Saturday, August 27, 2005

Post Number Forty-Five: Thoughts of a Breakfast with Viv

Of the European path to Civilization

First and foremost:
Dear friends and readers of my blog, as you will notice, I have added the "word recognition" feature to add comments to my posts. This was necessary to prevent comment spamming. I would like to state clearly, that comments to my posts are most welcome and accepted as long as they are not used to promote or advertise services and products of any sort. I will not tolerate advertising of any kind and such comments will be removed as soon as I detect them. Some companies use advertising software to automatically add comments to posts. Simply said, I won't tolerate any form of advertising, automatical or intentional.


During my stay in Sweden, I had at least two particularly intense and thoughtful conversation with that charming girl Viv, whose volcanic mind never fails to impress me. One of them, though, found me in total disagreement with her, and I believe, such disagreement was most likely due to a cultural gap that I have always ignored (and keep ignoring) between the Europeans and the Americans.
What have Americans got to do with a Chinese girl from Singapore? Apparently nothing, but when one thinks about it, it can't go unnoticed that the economical model of development of Singapore, as well as that of other like-minded Eastern nations like Hong-Kong, Taiwan and South Korea, borrows a lot from that of the United States of America. Especially in terms of "freedom of market", scarce-to-non-existent interference of the State in business, low standards of public welfare, promotion of self-entrepreneurship, pursuit of wealth as the main goal of the laymen and such.
Therefore, the American model, which is quite based on these standards, is definitely important in shaping and leading the economies of most Eastern nations, including Singapore's.
The European approach to economy is quite different of course. In the European model, the State intervenes relatively heavily on business through the taxation of financial transactions, by owning critical services (public transport, resources, highways, TV networks...) and by providing significant public services to the population, paid for by taxes. It is known as "Welfare model", and it is typical of the Central and Northern European Democracies, usually led by Social Democratic Parties. Just in case, I am a Social Democrat at heart.
According to Viv, such a system would not work in Singapore, basically because the population is very diverse. There is no way the hard-working Chinese would accept to be stripped of their earned wealth by taxes that would be then used to provide assistance and services to the lazy members of some other ethnic group. In a very diverse society, where people know they are different from each other, any public welfare system is doomed to failure. Besides, it would impoverish the economy, and Singapore is surrounded by hostile nations, protected by its wealthy economy alone.
I presume I have reported Viv's opinion precisely enough. If I made any mistake, and you are reading here Viv, you are welcome to correct me.
First of all, I would like to point out that the fact that a welfare system such as that of Europe is not, as the Americans like to advertise on books written by their experts, going to impoverish the economy. This is simply explained by carrying one example.
The nation of Finland has the wealthiest economy in the world. According to international surveys, they vastly beat the United States in terms of technological advancement and they even surpass mainland China in educational level. Their reliability in business is usually the highest in the world. Nonetheless, they also run their State according to a strictly Social Democratic, European Welfare model, which doesn't make their economy any poorer or less competitive than that of other, aggressively capitalist countries. In fact, they are faring better in terms of economy than those countries.
You might want to check the following link:
Here you will find a listing of the most competitive economies of the world. You will notice that Finland is number 1 in the world, and among the first 4, 3 (Finland, Sweden and Denmark) are actually Socialist European countries, where taxes are high and the welfare intense. In fact, Singapore ranks 6th. This means that the three countries with the highest level of welfare in the world (Finland, Sweden and Denmark) actually possess a more competitive economy than Singapore. Therefore, if Singapore were to choose a Social Democrat model of development, chances are high that the nation would be wealthier and probably even better protected by its hostile neighbors. It might be interesting to note that among those leading 15 economies in the world, Northern and Central European countries with a Socialist approach to economy appear 8 times, and New Zealand, which is also modeled on the Northern European economy, is ranked 14th.
The secret of course lies in not in how free the market is but on how much the country focuses on high education, high tech, and most especially on how efficiently wealth is redistributed among the people, so as not to produce large sectors of population that are basically unproductive for excessive poverty or lack of education.
Finland has the best economy in the world (better than the American) and an extensive public welfare system. This is the last word on the books written by self-appointed experts from the USA that are just afraid they might have to pay more taxes, or even worse, that their taxes could be used for the welfare of the population instead of supporting the industries they own.

