Bob wrote:
>
> David Hillary wrote:
> >
> > [EMAIL PROTECTED] wrote:
> > >
> > > A fascinating viewpoint, David!
> > >
> > > Surely the Euro was created BY statists -- you're saying that --
> > > long-term -- the Euro will be a part of (an instrumental part of) the
> > > downfall of the statists.
> > >
> > > Is that correct?
> >
> > It is, although I don't necessarily see the forces of European
> > integration as being statist. Europe is dominated by mixed economy
> > welfare state style democratic capitalism, which is really a different
> > thing from statism. Compared to other parts of the world, western Europe
> > is noted for its extremely high govt. expenditure to GDP ratios (up to
> > 66% in the case of Sweeden, according to the Fraser Institute's Economic
> > Freedom of the World), but its use of the free market
>
> What free market? SHOW ME THE FREE MARKET! The only free markets I can
> see
> in the world are black ones and the FX market.
European markets are free compared to other major centres of population
and output, although they could be freer, and will be over the coming
decades.
>
> in matters such as
> > banking, finance, capital markets, economic structure, openness to
> > trade,
>
> You didn't notice the beginnings of a trade war between the US and
> some European countries under the Clinton administration?
>
I know there are trade disputes and trade protectionism in both the US
and Europe -- it was only a few years ago that Clinton slapped punative
tariffs on New Zealand and Australian lamb (if you want to see free,
unsupported and unprotected agricultural markets thriving nook no
further than down under). Obviously these are worrying, as is lack of
progress on trade reform. However it should be noted that within europe
there is free trade (again imperfect, but a hell of a lot beter than
each little feifdom having its own trade policy!).
> and foreign investment, and maintains very high security of
> > property and small blackmarket/informal sector. This actually makes
> > western Europe more or less the most capitalist place on earth. The
> > world rankings of European nations for economic freedom according to the
> > Heritage Foundation's latest Index of Economic Freedom (2001) are:
> > Ireland (3), Luxembourg (5), UK (7), Netherlands (8), Switzerland (9),
> > Austria (14), Denmark (14), Estonia (14), Belgium (20), Germany (20),
> > Finland(23), Czech Republic (27), Italy (32), France (39). For
> > comparison the following economies are ranked: Hong Kong (1), Singapore
> > (2), New Zealand (4), USA (5), Australia (9), Chile (13), Canada (14),
> > Japan (14), Taiwan (20), Thailand (27), South Korea (29), Argentina
> > (29), Mexico (68), South Africa (81), Phillipines (81), PRC (114),
> > Indonesia (114), India (133), North Korea (155). Although I have grave
> > fears of a euro-super-state, I believe this threat can be contained by
> > the economic forces of international competition and globalisation.
> > Motives in europolitics includes various shades of collectivist and
> > non-liberal thinking, but there is also substantial liberalism within
> > Europe. The liberal and non-liberal forces can compromise, acheiving
> > *integration* (mutual recognition of laws etc. and the removal of
> > barriers to international movement of resources, including labour) but
> > resisting *harmonisation,* (maintaining the same policies) so that the
> > appearence and symbolism of co-operation can be maintained while
> > national sovereignty survives intact and the integrated market fosters
> > competition and keeps states in check. So while many motivations, and
> > the current paradigm, might be 'statist' in the sence of welfare state
> > mixed economy capitalism, the forces they are unleashing will inevitably
> > lead Europe to become a community of Hong Kongs.
>
> Maybe. But I think European governments will only do it after they loose
> huge amounts of revenue (political power). They have the same problems
> Japan and the US has. An increasing greying population. Huge and growing
> unfunded liabilities. The US is adding over a trillion a year, up to
> 1.5 trill depending on definition. Those numbers aren't chicken feed.
>
This unfunded liability and welfare dependency problems will force
further immigration liberalisation, and welfare and pension reform. The
problems are very very serious, however, people are free to migrate to
european jurisdictions which are making better progress at fixing the
problems. This puts governments under much more pressure than the govt
of the USA of Japan, which have much larger and more captive
populations.
> Yes, European nation
> > states will reduce their appetites for revenue to around 15-20% GDP,
> > they will not subsidise tertiary education and they will deregulate
> > their economies, much like Hong Kong today. Yes it will take a long time
> > (30 years at least).
> >
> >
> > >
> > > So for example, we all love what has been happening in Eireland, and
> > > your point is that the EURO indeed HELPS Eireland
> >
> > The euro certinally helps Ireland attract european capital and european
> > companies: companies have no nominal exchange rate risk and no barriers
> > to exporting their product to the rest of Europe.
> >
> > Ireland is leading the pack in terms of control of government
> > expenditure, openness to foreign investment, slashing corporate tax
> > rates and repayment of public debt and microeconomic reform. You might
> > know that Ireland has averaged real GDP growth of around 6% p.a. for the
> > last decade! This is the sort of thing that is possible when nation
> > states are soverign and markets are global -- the nation state provides
> > land that is hospitable to labour and capital, labour and capital flood
> > in. Soon one or two or perhaps three other european states will try and
> > emulate this performance. Any serious attempt to do so will reproduce
> > the similar success. This forces response from other states and soon you
> > have full blown tax competition. The Euro helps this process, as does
> > the free movement of labour.
