By Steve Forbes
Wednesday, April 15, 2015
Politicians, pundits, economists and financiers are
taking the attitude that a Greek exit from the euro zone would be no big deal,
unlike the situation in 2011–12, when a Greek collapse would have dragged down
much of the rest of the global financial system with it. Virtually the only
private holders of Greek government debt these days are speculators. Everyone
has had time to prepare for “a Grexit” and is ready for it. Such a move would,
perversely, be welcomed by European governments: The misery it would cause
Greece would be an object lesson for their own voters of what happens when you
elect extremist parties with siren songs about shucking off austerity measures
and promising bigger giveaways.
While it may be true that the economic damage of a Greek
collapse would largely be confined to Greece itself, it nonetheless would
undermine the great post-WWII dream of a united Europe that would never
experience another catastrophic war. What’s taken place since the late 1940s
has been remarkable, particularly the creation of the euro.
True, there have always been the tensions that come from
Europe’s statist mentality, whereby continental initiatives too often have been
forced from the top down, with scant regard for the public’s concerns. This has
fueled the rise of extremist parties. The European Commission in Brussels is a
bureaucratic monstrosity that spews smothering, ludicrous regulations–what is a
banana–and is all too prone to corruption.
Even so, until this year a European war on the scale of
those experienced in the last century–not to mention every century before
that–has been utterly inconceivable.
Thanks to remarkably bad leadership, Europe’s post-WWII
order is in mortal danger, threatening unimaginable political and economic
repercussions. The problem isn’t Greece, per se, or Putin’s depredations in
Ukraine and Crimea. The problem is that European leaders don’t know what to do.
Not since the 1930s has the ruling class seemed so helpless, where events seem
to be so out of control. Forbes columnist David Malpass notes in his latest
post, “More Government, Less Representation,” that ever since the 2008
financial crisis governments have imposed austerity largely on the private
sector through more taxes and more growth-killing rules. As in Greece,
government services may be cut–but the government itself gets bigger or is left
largely untouched while everyone else suffers. The only notable exception is
Great Britain, which, under the incumbent government, has cut about a million
jobs from its bloated public sector. This measure, combined with cuts in the
corporate tax rate to 20% (the U.S. rate is almost 40%) and a minor cut in the
top income tax rate from 50% to 45%, has enabled the U.K.’s economy to grow
faster than those of just about everyone else.
Governments aren’t the only guilty parties. Central banks
have made it difficult for banks to lend robustly to the private sector.
Europe has experienced little of the internal structural
reforms that would unleash vigorous, job-creating growth and save the European
experiment that rose from the ashes of WWII. The sad fact is, Europe can’t save
itself.
The U.S. will have to perform that task again, not on the
beaches of Normandy but through the power of positive example once we elect a
new President in two years. Ronald Reagan showed us how to do this with his
reforms during the 1980s. These were quickly emulated by other countries, which
led not only to global prosperity but also to victory in the Cold War, which,
in turn, unleashed even more prosperity around the world.
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