A very European Road to Perdition


Bill Bonner writing from Paris for The Daily Reckoning is claiming that the US road to bankruptcy is running parallel to France. He states that, If you’re French you have to worry about the country going broke. There is no way they can continue to pay all those people who are retired. They seem to live forever…and they’re very expensive. France is going broke. In terms of debt and deficits the country that most resembles France is the United States of America. Both are going broke. But so are many other “European” nations…and eventually, probably all of them. The point is, most of them are going broke. Their model is exhausted. This was the social welfare model derived from Bismarck – take from workers; pay to non-workers. It was okay as long as the pool of workers was growing faster than the pool of non-workers. But that’s no longer the case.

He concludes that, Curiously, the nation furthest along on the road to bankruptcy is a non-European nation that picked up the model early, Japan. Already, there are more people retiring in Japan than there are people entering the workforce. Overall, the population is falling, while the number of people over 65 increases at 3% per year. In 1990, there were more than 4 people working for every retiree. Now there are barely two. Practically all the European nations, and all the nations lived in predominantly by people from Europe…as well as Japan…are headed down this dead-end road.

Bill Bonner and his crew are pretty accurate in their economic predictions, but then they would need to be to sell their services. My instinct regarding their services is that there is a faint odour of snake oil. But we can’t assume that snake oil isn’t a cure for something and may well effect a number of cures, depending on what ails you and your belief in its efficacy. However, there is a fundamental, and undeniable, truth in all of this and that is; ‘to take from workers to pay to non-workers is okay as long as the pool of workers is growing faster than the pool of non-workers‘. To which I would add. ‘and providing that the pool of workers create a surplus of national wealth to maintain such indigence’.

Bonner may well be proved right. Nations are now competing in a scramble for growth, which translates into a competitive scramble for world resources to feed that growth. Further, this growth needs to provide the national wealth to maintain a national social welfare programme such as is found in a European model. The politico-economic solution that you buy into, in the belief that it is the cure that allows you to continue as before, may well be snake oil. Whatever solution you buy into, the medicine that you take isn’t going to be a ‘cure all’, and its efficacy may only provide a respite that is an illusion. But by the time that you find this out, the snake oil salesman will have left town.

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Hello, I’m Ed Conway, Economics Editor of Sky News, and this is my website. Blogposts, stuff about my books and a little bit of music

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