The stagnation and decline in Europe raise several thoughts. In the aftermath of World War Two their private sector was woefully unable to provide the immediate needs of a devastated population. This reality and the greater tolerance for socialist ideology and central planning paved the way for the welfare state and the European Union.

As the time line left the post WW II causes behind, the social costs of the welfare state became more pronounced. A low birthrate and a wave of new immigration magnified that cost.

Europe was forced to share the cost with everyone. There was not a large enough wealthy class to absorb this cost. The United States has not yet faced that reality; a large part of the American electorate clamors for benefits without the desire to pay for them with higher taxes. But the high taxes in Europe had consequences, curtailing an entrepreneurial spirit by raising the costs of startups. With no population growth the lack of economic growth will be devastating.

The challenge of the welfare state in Europe is the same as it is here. How do we provide for those who fall between the cracks of a capitalist system without creating a sense of dependency and embedding an underclass in a cycle of poverty?

The history of immigration in America is a story of the impoverished of the world taking advantages of opportunities unique to this country. This story of Cambodian doughnut shops in California is an old tale in the United States with new actors. Relatively low taxes and regulations allowed immigrants to escape their condition.

In the absence of this opportunity in Europe the immigrants present a greater problem; becoming a permanent underclass with all the social threats that entails. A welfare state presents problems of costs and perverse incentives with a native homogenous population, but combined with a policy of open borders both the fiscal and social costs become unbearable. America has a better record of absorbing immigrants partially because of better economic opportunities and partially because of our diverse culture.

Europe is at a crossroads of slow economic growth from a post war period of regulation and high taxes and the creation of a new growing underclass of immigrants that are not being absorbed. Avoiding the ensuing financial, social and political costs is unimaginable. England embraced Brexit for several reasons; most often stated was the loss of sovereignty and control of their destiny. They may simply be the first to leave a sinking ship.

print