Europe in Decline

Larry Kudlow:

According to the free market editorial page of Investor's Business Daily, since 1991, output has grown 27% faster in the U.S. than in the E.U. According to the U.S. Labor Department, real per capital GDP in the U.S. stands at nearly $35,000 in 2003, a full 24 percent higher than the near $27,000 average in Europe's biggest economies. EU unemployment is now 9 percent. On a tax basis, it costs 11.5 percent more to bring on a new job in the EU than in the U.S., according to OECD data.

The sad part, for Europe, is that the gap will continue to widen. The big European economies have strong labor unions, and left-of-center politicians in charge. The labor unions limit employment and keep wages artificially high, and whenever talk of solving Europe's economic problems comes up the solution is usually more government not less. Add to this the native aging population of Europe and their dependency on mostly the Muslim non-assimilating population, and you get the perfect storm. So, the problem is economical, social, and cultural.

We can add another item to the mix: the EU. There are talks of tax harmony throughout Europe because of the EU. That would in effect raise taxes of the smaller and faster-growing economies, and thus apply the awful template of slow growth, and high unemployment to practically all of Europe. It seems that politicians in the larger economies of Europe would rather destroy the better incentives of the smaller European countries than create some in their own.

It would be foolish if Europe continued unabated on this destructive path. There might be gutsy right-of-center politicians who oppose such policies and embrace cowboy capitalism. Or so we hope.