15 Jan 2008

Are Europeans Rejecting Economics?

In a scary and thought-provoking essay, Stefan Theil of Newsweek magazine discusses the "economics" content of French and German textbooks. What he finds is an abundance of paranoia of markets and faith in state-managed economies.

Textbooks say things like this:
"Economic growth imposes a hectic form of life, producing overwork, stress, nervous depression, cardiovascular disease and, according to some, even the development of cancer," asserts the three-volume Histoire du XXe si├Ęcle, a set of texts memorized by countless French high school students as they prepare for entrance exams to Sciences Po and other prestigious French universities. The past 20 years have "doubled wealth, doubled unemployment, poverty, and exclusion, whose ill effects constitute the background for a profound social malaise," the text continues. Because the 21st century begins with "an awareness of the limits to growth and the risks posed to humanity [by economic growth]," any future prosperity "depends on the regulation of capitalism on a planetary scale."
While I am not friend of unfettered capitalism (for that, look at China -- and then look at China's water crises), I also know that capitalism does create wealth and prosperity for workers, citizens, entrepreneurs and capitalists. Even bureaucrats need capitalism, if they are to gather (and spend) ever-larger chunks of money "for the public good".

It gets worse, laying out the tired fallacy that companies are the enemy of workers:
One 10th-grade [German] social studies text titled FAKT has a chapter on "What to do against unemployment." Instead of describing how companies might create jobs, the section explains how those without jobs can organize into self-help groups and join weekly anti-reform protests "in the tradition of the East German Monday demonstrations" (which in 1989 helped topple the communist dictatorship). The not-so-subtle subtext? Jobs are a right to be demanded from the government. The same chapter also details various welfare programs, explains how employers use the threat of layoffs as a tactic to cut pay, and concludes with a long excerpt from the platform of the German Union Federation, including the 30-hour work week, retirement at age 60, and redistribution of the work pie by splitting full-time into part-time jobs. No market alternative is taught. When fakt presents the reasons for unemployment, it blames computers and robots. In fact, this is a recurring theme in German textbooks—the Internet will turn workers into "anonymous code" and kill off interpersonal communication.
Oh really? Without companies, many people would be desperately poor. Not everyone has the character to be a self-made entrepreneur or petit capitalist, but many people are happy to work as a cog in the gears -- in exchange for a nice salary and enough time to "work" and read Dilbert.

This educational agenda, if as widespread as Theil says, is bad bad news. Besides creating a generation paranoid of capitalism, it creates a generation ignorant of economics. If there's one thing the world needs more of, it's economic knowledge. The economic ignorance behind many U.S. policies has impoverished the very people who support them and enriched politically-adept, "political" entrepreneurs presenting themselves as "public heroes". We need more, not less, sophisticated citizens, and these textbooks are going the wrong way.

Bottom Line: Citizens and voters support policies. The state educational systems in France and Germany are supporting education of children that favors the State over private enterprise. These children, as voters, will of course give more support to the State, increasing its role and diverting resources from the private sector. As Ayn Rand wrote in Atlas Shrugged, there is only so much burden that capitalists and entrepreneurs are willing to carry before they revolt and take their toys elsewhere. Even worse, they may give up, and we will all pay the price.


  1. " . . . left behind . . . "? Do you think Krugman read this article before writing this column this week?

    If, behind the veil of ignorance, I had to choose where to be born, I'd choose Europe, hands down.

  2. Yes, the veil is a useful idea: you will be safe, but safe in a place that does not reward risk. After time (this is a short long run), there's less to go around. The Soviets knew about this :)

    Krugman's points are good -- about present day Europe. The point in the other piece is that State-centric policy is getting a central place...

  3. leaders, and are doing very well. I don't see that changing for quite some time, no matter what the ideology of their textbooks.

    Externalities exist, information is imperfect, and the second derivative of a firm's production function is positive in some industries. Even imperfect government policies can address these problems and increase efficiency. (Even you would agree with this, wouldn't you? Or are you ready to let the SUVs melt the icecaps?)

    The real point of Theil's article is to scare people in the U.S. "Don't let it happen here!" If anyone even begins to suggest that the U.S. might consider sound policies to address market failure, the Euro-bogeyman can be rolled out to shut down debate, the same way the communist bogeyman was rolled out in the past. The Soviets knew quite well that it was always helpful to have a good bogeyman around, didn't they comrade?

  4. Good point, but my fear -- the manipulation of children -- is relevant. I have had surreal conversations about "the market" in Europe, and this piece captures the ignorance and fear I encountered.

    The US is not going down that road, and -- yes -- I think that government regulation can be helpful. (I also *know* that regulation is often manipulated by business).

  5. The widespread ignorance of basic economics is indeed scary. Hell, I've had surreal conversations about "the market" in San Francisco, Oakland, Los Angeles, Portland...!


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