<http://online.wsj.com/article_print/0,,SB111152956482086775,00.html>
The Wall Street Journal March 23, 2005 REVIEW & OUTLOOK Out of Service March 23, 2005 The rhetoric over a proposed liberalization of the European Union's services market has reached a hysterical pitch in recent weeks. One French newspaper refers to the reform as the "Bolkestein Nightmare." Protesters have taken to the streets to oppose what is referred to in the argot of the left as "social dumping." Frits Bolkestein, the former European commissioner who authored the directive during the term of the previous commission, has taken to the airwaves to defend the regulation and to attempt to calm the waters. It's time for a reality check. At this point, it seems almost certain that the so-called services directive will be watered down, perhaps as soon as at this week's summit in Brussels, if it passes into law at all. But in its present form, it essentially requires EU member states to allow those permitted to perform a given service -- architecture, plumbing, etc. -- in one member state to offer their services in any other EU country. This is not only simple, it is a right enshrined -- in theory -- in the EU's oldest founding documents going back 50 years. And it would open up to competition the 70% of the European economy that remains most in need of liberalization. The free movement of capital and goods works fairly smoothly in Europe. The free movement of people works well, with the exception of the bigoted restrictions on the right of citizens of new member states to seek work in most of the 15 old ones. But when it comes to services, the old guard is out in force. Visions of hordes of Polish plumbers driving French and German ones out of business have clouded the minds of union leaders and politicians alike. Hard-won social protections are said to be in jeopardy as poorer, and in some cases more liberal, eastern member states send cleaners, movers and accountants -- all supposedly making starvation wages and denied adequate job protection at home -- westward, lowering standards of service and destroying Western Europe's economies in the process. Forgive us for breaking up the angst party, but this isn't going to happen. There are barriers of language and, in many cases, distance to be overcome, for one thing. But the real elephant in the room in this debate is that the barbarians are already inside the gate -- and in many cases they are not foreigners from east, but longtime neighbors. There isn't a country in Western Europe in which one cannot contract with some service provider or other for cash in the black market, reaping a handy discount and saving your contractor a hefty tax bill in the process. In some cases, this means dealing with a duly licensed, legitimate businessman who does a little work on the side, off the books. In others, it means hiring illegals to re-roof your house or renovate the kitchen. In either case, many of the rules that are supposed to protect worker and client alike are more often than not being bypassed in the name of saving a euro or two. But those euros add up. In some countries in Western Europe, the black economy has been estimated to equal from a fifth to a third of the size of the legitimate, tax-paying sector. The prevalence of the underground economy speaks to the demand for competition in services, demand that is too often squelched by protectionist legislation such as the German law that requires three years of formal schooling to cut hair. Opening up Europe's services sector to competition from other member states where feasible will not so much mean the destruction of legal standards as the likely replacement of some portion of the black market in many sectors with licensed, tax-paying providers from other member states. It will also, according to the commission's estimates, create over half a million net jobs and bring prices down by 7% on average -- the latter a testament to just how coddled many of these businesses currently are. "Social dumping" is already here. It's called the black market, and it's all around us. It is, in a sense, the desideratum of a welfare state so burdensome that many people can only get by, and many others can only get service, by circumventing laws. -- ----------------- R. A. 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