John Mauldin is a well known economics commentator and forecaster. I recommend subscribing to his email newsletter "Thoughts from the Frontline", which you can do here.
In this week's newsletter he provides a concise description of what ails Europe and that the banking system's debt is a creation of government policy (allowing banks to buy sovereign debt at a 30:1 leverage ratio) and the inexorable effects of having to borrow more to pay back previous debt.
The root cause, of course, is paying for the increasingly large promises of the social welfare state. Not that today's left can understand that basic fact.
When the Labor government won power in Australia in 2007 it inherited probably the strongest economy on the planet, which included near zero government debt. In only a few years it has managed to grow that debt to $230 billion. The tragedy is not only that the country has nothing to show for all that spending but also that we are not able to learn from the disaster in Europe.
One of the interesting things about being in Hong Kong is that I get to see the weekend edition of the Financial Times 12 hours early. And the headlines were not all that pleasant. As I promised last week, we will cast our eyes to Europe and ponder what is in store for Europe for the year and the next five years. And what do we read on page 2? The "ECB raps revisions to draft a fiscal pact." Seems they feel there are too many loopholes, which will make the document meaningless … somewhat like the treaty they have now. And we further learn that "Greek default threat grows as talks falter." Seems there is a lack of agreement on how much of a haircut the investors ought to take, and the Greeks don't want to guarantee any future debt, just in case they need to default some more in the future. But they do want the €15 billion they need to keep the debt machine running for a few more months.
And on page 1, in big type, we are surprised (but not very) by the headline, "France and Austria face debt blow." Seems those sharp-eyed accountants over at S&P have decided to downgrade French debt from AAA. Which of course leads to another headline on page 2, suggesting "Firepower of bail-out fund cast into doubt." The currency markets were shocked – shocked I tell you – that S&P would do such a thing and promptly took back the euro rally and cast the euro down to recent cycle lows. Who knew, other than the entire free world not watching reality TV, that S&P was planning to do such a thing? And we read elsewhere that the European Commission is dismayed that S&P would do something so clearly not right, at least according to the way they keep their own books. Even here in amazing Hong Kong, with the growth of China driving a wave of prosperity, eyes are fixed on Europe. How will they deal with the crisis? We read that US exports to Europe were down 7% last quarter, and Europe has not yet really entered into recession, which is almost guaranteed this year. And if US exports are down, then so are Asian and Latin American exports. Global growth appears to be threatened.
Solving the Mayan Code
There are so many pieces of data to go through in order to augur Europe's future – I want readers to know I have left no stone unturned! In fact, I went to some very old stones to get help with this week's letter. I began to scrutinize the Mayan Code from ancient Central America, which so many feel predicts the end of the world on December 21 of this year, bringing my fresh eyes to an old mystery. After much deliberation, I have come to this astounding insight: The Mayan academics who created the code were not in fact astronomers or even astrologers. No, it is clear they were another breed of even more dubious forecasters, called economists. Once you approach the glyphs with that understanding, it becomes clear they are not predicting the end of the world, merely the end of Europe. One symbol clearly shows the Greek flag dipping to the ground. Another depicts the Italian flag with its wheels coming off. Oh, and you don't even want to know what they have prognosticated for the French. This is a family e-letter and I can't squeeze such language past the censors. But now that I have provided the basic insight, I leave it to you, fellow scholars, to decipher the rest of code.
And we will spend our time together here this week trying to discern what it means, in fact, for Europe to come to the place in its journey where it must make extremely difficult and often painful choices. As I wrote last week, as I started this voyage of discovery with you, the choices the various countries in the developed world are now making will put us on a path that does not allow us to turn back without severe consequences. (If you missed last week's letter, here it is.) We are left with debt that must be dealt with, with imbalances that must be balanced, and with deficits that must be brought under control. No matter what we choose, there will be pain for all of us. You cannot make debt go away without paying it back or defaulting, one way or the other, which means someone loses. And as we will see, paying it back can be very difficult, indeed, once it has grown this large.
To Solve the Crisis You Must Solve Three Problems
There are three main problems in Europe. The first is that most of the banks are massively insolvent, because they have 30 times their capital invested in the second problem, which is the sovereign debt of countries that are going to have trouble paying that debt. If the banks have to mark down the debt to what its real value is – or to what it will soon be – they will be bankrupt on a scale that makes 2008 look like a waltz in the park.
