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Politically Correct Welfare State: Beginning of the End

Dr. Jan Winiecki

Dr. Jan Winiecki is currently a professor of international trade and finance and chair of the Department of Economics, Viadrina, European University, Frankfurt/Oder, Germany. He has taught at universities in Poland and Denmark and served as economic adviser to the leadership of underground "Solidarity" from 1985-1989 and a member of President Walesa's Political Advisory Council in 1991. He was president of the Adam Smith Research Center in Warsaw, Poland, from 1990-1995 and was executive director of the European Band for Construction and Development, London, England, from 1991-1993. He has written dozens of articles on Soviet-type economies, comparative economic systems and the transition of Eastern Europe in the last 10 years from central planning to market-based economies. He has authored 10 scholarly books, the latest being Political Economy of Reform and Change, and has recently edited Institutional Barriers to Poland's Economic Development.

by Jan Winiecki
August 30th, 2002

This writer is not at all sure that Western Europe has learned the lesson of the French presidential election. The bubbling of politicians and pundits suggests the same, old, self-satisfied frame of mind.

Some journalists wrote and talked about the defense of the "dignity" of France, others about the "shame" of France, but the politically correct still see both the defense of dignity and the shame in the context of the Le Pen electoral results. There is not much more sense, when one distills the content of the stories written about the murdered Dutch politician Pim Fortuyn.

Returning for a moment to the French election, for me as much shameful as the Le Pen result has been the collective electoral result of the "three-and-a-half" Trotskyite candidates. Even without Mr. Jospin's "half," they collected 10.5% and, after adding the result of the Stalinist communist party candidate, it amounted altogether to almost as much as Le Pen got! Same old story in left-leaning Europe. There are no enemies (even totalitarian enemies) on the left.

Political Consequences
of the "Right to Somebody Else's Income"

But, let us leave aside the idiosyncrasies of French politics. France is probably the most visible piece of a larger West European landscape. And the landscape is, after September 11, clearly pointing to a change of paradigm. The paradigm for the last 15-20 years or more has been characterized by the unmovable welfare state, increasingly underpinned by (often legally enforceable) political correctness.

The welfare state has been taking away more than half of the taxpayers' income and redistributing it in accordance with morally and economically dubious principles. In turn, the (increasingly) politically correct state limited free speech in many walks of life, either legally or under the threat of political ostracism. And the issues taken out of the public debate have often been of crucial importance for the sense of well being of the citizenry.

One of them has been the immigration question. And yet, anybody who questioned the politically correct view that the problem does not exist has been (often viciously) attacked as a xenophobe. And yet no left-leaning or leftist or downright totalitarian critics of "xenophobes" -- that is, those demanding some limitations on immigration for one reason or another -- ever considered the following question: Why were there no discussions on the immigrants' costs for the citizenry in the XIX century, when migrations were very much larger than at present? My suspicion is that the question has not been asked because the answer is rather uncomfortable for the politically correct bunch.

The XIX century was the age of the liberal order, and host countries were strongly free market oriented. Those entering the U.S., Australia, Canada, etc. knew they had to depend on themselves. There were no social assistance benefits, unemployment benefits, housing benefits or many other benefits offered nowadays by the welfare state. Therefore, nobody bothered oneself with the fertility of immigrant families, for example, for it was understood as a matter of course that the children were to be maintained by their parents, not by the redistributive state. Please note that the progressive income tax and income redistribution is the invention of the XX century. It was the last century that introduced what Polish philosopher Bronis'aw 'agowski called "the right to somebody else's income."

There is no free lunch, though, as we are taught by Milton Friedman. And, if the redistributive "dole" is being spread widely to relative newcomers, sooner or later people will start asking unpleasant questions, such as: "Who is footing the bill?" The welfare state that whets people's appetite with chunks of somebody else's income deforms character and undermines morals. It becomes the source of new conflicts, hitherto unknown in the XIX century liberal order.

