Mind the Gap

The productivity gap, that is. So says Anthony de Jasay to the EUrocrats in general debating economic liberalization and their revealed preference against it.

According to de Jasay, the political problem facing the EUrocrats is this:

The long and short of it is that the increase in material wealth and social justice are regarded by the dominant strand of European opinion as two rival gods. If the economy is driven to deliver more of one, it will inevitably deliver less of the other. The social and political mix incorporated in the American model will make it deliver more wealth and less social justice; the European model will make it do the opposite.

This is very broad-brush economic theorizing and it is easy to bring it down to earth with some hard-headed scrutiny. However, it has the great strength of meshing remarkably well with the ideological defence of social justice. For if material wealth and its equal distribution are two rival goods that can be "produced" in variable proportions,?more of one entailing less of the other?asking which is "better" is a silly question. There shall be no dispute about tastes; it is for the consumer to decide what dose of each good he prefers. The American apparently wants to tilt the "product mix" more towards riches, the European favours a mix with more equality even if that means somewhat less wealth.

Of course, the voters destroy any politician on the continent (or even the UK) that threatens to or attempts to liberalize their respective economies, hence European voters, at least, are getting what they ask for (high unemployment, low growth, & generously mediocre social services).

In monetary policy, you can't keep inflating forever, or else you get the crack-up boom. Austrians know that when the inflation stops, the bust (and painful readjustment to reality) occurs. The only decision is how bad the bust will be[1]. The same deal goes for social welfare statism that is premised on an ever-growing economy and youthful population; the cost of benefits is outstripping the ability to pay. Something's gotta give.

fn1. Which is directly dependent on the length and amount of credit expansion.

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