This much said it is also true that the European Economy is in general quite sluggish, especially in Southern Europe and Germany. This is usually explained by an alleged malfunctioning of the welfare system.
This is quite not the case.
Ever since Berlusconi set his dictatorship's agenda with the main goal of dismantling's Italian Welfare system, the Italian economy has gone worse and worse each year. The misconception that less taxes imply an economic boom is, in fact, just that: a misconception. The economy can grow a little bit faster with less taxes for a short while, maybe 10-20 years. Then it just becomes sluggish and the nation usually faces the consequences of not caring for its population: in America, the child death rate has increased significantly in the last 50 years, and there are large sections of the population (especially immigrants) who do not have a job, are seriously lacking an education and therefore do not participate to the wealth of the economy. This is America's greatest mistake. Today, America is alive only thanks to the foreigner Engineers that work there, but as soon as other countries will provide better education, America will face the consequences of its shortsighted economy. In 50 years from now, unless America changes dramatically, I expect it to become much poorer and to lose, perhaps indefinitely, its lead in technological innovation in the world.
This I believe is evidence enough to disprove any misconception about the purported efficiency of de-regulated markets as opposed to systems where taxes are used to redistribute wealth.

Now, to the most important part of the conversation I have with Viv. She was saying that Europe needs reformations in the market (I presume, she intended in the sense of free-market reforms American style). I was answering that in Europe there are very powerful leftist parties that would not allow that. She replied that Europe will have to face the consequences of this because the globalization cannot be stopped and such.
I will leave the whole discussion aside for a second because it dawned on me later that morning that probably Viv believes that reforms are prevented by the existence in Europe of leftist parties. And moreover, she might believe that the European model of social welfare was somehow granted from the above by some benevolent socialist government in total disregard of the efficiency of the economy. I have no idea whether in Eastern Asian emerging economies it is usually taken from granted that the model of development is chosen by the government or not, or whether the people over there usually accept the system they live in or not. Judging from her words, it might seem so, but I have no way to know for real. What I know is that this is not the case in Europe.
I am becoming more and more convinced that the Western Civilization is in itself a misconception. There is no Western Civilization. There is a European Civilization and an American Civilization, and to my great discomfort, not all the Western countries are equally philosophically advanced, which makes some of them much more shortsighted than others. Italy is among the most shortsighted by the way.
The European economy started off in the 1950s, after recovering from the world war, following the same principles of the American free market economy. The government were not benevolent. The people had little or no welfare, taxes were relatively low, and there was a huge difference of wealth between the poor and rich. There was no benevolent leftist party granting anything to anyone.
I don't know if this has to do with the fact that we are the cradle of civilization or if Europeans are just made this way. After all, 2500 years ago in Rome the plebeians, which were the common people in the Republic of Rome, revolted against the rich aristocrats and obtained their representatives in the Senate. Perhaps ever since we Europeans have it hardwired in our brains that human beings are all equal, no matter how much some would like to believe otherwise. Whether some people want to buy it or not, human beings are all equal, especially in their reactions to stimuli. It is not a philosophical abstraction, it is a mere fact. They are so similar that every place where some people have been intolerably made to suffer, the weaks revolted. Every time, every where. The Jews revolted against the Egyptians 3500 years ago. The Cubans revolted against the pro-American rich bastards in the 50's. The Chinese revolted against the colonialists in Peking (the revolt of the Boxers) at the beginning of the 20th century.
And the Europeans revolted against the free market economy in the 60's and 70's of the 20th century. Just to make it clear: we are one step beyond capitalism, not behind. There are people, even in Italy that fought and died to obtain pensions, retirements, public health care and general welfare. And the governments were far from benevolent. In the late 50's the infamous Italian Minister of Internal Affairs Mario Scelba, prided himself of ordering the police to open fire on demonstrants. We have made the European economy EVOLVE from the savage, barbarian, primitive capitalism of the USA, into the modern, state-of-the-art welfare system that makes Finland the leading economy in the world while the USA slide down the list day by day.
The leftist parties now found in Europe are there because the people put them there, they are not some bunch of old-school Marxist philosophers that live in la-la-land and do not understand the requirements of globalization. They are the expression of the European people in its struggle to evolve into something more than mere market. Who said that Europe cannot cope with globalization? Not only we can, we are going to change the path of globalization. Thanks to the well-established liberal culture of Europe, the continent is putting more and more pressure on a regulated globalization that favors the development and wealth of third world countries, possibly in contrast with the American approach that is based on the belief that the world is George Bush's playground. There is no way the people of Europe can let their governments return to the old barbarian capitalism. We haven't died for nothing. What is going to happen, instead, and must happen, is that on the long run the so called free-market economies, after their initial skyrocketing increase in GNP, will create such an intense social tension that strikes and revolts will be unavoidable, and their countries will have to concede more and more to the population. Believe it or not, human beings are equal and they always revolt after the social tension reaches a maximum level. Regardless of their culture. It is somewhat possible that in Singapore it won't be the Chinese to revolt. Perhaps the Malay or the Indians, depending on who's the poorest.
The secret to wealth and prosperity is education and lack of social tension. This means lots, lots and more lots of science and technology. Mathematics. Physics. Biotechnologies. Informatics. At all levels. That's the first step. The second step is to prevent the concentration of wealth in the hands of few people. This means taxes whose revenues are used to increase the welfare of the people. It shouldn't be too hard to realize that a society whose people is not stressed, where the public health is granted to everyone regardless of their wealth and life is mostly secure, where everyone has a state-of-the-art level of education, there are no unproductive citizens left behind. That's the secret of Finland, and that's the secret of Europe too.
I am beginning to wonder if Europe has some sort of "destiny" to always be one step ahead of the United States after being left behind when they made their nation. Incidentally, the initial boom of the American economy was due to the immense amount of money invested by their government in public education during the 1800's. Nowadays, America's level of education is appalling to say the least, science is diserted and many confound the bible with reality. That's why they are slowly losing their lead in technological development.