In Defense of "Club Goods"

Another uncomfortable answer concerns the question which people, for reasons of political ostracism or even threat of legal action, have often been afraid to ask. Let us, then, call a spade a spade. There is strong theoretical, economic, political, and social rationale for establishing certain barriers (quantitative as well as qualitative) to immigration. These are best explained in terms of the theory of clubs, formulated by such economists as Herbert Giersch and Gary Becker. The theory stresses positive economic effects of the so-called club goods: the pride in the club membership, sticking to the letter and the spirit of club rules, attachment to honest dealing, truthfulness, punctuality and other "lesser virtues" (in terms of Victorian moralists).

These virtues emerged in the long process of capitalist market evolution. Now, accepting as club members those to whom most of the club rules are foreign, or even those who believe that the rules were imposed upon them and, therefore, do not intend to play by these rules, will result in the decreased predictability of behavior of club members. This reduces the benefits of club membership. Once the numbers of those who do not play by the rules increases above a certain quantitative threshold, the benefits from club membership disappear altogether.

Please note that the difference between America in the XIX and France (for example) and Britain or The Netherlands in the XX-XXI century is that those who settled in the former dreamed of becoming "true Americans." The first generations did not always succeed, and lived for a long time in their linguistic ghettoes. But their children and, certainly, their grandchildren, succeeded and emerged from the melting pot as American as everybody else.

The real problem of many late XX century immigrants to Western Europe is their unwillingness and, perhaps, their inability to accept the rules of the game of democratic capitalism. Since joining the club means not only jobs and welfare benefits, but also standards of Western civilization, many of those brought up in different standards reject the world they live in, but not the benefits of that world!

Therefore, the limits to immigration are increasingly perceived as the defense of club goods. The term, "the livable Netherlands," coined by the much maligned and finally murdered Dutch liberal Pim Fortuyn, refers indirectly to the club goods in danger of being eroded by those rejecting them while being in. The Australian foreign minister said in an interview, "There are limits to our generosity." The welfare state and politically correct state meet together in the foregoing statement. It should be noted that the generosity would not become an issue if, as in the age of liberalism, there were a tacit agreement between the host countries' population and newcomers that the latter will live on what they earn.

End of Terror of Political Correctness

The common people see all that and much more.

For the last 10-15 years, it has been taboo to link public immigration and crime. One could easily earn the label of a xenophobe or worse. The increasingly politically correct London Economist called Le Pen, after his success, "super fascist." Although some of his views are nasty indeed, some others are merely stupid. Incidentally, I did not hear the label "super Stalinist" or "super Trotskyist" used vis-à-vis as nasty and as stupid views in regard to the extreme left of the political scene!

It is not accidental that in almost every Western European country there is a growing popularity of those politicians -- mostly new -- who openly call for more law and order and do not hide the fact that there is a link between immigrants -- legal and illegal -- and the level of criminality. The man on the street does not think in terms of high theory; he or she sees the growing threat -- or has been directly affected -- and expresses fear and disgust.

The horrors of September 11 changed the ruling paradigm. With the terror of political correctness weakened, certain things became again, even if with visible difficulty, an object of normal political debate. So, one can suddenly read in Newsweek that in Switzerland, 80% of drug dealers, 68% of rapists, and 62% of murderers are foreigners. Foreigners also committed 80% of the robberies and make up more than half of the Swiss prison population. Within only a few weeks, I read similar data for a number of other West European countries in the press, a press that earlier was curiously silent on the topic of law and order and the contribution of immigrants to the rise in criminality for many years.

In France, a victim still cannot say that it was an Arab who tore away her handbag and escaped, since it would be a crime of "inciting racial hatred." But, people have their own experience in this and other respects. They have been all the more furious since they could not express their fears and their postulates, because political correctness removed some issues vital for their well-being beyond the borders of normal political discourse.

People Are Groping in the Dark

Irrationality is, unfortunately, blooming. For without open public debate people are groping in the dark. It is clear that the problems of the demoralizing, greed-reinforcing welfare state, with its right to somebody else's income, will be solved neither by Le Pen nor by Trotskyite ideas. Nor are they a cure for the terror of political correctness, with its enforced problem avoidance. But the blame should be put squarely on the shoulders of those who for so long refused to face the reality.