Countries simply cannot function in a manner that can be called normal without viable banking systems, which is why the authorities spend so much time worrying about them. If banks can't make loans, then businesses must cut back, which means fewer jobs, products, and services, which quickly becomes an ugly spiral. Losses in the private sector mount up. This obliges the treasury secretary to get on one knee and beg some elected official who has no understanding of how business and economics work to save the world as he knows it.
But if countries must step in and save their banks, then they have to assume some of the losses. (I am assuming that this time shareholders get completely wiped out, as do most bondholders. Taxpayers – read voters –are actually paying attention this time. They are in no mood to bail out bankers.) But most of the countries in Europe with the worst banks simply do not have the money to invest. They already have too much debt. Where do they get the capital? (More on that later.)
For most of the past two years, European leaders have tried to deal with the problems as though they were short-term liquidity problems: "If we just find the money to buy some more Greek bonds, then Greece can figure out how to solve its problems and then pay us back. Given enough time, the problem can get solved." They have now arrived at the understanding that it this not a short-term problem. Rather, it's a solvency problem of the various governments, which of course creates a solvency problem for their banks. They are now addressing the problem of solvency and providing capital until such time as certain countries can get their budgets under control and the bond market sees fit to provide the capital they need.
But they are completely ignoring the third and largest problem, and that is massive trade imbalances. Germany exports products to the peripheral European countries, which run trade deficits. As I have shown in several letters, a country cannot reduce private-sector leverage, reduce public-sector leverage and deficits (balance its budget), and run a trade deficit all at the same time. That is simple, unavoidable math, based on 400 years of accounting understanding. Ultimately, there must be a trade surplus if leverage and debt are to be reduced.
Greece runs a trade deficit of about 10% of GDP. Until they can stop that bleeding, they cannot get their government and private budgets under control. It is not simply a matter of cutting budgets or raising taxes. Indeed, their economy will continue to shrink, making it more difficult buy foreign goods without increasing their own production of goods and services. It is a vicious spiral. And that same spiral will spin up to take in all of Europe. Again, more on that later, as we consider what their choices are.
But for now, let's start with my contention that if you do not solve all three problems you do not solve the real problem. Greece cannot "stand on its own" without a change in its cost of production relative to Northern Europe. Neither can Portugal, et al., unless Germany either changes how it exports and consumes more, or Germany is willing to fund Greek (and Portuguese and Italian and…) debt, so those countries can continue to run large deficits. Let's resort to something I have done in the past, and that is to create a simple model to help us understand the issues involved. As always, when we make simple assumptions we are ignoring the real complexities. I know things are vastly more complicated than the following simple analogies, but the underlying truths are basically the same.
Getting Simple About Europe
Let's assume a country that has a gross domestic product (GDP) of $1,000. In the beginning it taxes its citizens about 25% of GDP and spends the money for the public's benefit. But alas, it spends about 30% of GDP, so it must borrow the overage (about $50) from its citizens or from the citizens of other countries. Because the country starts out with relatively little debt, interest rates on this loan are low, because those who buy the debt can easily see that the the country can pay them back. If the debt of the country is only 5% of GDP ($50) and the interest rate is 4%, then the amount that must be paid as interest is only about $2 per year. Not a whole lot, about 0.2% of GDP.
But this goes on year after year. Sometimes the deficits get smaller and sometimes they get larger, depending on the economy; but government expenditures grow at the same rate as the country grows, and the debt keeps growing at an average of 5% of GDP per year. Now, if the country is growing at 3% a year, after 24 years the economy will have doubled to $2,000 GDP.
That means the debt has grown (roughly) to a total of $1,800, which is now a debt-to-GDP ratio of 90%. Debt has grown faster than the country's economy. Note that if the country had held its budget down to where it grew slower than GDP, thus reducing its need for debt, that ratio would be lower, even if the debt had grown. You can indeed grow your way out of a debt problem if the growth of government spending is less than the growth of the economy.