One word about China.
China grows at 9% per year. It's a lot. Some might think that this is a proof their model of development (without even the slightest trace of welfare, despite they claim themselves to be "Communists") actually works.
It works now. It is doomed to fail as soon as the population starts growing older unless pensions and other public care reforms are introduced. Finland's economy was not exactly state of the art in the 50's. They were a backwarded nation of fishermen lost among the swamps of the Eastern Baltic. They invested in education, science and technology. They implemented a capillary structure of welfare. They did not grow at 9% per year and it took them 50 years to climb the ladder, but in the long run they became the most competitive economy of this planet. A recent survey shows that even now Finnish students fare better in science and maths than the Chinese (who are second in the world). Americans rank among the worst. Italians fare worse than the Americans. Italian economy is stagnant (in recession actually). Finnish economy is steadily at the top. We are dismantling our welfare, they are not. This should tell something.

One final thing.

I can't be proud of being Italian thanks to Berlusconi and its dictatorship. There is little to proud of in Italy. I think Italy has a lot to learn from other countries and I am appalled by the stubborn attitude of our leftist philosophers that think that Italy has such a strong Socialist tradition that everyone else should learn from us. Look, we don't have any strong Socialist tradition and there is nothing particularly leftist in the Italian culture. Our former Communist party leaders, although respectful enough, aren't nearly comparable to the personalities of British Labour Party or the Swedish Socialdemokraterna. We have to learn from others just like everyone else.
But I can and am proud of being European. I understand that we Europeans have perhaps fought more and more often for our rights and for equality than some others. I do not mean, by this, that we are better, because I insist that we are equal. I like to think of myself as a European Citizen of the World. I love the Japanese and the New Zealanders, the post-apartheid South Africans and the Brazilians, but I am also proud of all the cultural background that I have been given by my European ancestors.

Perhaps it is time for Europe to open its doors again and export its welfare culture, instead of passively watch the Americans invade other countries and impose their model of so-called Democracy to them.