Why is Europe in the poo?

For those of you intrigued by the teaser in my recent post:

https://da-boss.com/2013/05/16/europe-update-8/

and dying to find out why Europe is doomed, the wait is over – all shall now be revealed! But before we delve into it let us briefly explore the reasons behind Europe’s economic dominance before the US took over in the early 20th century. Why were the English, French and Germans so good at generating wealth and projecting military power? Why were for example the Chinese lagging behind?

The answer is clear – technological superiority. England, being the cradle of the Industrial Revolution, had a head start but other European countries soon joined in this feast of progress, fueled by capitalism. As the technological advances spread to the dominions, Europe retained the lead for a while until another superpower emerged due to the extra advantage it enjoyed over Europe. Enter the United States of America.

So why did a remote former British colony turn into the World leader in terms of the living standards and economic power? Because it had the social system devoid of feudal hang-ups and geared towards growth. While the first viable car was a Benz, the first mass-produced car was Ford T. Why did Benz not mass-produce his vehicle in late 1800s? Because the sclerotic social structure of the Kaiser’s Germany did not create demand for it. Because the top social tier was already occupied by the blue-bloods and deemed inaccessible to others. None of these factors applied where Henry Ford lived so he proceeded with his dream. Telephone, washing machines, TV etc followed in Model T’s mode.

Fast forward to late 1900s. What had changed in the 100 years prior? Well, information and technology were spreading unobstructed, due to the internet (another US invention!). The capital became global – assisted by the free transfer of information. Education systems worldwide, modeled on Cambridge and Harvard, were producing skilled and capable graduates keen to make it in life. But the important difference was that, in the West, the social structures had evolved to include various human rights and universal welfare. Citizens expected to be looked after no matter what and the money to fund this indulgence had to come from those who actually worked for living. Participating in the wealth generation became optional – a parallel stream of welfare-riders had developed. The Western World had lost its competitive edge.

If it all sounds too theoretical consider a generic example of a Western executive in 1990 deciding whether to relocate production facilities from France to China. In France the trade unions would always twist the employers’ arm for more concessions – lunch breaks, holidays, maternity leave etc. In China equally well qualified (and, frequently – better motivated) workforce would be happy to bust their guts for a quarter of the pay and without unionism. There would be no hassles with gender equality, combating sexual harassment, anti-racism legislation, disabled toilets. Just the workers turning up on time, doing what is expected of them and leaving the factory after the shift is done, only to return the following morning. Also, like in the US during Ford’s times, as the middle class developed, more and more of the product would be sold locally. As an executive making this decision in 1990 what would you do?

This is the root cause of the West’s demise. When the access to technology and conducive social conditions only allowed for the hi-tech manufacture in Europe or US there was no issue. But these days a fabrication plant in Thailand or Vietnam churns out perfectly adequate LCD screens at a third of  the price German workers could make them for. The way things are going Asia will keep importing French wine and Italian violins but everything else will be made locally. More importantly, their products also flood the West’s markets, putting local manufacturers out of business. Not because Asians cheat but rather because they are better at the capitalist game started by Stephenson, Edison and Gates.

So, in da-boss’ view, the West cannot retain the current level of universal social services as well as the manufacturing base required to support them. The fact is others are willing to fabricate goods cheaper than we, burdened with the extra overheads to pay for the socialist utopia, ever could. We can hide behind trade barriers and tariffs but the commercial reality will eventually prevail. Unless the West becomes competitive we will die. So why will we not do it? The answer is democracy.

To improve its commercial competitiveness the West would have to lower the manufacturing overheads and increase the productivity of workforce. In the process we would need to sacrifice the social services we have become used to – unemployment benefits, public healthcare, free education etc. In a practical sense this would mean a political party declaring before the elections that all of this would happen and then winning enough votes to govern. This will not happen because the general population is too dumb to understand the issue and too short-sighted to make painful sacrifices for the sake of cultural survival.

So there you have it – the West is doomed because the Thais can make the same iPads cheaper and we want iPads. And we want them along with all the social services which can only be paid for through taxes on locally generated income. But no local manufacture = no income. No income = no taxes. No taxes = no social services. No social services = misfits taking to the streets, collapsing the system. It is that simple.

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2 Responses to “Why is Europe in the poo?”

  1. Nick Says:

    Can’t agree more.
    To elaborate your thought about democracy, or, to be more precise, populism as a root cause of Western problems. I personally think that meritocracy is much more suitable system than direct democracy which is stupid and does not work. According to Lenin “every kitchen maid should have the right to rule the state” — this is wrong.
    At the same time I am very anti-authoritarian; I think there should be a Middle Way. Decisions should be made by smart people elected by smart people who really care. So, there should be exams as well as other barriers (age, residential qualification, education, etc) for people who want to vote and/or be elected. But the opportunity to sit these exams should be opened for every qualified citizen.
    There should be no populism in this case.
    What do you think?

  2. da-boss Says:

    A post on how to “improve” democracy is in the pipeline…

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