But what if the size of government grows to about 50% of GDP, rather than 25% or 30%, over the 24 years, as politicians decide to spend more money and voters decide they want more benefits? (Think France.) Then the private sector must pay about 50% of its production to the state – plus, the debt is now growing unwieldly. The private sector has less to invest in new businesses and tools, and the growth of the economy slows. And then along comes a very nasty recession. The revenues of the government fall as the economy shrinks. If the economy shrinks by 3% and total taxes are 50%, then tax revenue falls to $970. But the government does not cut back; and indeed, because it must pay unemployment benefits and welfare (because unemployment rises in a recession), its expenses actually rise by 5%! So it now needs $1,050 to pay all its budgeted expenses. And it must now borrow $80 to pay everyone it has promised to pay, in addition to the $100 it was already borrowing every year to cover its deficit, or a total of $180 a year, which is 9% of GDP. (Yes, I know that debt must change as a percentage over time and nothing is stagnant, but work with me here.)
Now debt-to-GDP is rising by about 5% a year. Not a large number in the grand scheme of things, and everyone knows that the recession will soon be over and the deficits will come down. Sovereign governments never default on their debts – our government leaders assure us of that. They can always raise taxes or cut spending, can't they?
And things rock along just fine, and the bond market continues to buy the debt, until one day you look up and the debt is 120% of GDP. Then the bond market gets nervous and says that instead of 4% it wants 7%. Now the interest payments are over 8% of GDP and 16% of government spending, which means the government must either cut back on services or salaries or benefits, or raise taxes, or borrow more money. But cutting spending and raising taxes have consequences. They reduce GDP growth over the following 4-5 quarters as the economy adjusts.
What if that interest rate cost rose to 10%? Then the interest cost to the government would become 20% of its expenses and be rising faster than the country could grow, even in the best of times. And if they continued to borrow at 7% and the country did not grow, those interest expenses would rise at least 7% a year – as long as interest rates didn't go up.
And what if the other countries who had been buying the government's debt looked at the basic math and realized that, another step or two down the current path of government spending, there was no way they would be able to get their money back?
How Much Risk Do You Want in a Government Bond?
Now, government bond investors are a curious breed. They invest in government bonds because they actually think there is not supposed to be any risk. They want their money to be safe. If they wanted risk, there are lots of opportunities to invest with the potential for more reward.
The moment that government bond investors begin to think they might be at risk, they leave. And history suggests they tend to leave seemingly all at once. It is the Bang! moment. Someone fires the starting gun, and they all head for the exits. They start selling their bonds to speculators at discounts, which makes the effective interest rates in the market rise, sometimes by a lot. That means that if a country wants to borrow more money, it will have to pay the effective price in the market, or maybe as much as 15-20% IF – a big IF – it can even get someone to buy the bonds, which of course makes it even more difficult to pay their debt as interest costs rise.
Now, let's add a twist. The other countries that have bought those bonds are not actually countries, but banks in other countries. And because the regulators of those banks knew it was impossible – inconceivable – that a sovereign country might default, they allowed their banks to buy 30 times as much sovereign debt as they had capital in their banks. They did not have to reserve against any losses, so these were "free" profits for the banks. You pay 2% on deposits or short term commercial paper and buy bonds paying at 4%. You make a 2% spread, which you then do 30 times. Now you are making 60% profits on your capital and deposits. It is a very nice business – as long as everyone pays the interest. And because it is such a good business, you just roll over the debt every time the bond comes due, because you want more easy profits.
Let's say that banks bought up to 10% of their total government sovereign-debt holdings in our problem country. If the country gets into trouble and says, we will only pay 50% of our debt (we will discuss why below), then that means the banks lose 5% of their total assets. But they only have about 3% capital, because they were allowed to leverage. That means they are functionally bankrupt.
Without a functioning banking system, other countries now have to step in and take the losses (and perhaps wipe out the shareholders and owners of their banks). That would be bad for the other countries, as that much spare cash is not just lying around in government coffers. They are ALL borrowing money already and have their own deficits to worry about.
So everyone gets together and they tell the bankrupt country (because that is what it really is), we will lend you more money to keep you alive, but you must agree to balance your budget. And since that is the only way the problem country can get more money, they initially say, "Sure. We can do that. Just give us some money now so we can get it figured out and get everything under control." In the world of government, living within your means is called austerity. And it's an uphill slog. Let's say your deficit started out at 15% of GDP (somewhat like Greece's). If you agree to cut that deficit by 4% a year for four years running, if everything stays the same, you could be back in balance. But the other counties would have to agree to lend you the difference between what you budgeted to spend and what you took in as tax revenues. Just to keep things going. Otherwise you'd have to default on your debt. If the countries simply have to guarantee the loans and not actually spend the money, it is a lot easier than having to find real money to save their banks, so they agree.
