaps the only sound advice he received in the whole of his presidency. Mellon urged him to let the crisis take its toll and accept the pain: "Liquidate labor," he said. "Liquidate stocks, liquidate the farmers, liquidate real estate, and so purge the rottenness from the economy."
By allowing the Depression to apply its brutal medicine, unsound businesses would have been bankrupted, the sound would have survived, and new ones quickly filled the gaps. Hoover did exactly the opposite, trying to stamp on the Depression with all the financial resources of government. FDR continued and intensified this policy of government intervention with all the flourish of a brilliant publicity machine. The result was to deaden some of the pain but also to spread and prolong it for an entire decade. The Dow Jones Industrial Average did not recover its October 1929 levels until the 1940s, and it took a world war to restore the dynamism of the American economy.
The lessons of this dismal period have never been fully learned even in the U.S., and outside it they have been ignored completely. The Japanese were the first to suffer from this willful ignorance. Having imitated, with enormous success, many aspects of market capitalism, they revealed that they had failed completely to grasp its psychological core of risk and danger when recession came--as come it must. For a decade and a half the Japanese ruling elites have been using state power to keep alive banks and businesses that are bankrupt. So the recession continues, and grows worse, and there is no sign of its ending, for Japan is not going to be "rescued" by a third world war.
Now Continental Europe is following dolefully in Japan's wake. Both the German and the French governments have gone to extraordinary lengths to anesthetize the necessary pain of recession, keeping badly run businesses alive--just--by periodic injections of state cash. The victory of the Social Democrats in the German election ensures that this policy will continue. Indeed it will become more dogmatic in its safety-first nostrums, for the SPD is entirely dependent on the Greens, a party that regards any kind of risk--to health, safety or the environment--as abhorrent. Germany seems set for a long period of slow or nil growth and the one-time admirable engine of EU prosperity can now barely pull itself, let alone the rest of Europe.
The French are in little better state. And both countries are now suffering, for the first time, from restrictions imposed on the national economies in the name of common currency. Both are effectively denied the use of budget deficits to lift their economies out of recession. Once again safety-first policies have shown that they do not eliminate pain: they merely prolong it. Germany has well over four million unemployed, and the figure is growing. France has proportionately almost as many, Spain more.
Against this background of nervous depression and debility, can anyone wonder that Europe's response to Mr. Bush's war on terrorism has been spitefully critical? It is worth recalling that the dispirited democratic societies of the 1930s were similarly reluctant to take arms against the growing dictators of the period. They behaved like ostriches, and the mentality prevails today in countries emotionally drained by lack of economic dynamism.
But Europe must realize it has much to lose. The destruction of the French supertanker off Yemen shows that France has as much to fear from large-scale terrorist acts as the U.S., probably more. Germany is a peculiarly vulnerable target with its lax security procedures. The armed forces of both are in a lamentable state. And the viciousness with which Mr. Bush has been attacked reflects their powerlessness.
It is no accident that Britain, which is semi-detached from the EU and whose economy is aligned more with the American than the European model, has been prepared to take the war on terrorism seriously. We in Britain have comparatively high growth, low unemployment, attract high investment and enjoy economic dynamism. Our armed forces, though small, are well-equipped, experienced and confident.
All these things go together. America can fight and master terrorism alone, if need be, but the support of Britain is important, materially and psychologically. As for the Continental European, we can only hope that they have lost their self-respect as great nations only temporarily.
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