An Open Letter to Europe

Dear European Friends:

I’ve just returned from your wonderful continent, where I visited Berlin and Dresden, Wittenberg and Leipzig, and celebrated the end of communism and the reunification of East and West Germany. My European trip ended in Rome, where I attended a mass conducted by Pope John Paul II — a reminder that collapsing walls and the withering away of communism didn’t occur by accident. They were the result of the indomitable spirit of people who refused to accept totalitarianism.

President Ronald Reagan, Vaclav Havel, Lech Walesa, Margaret Thatcher, George H.W. Bush and others made historic decisions at critical junctures that liberated countries, brought an end to the Cold War and gave us the greatest chance in history to see liberal democracy flourish and prosper. There are 160 nations now freely electing their leaders and more on the way if we do things right in this 21st century. In talking to leaders both publicly and privately, I come away encouraged by talk about tax cuts and efforts to restore strong economic growth to the European Union, but I am discouraged by the anti-market attitude in Brussels and the myopic, growth-stifling ideas that seem to motivate and drive EUrocrats. Thatcher is right in her book “Statecraft” when she contends that the prevailing view of markets in Brussels — and in too many European capitals, I might add — is that markets are “barbaric.”

In the words of former French Prime Minister Edouard Balladur, “What is the market? It is the law of the jungle, the law of nature,” while “civilization is the struggle against nature.” Markets, according to Balladur, are jungles where primitive urges compete in a barbaric struggle for survival while “civilization” (read “government”) represents a heroic struggle of refined politicians against the baser impulses of men and women to harness market forces in pursuit of progress and the collective good.

As Thatcher points out, the “new-left” elite in charge in Brussels, operating under the sobriquet of “the Third Way,” has managed to persuade people “that free-enterprise capitalism needs to be tamed, qualified or restrained by state interventions to render it sympathetic. They have succeeded in this because it is still not widely understood that capitalism contains within itself the means by which society as a whole progresses. It does not need a touch of socialism on the tiller to help it along.” As Havel said, the Third Way is the route to the Third World.

Leaders in Brussels continue to insist on high tax rates, expanding the welfare state, increasing government spending and income redistribution, more regulations on business, protectionism and other market interventions to limit competition. And they insist on “harmonization” among EU members to create uniformity of these anti-growth policies within a single European superstate. The result has been chronic unemployment that hovers around 8.5 percent in EUroland on average, even higher in France (9.1 percent) and Germany (9.6 percent), and depressingly higher in areas I visited in eastern Germany.

Ireland resists this foolish and counterproductive uniformity and insists on conducting a Celtic experiment of its own along an alternative route to prosperity — low tax rates, fewer regulations and lower government spending. The Emerald Isle has one of the lowest corporate tax rates in the EU, scheduled to fall to 16 percent this year and to 12.5 percent in 2003. The results are in: The Celtic “tiger” thrives while the EU “kitten” lags way behind. Between 1994 and 1998, for example, Irish exports grew by 72 percent in real terms, outpacing world trade growth by a factor of three. Last year, in the face of a worldwide economic downturn, EUroland averaged an anemic 0.7 percent in economic growth while Ireland grew at 6.7 percent and its unemployment rate fell to 3.7 percent.

Rather than emulate the success of the Irish model, though, the European Commission has threatened retaliation against Ireland if it continues refusing to raise its tax rates and resists harmonizing other economic and social policies to comport with the slow-growth policies of EUroland. Brussels also has criticized German and French political party leaders for advocating tax cuts to restore economic growth.

I close my critique of the political-economic climate on your continent with some friendly advice from John Maynard Keynes, who once said: “Nor shall the argument seem strange, that taxation would be so high as to defeat its object and that given sufficient time to gather the fruits, a reduction of taxation will run a better chance than an increase of balancing the budget. To take the opposite view today is to resemble a manufacturer who, running at a loss, decides to raise his price. And when his declining sales increase the loss, wrapping himself in the rectitude of plain arithmetic, decides that prudence requires him to raise the price still more. And who, when at last his account is balanced when naught on both sides is still found righteously declares that it would have been the act of a gamble to reduce the price when you were already making a loss.”