But the cuts you have to make are not as easy as everyone hoped. It seems that employees don't like having their pay cut, and unions don't want pensions cut, and retirees certainly expect the government to fulfill its promises; and don't even get started on cutting healthcare, which is a God-given right.
So you raise taxes and cut spending by about 4% the first year. But a funny thing happens. That reduces the private economy by about 4%, so the base on which taxes are collected is reduced, which means less revenue is raised, which means that the deficit is much worse than projected. And then the following year you have to make another 4% in cuts, plus the last shortfall, just to make your plan and get to the agreed-upon deficit, in order to get more loan money. It becomes a very vicious circle.
And let's look at the endgame. That debt-to-GDP ratio will rise to at least 150%, while the economy is actually shrinking. If interest rates settle to a mere 7% (hardly likely), it means the people of the country are going to have to pay over 10% of their total production to foreign banks each and every year for decades, never mind paying down the principle.
Let's throw in one more twist. The country has been buying about 10% of GDP more from other countries than it sells to them. That is because the relative wages in the problem country are about 30% higher than in the "good" countries. The good countries get the money from what they sell and have a nice surplus. The problem country soon runs through its savings, trying to buy the goods and service it wants; and the private sector, as well as the government, must cut back.
What happens is that you are locking in what feels like a depression initially, and then you have a slow- or no-growth economy for many years, as so much of your work goes just to pay back that debt to the banks of other countries.
Understand, your government has freely obligated itself to pay that debt. But it means that its citizens in effect become debt slaves for a generation or two to foreign banks. Not a very popular platform for a politician to run on for re-election.
Long-time readers know I think the neo-Keynesians do not have a proper view of the world. They live in a theoretical world divorced from what really happens. But in this respect they are deadly right. Austerity on the scale needed by many countries will only reduce potential GDP. The Keynesian prescription is to therefore run deficits and borrow money until you get growth again; but when you have already exhausted your ability to borrow money, it just doesn't work.
More debt makes if far more difficult to grow your way out of the problem. If you are already drunk, you can't get sober by drinking more whiskey. If Greece cuts its deficit by 15% of GDP, the reality is that GDP over time will be reduced by about 20%, and the debt will grow, both in real terms and as a percentage of GDP. A 20% decline in GDP is by any standard a depression and makes it even harder to grow, as so much of what you do make has to go to basic expenses and not productive capital. And if you have the burden of massive debt it becomes damn near impossible.
That is why individuals can file for personal bankruptcy. We no longer force people into slavery or debtor's prison to pay their debts, at least in most places.
So our problem country goes to its lenders and says, "We think you should share our pain. We are only going to pay you back 50% of what we owe you, and you must let us pay a 4% interest rate and pay you over a longer period. We think we can do that. Oh, and give us some more money in the meantime. And if you refuse, we won't pay you anything and you will all have a banking crisis. Thanks for everything."
The difficult is that if our problem country A gets to cut its debt by 50%, what about problem countries B, C, and D? Do they get the same deal? Why would voters in one country expect any less, if you agree to such terms for the first country? So now let's return to the real world of Europe. Greece cannot pay its debt without a major depression. So its wants to pay only 50%, but it doesn't even want to guarantee that in any meaningful way; so bondholders scream, "We get nothing in return for agreeing to take a 50% haircut?!" Which is today's headline.
Greece cannot print its own money, so unless it leaves the Eurozone, it's stuck. They can default on their debt, but that means they are shut out of the bond market for some period of time. That would force them to make the spending cuts they are now resisting, as they would simply not have enough money to pay their bills. Even with a 100% haircut they're looking at a shorter but very real depression. And because no one will sell them products they need, like energy and food and medicine, unless they can sell or trade something in return (that trade-deficit problem), they will be forced to change their lifestyles. Wages must drop or productivity rise to be competitive with northern Europe. And that differential is about 30%. I am not certain, as I have not been to Greece in a long time, but my bet is, you won't find many Greeks who think they are overpaid by 30%. But that is what the market is going to say. And that is the third problem, which Europe is not addressing. Germany and the northern tier are simply more productive than the Southern periphery. (With the possible exception of Northern Italy, but Italy all gets lumped together, which is why many Northern Italians want to be their own country and not have to pay taxes that go to Southern Italy. I am not taking sides, just observing what we read in the papers.) Until Germany consumes more from the peripheral countries or the peripheral countries become more productive, the imbalance will not allow a positive solution.