The experience of the last few years, strongly stimulated by the change of paradigm after September 11, allows this writer to formulate three hypotheses: First, the people will continue to search for solutions to their existential problems.

Second, the parties of the establishment that supported the politically correct welfare state will continue to lose public support as both collectivist left and paternalistic right, by and large, are perceived to be unable to undergo a radical renewal. This is, however, a conditional, not categorical, statement, as the Conservative Party under Mrs. Thatcher indeed implemented a liberal, free market counterrevolution.

And third, people will increasingly be turning, not toward retrogressive nationalism, but toward free market liberalism. For the latter is not in conflict with law and order. On the contrary, the idea of "club goods" is based on the premise of a limited set of strongly enforceable rules. Economic efficiency and low level of criminality were the hallmark of the golden age of liberal order.

The trend is visible even now. A quick look across Western Europe confirms that. In Italy, the shift has already taken place. The parties of the old order have been all but wiped out. Prime Minister Berlusconi's Forza Italia is a new center party, with strong liberal leanings. It is still entangled with its more exotic coalition partners, but the liberal center party is already the strongest force, and that in the society of the most intensive attachment to the providential welfare state in the whole of Western Europe!

In Germany, the traditional Christian Democrats seem to be doing well, but only because their prime ministerial candidate, Edmund Stoiber, is perceived as a man from outside the politically correct welfare state consensus. But, even that did not prevent new and old liberal-leaning parties from doing well in regional elections. Interestingly, both the new party of Law and Order Offensive of judge Schill and somewhat renewed old liberals (FDP) appeal disproportionately to the young. And socially congealed Germany is the country where the rate of change is measured in millimeters.

In the Netherlands, the largest age group supporting ideas of the recently-assassinated Pim Fortuyn are also the young (in spite of being, more than others, subjected to politically correct brainwashing!). Both the ideas of limitations on immigration, quantitative and qualitative (requiring the adoption and observance of the "club goods") and liberal demands for low taxes, privatization of education and health services, etc., strongly appeal to the young. And once the young start learning to vote not only to vent their irritation, the shift in politics will become even more pronounced.

In other Western European countries the process of change is taking place almost everywhere. The Danish People's Party is not ruling (yet) but its liberal views underpin the measures taken by the ruling coalition, both on welfare state and immigration issues. Similarly, strongly liberal orientation has overtaken the Norwegian Progress Party or Swiss People's Party. Some say that they are not liberal, but, rather, radically libertarian in their views. The fury against the demoralizing welfare state augments the radicalism of their liberal proposals.

Torn Between Nationalism and Liberalism

The economic costs of the welfare state, as well as the socio-psychological costs of tolerance of criminality (regardless of who caused it) erode the support for the establishment parties of the politically correct welfare state. They are increasingly seen as being jointly guilty of support, or at a minimum tolerance, of both.

As I wrote, people are groping in the dark and often fall into the trap of primitive, simplistic solutions to difficult problems. The limitation or even reversal of the immigration trend will not solve, on its own, the crime and crime tolerance problem. For, apart from Muslims and some others rejecting the acceptance and observance of "club goods," France will continue to be corroded on daily basis by the greed-enhancing, demoralizing welfare state, with its rights to somebody else's income.

And, Le Pen's prescription for taking France out of the European Union will aggravate the problem of unemployment, low economic growth, low rate of innovation, etc. It is worse than the disease. It is the E.U. that has to be converted into a liberal grouping, thus freeing its members from the fetters of over-regulation and welfarism.

Europe already went through a period of economic nationalism, protectionism and interventionism, in general. And, in the period in question (1914-1950), Europe grew more slowly than during the preceding hundred years and following fifty years. Less trade and investment means less growth and wealth creation.

Therefore, European new liberals' creed of less welfare and more law and order is undoubtedly a better, because realistic, solution. Better for both, wealth creation and for the much longed-for citizens' safety. The political trends in Europe suggest that this is actually beginning to take place.

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