“They tried to make me go to rehab but I said no, no, no,” sang British singer-sensation Amy Winehouse before joining Jim Morrison, Jimi Hendrix and Janis Joplin in the “Dead at 27 Club.” Seeing the media atwitter over the “Euro Crisis” makes me think Winehouse’s unfortunate demise is a metaphor for what ails Europe.
Winehouse thought she didn’t need treatment. Similarly, the new head of the International Monetary Fund, Christine Largarde, fears “policy makers do not have the conviction” to change course at this “dangerous new phase of the debt crisis.” Yet with such high stakes, European policy makers, and Americans whose aim is to “Europeanize” America, must commit to rehab.
Like Winehouse, the Eurozone is severely depressed, both economically and socially. It suffers from out-of-control addictions to big government and borrowing, has existential doubts about whether so many dissimilar countries share enough interests to fit into an economic straitjacket, and lacks the political will to address its dysfunction.
More ominously, the Eurozone’s financial crisis threatens to pull down non-Eurozone countries.
Trend-spotting soothsayers who used to boast that the Eurozone would “end American supremacy” and “run the 21st century” now seem delusional. E.U. policies actually impede economic growth and vitality, rendering Europe less competitive. In the second quarter, the Eurozone grew 0.7 percent while Germany (Europe’s engine) grew only 0.5 percent. Plunging business and consumer confidence are further undermining the growth prospects of a region desperate to ease debt burdens in the “PIIGS” countries (Portugal, Ireland, Italy, Greece and Spain). However, despite talk of controlling spending and balancing budgets (mostly through tax increases), nobody in Europe has a genuine growth agenda.
It’s hard for Europe to grow when nearly half of Europeans are officially “dependents” and only 64 percent of working-age citizens work. Even worse, Europeans aren’t having babies (European fertility rates are one-third lower than both the replacement rate and the U.S. rate), so the ratio of European workers to retirees is expected to collapse from seven-to-one in 1960 to one-to-one by 2040. With so many 30-year-old students and 50-year-old retirees, it’s no wonder European welfare states are running out of other people’s money, to paraphrase Margaret Thatcher.
Furthermore, European welfare states not only use taxpayers’ money to give “free” benefits to particular groups, they require that employers do the same. Faced with higher labor costs, employers are hiring fewer workers in Europe.
The New York Times captured the crux of the crisis: because Europeans “translated higher taxes into a cradle-to-grave safety net … governments with big budgets, falling tax revenues and aging populations are experiencing rising deficits, with more bad news ahead.” Ballooning unemployment, stagnant economies, catastrophic debt and demographic collapse threaten the European economic model.
Meanwhile, European politicians take piecemeal steps to respond to bond markets and political pressures from those who don’t want to bail out their neighbors’ excesses. Former German foreign minister Joschka Fischer argued, “You can’t have a pension at 67 here and 55 in Greece.” Luckily, his remarks weren’t made in Greece, where protesters defending their “rights” killed innocents.
Czech President Vaclav Klaus, whose country joined the E.U. but not the Euro, despairs that Europe’s real problem is that Europeans don’t value economic freedom. Rather, they “prefer leisure to work, security to risk-taking, paternalism to free markets, group entitlements to individualism and don’t understand that their current behavior undermines the very institutions that made past successes possible.”
This is the existential question: When the social institutions (family, vocation, community and faith) that drive human productivity and satisfaction become less vital, from what will life’s purpose and meaning come? Not government security. A 2001 University of Michigan study (among others) shows that people who receive government benefits are twice as likely as people who don’t receive government benefits to feel hopeless or worthless.
It’s not too late for America. We appreciate that work, parenting and community engagement, while often challenging, give us a sense of accomplishment, satisfaction, control and pride — necessary elements for happiness.
In 2005, after pancreatic cancer treatment, college dropout Steve Jobs addressed Stanford graduates, offering advice that reflects this quintessentially American credo about work and happiness. He told them to stay hungry and to find and follow their passions because “the only way to be truly satisfied in life is to do great work, and the only way to do great work is to love what you do.” Despite failing health, Jobs is happy (as are Apple customers, employees and investors), having created the world’s most innovative and valuable company, spawning industries in his wake.
If Jobs’s illness could be cured by rehab, he would go. As America slouches toward Europe, we should learn from the Euro Crisis and go too.
Melanie Sturm has 15 years of private equity investment experience, previous to which she specialized in project finance at International Finance Corporation and mergers & acquisitions at Morgan Stanley and Drexel Burnham Lambert. She has an MBA from INSEAD and undergraduate degrees in international relations and economics from Tufts University.