Prior to the euro, the imbalances would be handled by currency exchange rates. The value of the drachma would go down relative to the value of the deutschmark. Things would balance over time. Now, all of the eurozone countries are effectively on a gold standard, with the euro standing in for gold this time. Britain, the US, and Japan print their own currencies. Their currencies can rise or fall over long periods of time, based on national accounts and the desires of foreigners to buy goods or invest in their countries. Greece and the other peripheral countries face a difficult choice. Do we stay in the euro and pay as much as we can, and watch our economy drop; pay nothing and watch our economy drop (as we get shut out of the bond market); or leave the euro and go back to our own currency and watch our economy drop?
They have no choices that allow them to grow and prosper without first suffering (for perhaps a long time) some very real economic pain. As I have written in previous letters, leaving the eurozone has severe consequences; but the economic pain of leaving would go away sooner and allow for quicker adjustments, than if they stayed. However, the initial pain would be worse than the slow pain they'd suffer by staying in the euro. Their choice is, simply, which pain do they want – or maybe, which pain do they think they want? Because whatever they choose, they are not going to like it.
And just as I was finishing this section, this note came from Naked Capitalism:
"The three Troika inspectors—Poul Thomsen from the IMF, Mathias Morse from the EU, and Klaus Mazouch from the ECB—are supposed to head to Greece next week to inspect its books; the budget deficit is once again higher than the revised limit that Greece had vowed to abide by. And they're supposed to negotiate additional 'structural reforms.' But there probably won't be three inspectors, according to senior IMF sources. Missing: Poul Thomsen. The IMF has had enough.
"Already, according to more leaks, IMF Managing Director Christine Lagarde had warned German Chancellor Angela Merkel and French President Nicolas Sarkozy that the fiscal and economic situation in Greece had deteriorated. Hence, the 'voluntary' haircut on Greek bonds held by private sector investors should be increased to more than 50% to maintain the goal of bringing Greece's debt load down to 120% of GDP. And the second €130 billion bailout package, agreed upon on October 26, should be enlarged by 'tens of billions of euros.'
"The German reaction was immediate. 'There has to be a line somewhere,' said Michael Fuchs, deputy leader of Merkel's party, the CDU. 'This cannot be a bottomless barrel.' Even if Merkel were amenable to committing more taxpayer money to bail out Greece, she'd face a wall of opposition in her own party. And he wasn't brimming with optimism: 'I don't think that Greece, in its current condition, can be saved,' he said."
The article goes on with a description of the chaos in Greece. It is worse than I have described. Really. And so terribly sad.
Yanis Varoufakis has been in the media a fair bit recently given his academic status, clarity of thought and expression, and Greece's prominence in discussions of the financial crisis that has beset Europe.
In this interesting interview they cover the Greek situation, Euro politics and his three pronged solution to it all.
He discusses a topic that I've been meaning to cover in greater depth, which I'll do so in a future post, and that is the concept of national dignity - a different thing to terms you often hear such as national pride or nationalism.
Update: By the way, Yanis is a self described Marxist so it's a funny, old world when the crisis is so bad that Marxists and capitalists are lying in the same bed! I guess that in WW2 many partisan groups fighting with the Allies were also Communists and the need to fight against the common enemy brought them together.
I encourage everybody to watch the following video, which provides an easy to understand overview of Europe's debt woes, how they got there and what their options are.
It really does show that the social democratic state eventually falls to bits under the increasing financial burden of the promises that the left has to make to various constituencies in order to gain power, which leads to the gigantic Ponzi scheme they've got going at present.
Christopher Booker has attracted the ire of the Euro-left in general and Climate Faithful in particular for his unwelcome habit of pointing out that the emperor has no clothes.
Vaclav Klaus is another who has attracted the same ire but being the leader of a member state of the EU makes it harder to dismiss his views.
Not that it stopped Daniel Cohn-Bendit, a Green Franco-German MEP, from assailing Klaus for his views on the Lisbon Treaty and climate change.