>
> I can't see the Euro helping much compared to a government making
> substantial
> steps to get out of the way of workers and business, which is what
> Ireland
> is doing. This was started substantially before the Euro was started.
> Ireland
> could very well undo their current successes if they join the EU because
> of
> the anti-competition rules and regulations that they would then be
> subject to.
The euro is less important than the free movement of labour, but it is
still important.
>
> > > {A world-wide currency would help them more -- hey, e-gold! :) }
> >
> > This is growing and will continue to grow, but I am unsure where it will
> > end up! Certinally it will dominate the blackmarket!
> >
> > >
> > > What are your thoughts on Europe, with it's various parts but one
> > > currency, vs. the US with it's various parts but one currency?
> >
> > Think of the USA as 50 countries with a comprehensive free trade, free
> > investment and free migration treaty.
>
> Why bother. That's not the case in the US. Just some micro examples:
> A Massachusetts refrigeration mechanic or pipefitter caught working
> in Rhode Island without a Rhode Island license to do that type of
> work can legally be arrested on the spot and his vehicle impounded.
> In Michigan you have to have a government license just to lay tile.
> In Nevada, name one occupation that you can work at that you don't
> need permission from and a payment made to the government to work at.
> Ok, marrying people. But they're now trying to license *and*
> finger print them too.
>
> More and more working in the US is becoming a government granted
> priviledge that you have to pay for.
>
> You can take about USD 2,000 down to Mexico or Brazil and buy
> a brand spanking new VW. They are now illegal to import into
> the US. The cheapest car you can buy in the US is about $10,000.
> Free market, my butt. One guy could pull the engine, rebuild
> it with $100 bucks of parts, throw it back in (4 bolts) and
> restart it that same night (a long one, you'd have to push)
> after work.
Its sad to hear about so much occupational regulation in the USA.
>
> It also, by virtue of a common
> > currency, has a common financial/capital market. Add in a history and
> > culture of individulism, and you get the most powerful political entity
> > in the world.
>
> Currently now, ya. But what are the trends in place? Trends are real
> important to watch.
I'm watching, with fear as well as optimism!
>
> The USA has about 270 million people and Euro has about
> > 350 million (give or take), with free trade, free investment and free
> > movement of labour as well -- its not hard to see the similarities, both
> > being advanced capitalist economies. The difference is that the USA had
> > an overbearing federal government which collects 20% of GDP in taxes,
> > imposes a top tax rate of nearly 40% and a top company tax rate of 35%,
> > whereas in Euro area individual nation states can determine their own
> > tax policies to a greater degree (for example Ireland with a 12.5%
> > company tax rate by 2003). This obviously limits tax competition within
> > the USA while allows it in the euro area. The euro area has a lot more
> > upside potential from microeconomic reform,
>
> Right. That's how bad things are over there right now. I see a lot more
> on the down side before things get better. Decades.
Tax rates on capital are already being cut and have been cut! This is
the fruit of capital market integration and financial integration,
lagged several years. The effects in the labour market will start coming
through soon.
>
> labour participation rate
> > increases, welfare reform, trade liberalisation and financial
> > integration than the USA because the USA is quite far ahead
> > historically, but in effect trapped in a political/economic/rent-seeking
> > equlibrium of policy. In the next 20 years western Europe will probably
> > grow faster than the USA. So invest in European stocks for your long
> > term investments (in places like Ireland of course!).
>
> I wouldn't even use your money to buy Europe. :) Not for a long long
> long
> time. There's some huge percentage of the population over there that is
> depending on the government for their retirement benefits, health care,
> etc. This situation is going to get worse because of their demographics.
> These are European government unfunded liabilities. To raise revenues
> they can sell government assets (not bad), raise already high taxes (bad
> for the economy, therefore bad for revenues), incurr more debt (bad for
> the economy, therefore bad for revenues), or print more money (bad for
> the
> economy, therefore bad for revenues). I see 'em as real close to being
> between a rock and a hard place.
Governments in europe are between a rock and a hard place alright! They
will have to make tough decisions. I have optimism that the feedback
from good versus bad ways of coping with the problem are intensifying
and that most jurisdictions will move the right way reasonably soon.
>
> > Obviously the USA would be much better off if the federal government was
> > constitutionally prohibited from levying taxes on citizens and could
> > only raise revenue from the states.
>
> Hey hey hey! What's the matter with plain 'ol voluntary taxation? <grin>
Well I don't think it would be paid, hell I wouldn't pay! <grin>
Taxation should be on land value and at the local level in my view, with
the rent of land being a good proxy for the benefits provided by
government.
>
> In this way tax reform could be
> > undertaken by individual states and the people of the USA would have a
> > much increased ability to contsrain their currently bloated and
> > overcentralised government.
>
> You got that right. And that ain't economic freedom. For that try
> Shainghia, Guangdong, Shenzhen and Hong Kong. There's a lot of
> political power in those places. Concentrations of wealth tend to
> produce that type of thing. So watch the world's wealth movement.
Shainghia, Guangdong, Shenzhen? where are they?
David Hillary
>
> Another thing China has going for them. The US isn't likely to mess
> with them much as they have about USD .4 trill of US government debt.
> Can you imagine what would happen to the US economy if they started
> dumping that on the market?
>
> Bob
>
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