Tuesday, June 21, 2005

The Incentive Killers

There are damned few incentives left in modern-day Europe to pull it out of its economic doldrums and the recent bashing the EU has taken on referenda on the proposed constitution are emblematic of continental malaise. Here in the Czech Republic, the government recently opted to tax small businesses 6,000 crowns a year minimum tax, regardless of whether they actually made a profit or made anything---thereby closing down 18,000 little people, the grandmothers who crochet little odds and ends or paint decorative eggs for the annual Christmas festivals, as one example. 


On top of embarrassment over disintegrating constitutional support, budget meetings in Brussels blew up last week over entitlements, the French calling Brits greedy and Tony Blair referring to Jacques Chirac as merely one of twenty-five rather than the voice of the EU.  Chirac doesn’t like to be called merely anything. The French are touchy.  Elegant, but very touchy.


World orders are in disorder everywhere.  Perhaps it’s their nature.  Chaos in its most natural environment. America has its problems with unilateralism and runaway deficits, while the U.N. exists in a state of disunity that has come to define the world body.  The European Union seems to be splitting at the seams and whole continents (Africa and South America) are falling apart.  The Muslim world levitates in what (under the most complimentary of terms) can only be called a state of flux.


Humans across the planet are thus drained of their energies by never-ending power struggles among their leaders.  Creative energy, the natural state of mankind when it is given even the smallest of encouragements, struggles mightily under the load of excessive manipulation, taxation and corruption.  France whimpers over Britain’s $6 billion rebate on their annual EU contribution (probably correctly) as Tony Blair fires back that French farmers consume $13 billion in funds (correct times three). The EU structure encourages farmers to consume 40% of the annual budget while representing a mere 5% of population and 2% of jobs.  There’s that mere word again, but it's small wonder that populations so widely discriminated against are not having the constitutional offering.


Meanwhile, catering to EU farmers and the high levels of social welfare throughout Europe have the continent in a bind.  European citizens have become used to limited working hours, extensive vacation time and early retirements. That’s a hard trend to change and yet it’s been delivered free of charge by decades of politicians to buy votes. This constant purchase with no apparent value other than sustaining one party or another has bankrupted Europe.  Suddenly the bill for free of charge has come due. A similar purchase of the electorate in America has the country perched on the edge of bankruptcy. 


What are voters to do, turn it down? 


Comfort is an incentive-killer, it’s a fact as true as any you can name.  Corruption knocks off incentive as well and our world is increasingly split between the comfortable and the corrupt. 


  • America (comfortable and corrupt)

  • European Union (comfortable and corrupt)

  • Africa (corrupt)

  • South America (corrupt)

  • The Muslim World (corrupt)

It seems that the natural energetic state of man maximizes early and, as his society matures, the incentives become less.  Europe’s weakness is that it has no history (or structure) favorable to renewing that energy.  The largest share of America’s strength lies in the fact that it continues to reinvent itself through business. Business is unforgiving.  Business culture innovates (airlines in the thirties), matures (the fifties) and declines (eighties) into bankruptcy.  The same airline model can be found in the auto industry, or steel.  In a strange and ongoing renewal, bankruptcies mow our economic lawn, bringing up the new and green, mulching the inefficient.  Diametrically, Europe works overly hard and overly long at keeping anything at all from going broke, even as its farmers consume most of its largesse.


But economic miracles begin and end with grandmothers hand-painting eggs to sell at the yearly market.


More at my personal web site about what interests me outside America.