Fairness and Hard Work

Headlines in today’s newspaper said Europe was slowly sliding into a deep recession.  Without a bailout (read German loans), dark days lay ahead.  How did this situation come about?

You can be sure it didn’t happen over night.  It has been building and is the result of cumulative events.  But then, life is usually that way.

France had riots this week in the city Amiens.  With unemployment over 20%, some French citizens have had enough and are not going to take any more.  But who should they blame?

French unions pushed for a 35 hour work week in 2000.  They claimed this reduction with working hours would required companies to hire more workers.  More workers, lower unemployment they reasoned.   Business owners saw it differently.

It might have worked had workers agreed to take a pay reduction equivalent to prorated 35 hours of pay.  Instead workers wanted to keep their full pay, in effect, a pay increase for working less hours.  Nice if you can get it.

France like most other European countries had used import restriction and fair price regulations to protect their industries (and their workers) from imports.  It may not have been efficient but life was quite comfortable for the French.  In 2000 with globalization and the Euro in place, these old tricks would not fly.

The French then turned to government subsidies and unbalanced budgets.  Almost unnoticed was the advent of big box discount stores.  Mom and Pop shops and businesses began to disappear.  With globally lower prices, jobs evaporated in France and reappeared in places like China.   Sound familiar?

Fast forward.   France finds itself today with high national debt, a mediocre global competitive position, no plan to balance its budget, and high unemployment.  To some extent, the same can be said for Greece, Italy, Spain, and Portugal.  How can these governments “spend” their way back to prosperity when they are tapped out on credit?

There is plenty of blame to go around.  Working less and getting more just doesn’t compute.  Thinking that good outcomes come from importing unlimited amounts of goods without a balance of trade is a loser idea too.

Politicians who offer the “free lunch” solution (lower taxes, increased government benefits, etc) do no one a favor. And greedy corporate and banking executives that see profits to be reaped and do not think about the long term consequences are very close to committing criminal actions.

This is all happening in Europe.  But wait, is this not also a blue print of the US economy?

Republicans are telling voters it is time to stop digging. (Good idea)  Unfortunately, their message of stop digging (eliminating a large amount of government spending) is selective.  The holes associated with defense and energy industries do not upset Republicans as does health care and social programs.   And, taxes, Republicans incredibly say, can only help if they were lower (making the deficit closure more onerous).

Democrats seem mostly in favor of riding the current situation out and hoping it will improve.  Democrats do call for higher taxes for the top 2%   While that may restore some amount of fairness, it will not balance the budget nor bring the deficit and debt under control.

The French government knows its own situation well.  These bureaucrats know full well what should be done.  The problem is voters.

Until France tells its citizens the full truth and calls for across the board sacrifices (fairness and hard work) followed by living within its means, it cannot expect to aid its economy.

The same is true for the US but who here wants to learn from Europeans?

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