Imagine that a Franco-German MEP, invited to meet the Queen at Buckingham Palace, plonked down in front of her an EU "ring of stars" flag, insisting that she hoist it over the palace alongside the Royal Standard, and then proceeded to address her in a deliberately insulting way. The British people, if news of the incident leaked out, might not be too pleased.
Something not dissimilar took place at a remarkable recent meeting between the heads of the groups in the European Parliament and Vaclav Klaus, the Czech head of state, in his palace in Hradcany Castle, on a hill overlooking Prague. The aim was to discuss how the Czechs should handle the EU's rotating six-monthly presidency when they take over from France on January 1.
The EU's ruling elite view President Klaus, a distinguished academic economist, with a mixture of bewilderment, hatred and contempt. As his country's prime minister, he applied to join the EU in the days after the fall of Communism in the 1990s. But now Klaus is alone among European leaders in expressing openly Eurosceptic views, not least about the Lisbon Treaty, which the Czech parliament has yet to ratify.
Klaus was an outspoken dissident under the Communist regime, and he has come to regard the EU as dangerously anti-democratic. But he compounds this sin with highly sceptical views on global warming, on which he recently published a book, Blue Planet in Green Shackles. He likens the extreme environmentalism favoured by the EU to Communism, as a serious threat to democracy, freedom and prosperity.
So when Klaus was due to meet the MEPs, one of them decided this was a moment to display the Euro-elite's hostility to him. Daniel Cohn-Bendit, who is German born but lives in France, first came to prominence in Paris in 1968 as a student agitator. He is now leader of the Green MEPs. Talking loudly in the plane to Prague, he made no secret of his intentions, and brief French journalists on how to get maximum publicity for his planned insults.
I happen to know the splendid room in which the meeting took place, because I sat there myself with President Klaus in 2005, when he had arranged for a history of the EU I had co-authored to be published in Czech. As Cohn-Bendit was aware, the only flag that flies over the castle is the presidential standard (though the "ring of stars" is much in evidence elsewhere in Prague, flown outside every government ministry).
As described to me by someone present, President Klaus greeted the MEPs with his usual genial courtesy. Whatever his own views, he assured them, his countrymen would conduct their presidency in fully "communautaire" fashion. Cohn-Bendit then staged his ambush. Brusquely plonking down his EU flag., which he observed sarcastically was so much in evidence around the palace, he warned that the Czechs would be expected to put through the EU's "climate change package" without interference.
"You can believe what you want," he scornfully told the president, "but I don't believe, I know that global warming is a reality." He added, "my view is based on scientific views and the majority approval of the EU Parliament".
He then moved on to the Lisbon Treaty. "I don't care about your opinions on it," he said. If the Czech Parliament approves the treaty in February, he demanded, "Will you respect the will of the representatives of the people?"
He then reprimanded the president for his recent meeting in Ireland with Declan Ganley, the millionaire leader of the "No" campaign in the Irish referendum, claiming that it was improper for Klaus to have talked to someone whose "finances come from problematic sources".
Visibly taken aback by this onslaught, Klaus observed: "I must say that no one has talked to me in such a style and tone in the past six years. You are not on the barricades in Paris here. I thought that such manners ended for us 19 years ago" (ie when Communism fell). When Klaus suggested to Hans-Gert Pöttering, the president of the EU Parliament, that perhaps it was time for someone else to take the floor, Pöttering replied that "anyone from the members of the Parliament can ask you what he likes", and invited Cohn-Bendit to continue.
"This is incredible', said Klaus. "I have never experienced anything like this before."
After a further exchange, in which Cohn-Bendit compared Klaus unfavourably with his predecessor, President Havel, he gave way to an Irish MEP, Brian Crowley, who began by saying "all his life my father fought against the British domination [of Ireland]… That is why I dare to say that the Irish wish for the Lisbon Treaty. It was an insult, Mr President, to me and the Irish people what you said during your state visit to Ireland." Klaus repeated that he had not experienced anything like this for19 years and that it seemed we were no longer living in a democracy, but that it was "post-democracy which rules the EU".
On the EU constitution, Klaus recalled that three countries had voted against it, and that if Mr Crowley wanted to talk about insults to the Irish people, "the biggest insult to the Irish people is not to accept the result of the Irish referendum". This provoked Crowley to retort angrily, "You will not tell me what the Irish think. As an Irishman, I know it best."
Everntually Pöttering closed the meeting by saying that he wanted to leave the room "in good terms", but it was quite unacceptable to compare himself and his colleagues with the Soviet Union. Klaus replied that he had not mentioned the Soviet Union: "I only said that I had not experienced such an atmosphere, such a style of debate, in the Czech Republic in the last 19 years."
This bizarre confrontation, which has been recounted and discussed with shock across formerly Communist eastern Europe, confirms the inability of the Euro-elite to accept that anyone holds different views from their own, on Lisbon, global warming or anything else. As we see from the way our own political parties are run, when it comes to "Europe", the system has no place for opposition. Everything must be decided by "consensus", directed from the top. There is only one approved "party line". Apart from a few little powerless dissidents round the edges, the EU is thus in essence a one-party state.
It was a sense of this that powerfully influenced the French, Dutch and Irish people, when they were given the chance, to vote against the constitution which will cement that one-party state into place more firmly than ever. And it explains why, last week, the European Council told the Irish that they must hold their referendum again, on the understanding that this time they will get it right. That is the way one-party states behave – as President Klaus, who lived under one for the first 50 years of his life, knows only too well.
Do people ever stop to analyse exactly why it is that a Marxist such as Daniel Cohn-Bendit would not only hold the strength of views he does about Lisbon and climate change but also feel that he had the freedom in which to act like a child?
The media's silence is deafening on his motives.
No doubt they have the same philosophy as him.
Eurofascists like Cohn-Bendit and Crowley are ruining Europe.
Tom Friedman may well be a devout liberal but at least he has the intellectual honesty to occasionally challenge the orthodox left position and expose some of its associated humbug.
He had a great piece in the NYT last weekend exhorting the world to 'show me the money' and put their real money where their rhetoric has been now that 'their' man is the president-elect.
European culture has been going down the flusher quicker than a $2 curry for the last 15 years thanks to the unchecked immigration of people who choose not to become absorbed into their new nation's culture - and why would they when they don't have to in order to get on with life - but instead transplant whatever culture existed in the villages and towns from whence they came and the ridiculous cult of political correctness that means people aren't allowed to actually say what they think.
Immigrants, not having to join their host community, or even learn its language, build ghettos from which escape into a better life is made all the more difficult by ancient norms and taboos.
Enabling all of this is a stunning cultural capitulation in which those who most critical of what should be each nation's proudest historical achievements are lauded for only looking at negatives while dismissing historical positives in the same way that the US Civil War has been redefined as not being about the end of slavery.
Since WW2, Europe has become increasingly pacifistic, which is somewhat understandable given the horrors it fought through, but along with the pacifism has come a reluctance to stand up, militarily, for what is right and to defend those who need defending in the same way that a child will not stand up to a school bully. There are some exceptions, of course, including Great Britain who at least has had the good sense to maintain a hawkish foreign policy.
Europe has been able to get away with appearing to be the 'good guy' in resolving difficulties because it always take a conciliatory approach starting with using 'diplomacy' to try and talk the bad guys down.
Do you think that Europe's soft power would have any effect at all if it was not backed by America's hard power?
Now that Barack Obama is going to be the President of the United States will the Germans start shooting bad guys in Afghanistan rather than let them pass by as reported recently in Der Spiegel?
How many innocent people will now lose their lives because of Germany's cowardice?
Since September 2006, Italy and Spain, along with Germany, have had a policy of keeping their troops away from the conflict-hit south of Afghanistan, restricting them to non-combat assignments. Italy's soldiers are deployed mainly in the western province of Herat, or in the capital Kabul.
At least Burlusconi is thinking about allowing the troops to take on more dangerous roles unlike his predecessor, Prodi, who has always been too focused on issues relating to the European Union to worry about those areas of the world that are in real need of Italian support.
So, I was speaking to an Iranian friend about what a mind-bending thing it must be for people in the Middle East to see Americans, seven years after 9/11, electing someone named Barack Hussein Obama as president. America is surely the only nation that could — in the same decade — go to war against a president named Hussein (Saddam of Iraq), threaten to use force against a country whose most revered religious martyr is named Hussein (Iran) and then elect its own president who’s middle-named Hussein.
Is this a great country or what?
Yes, Tom. Yes it is.
Politics always lags culture so while its detractors around the world continued to bray long and loud about America being a racist nation American culture moved quietly past the rest of the world to prove once and for all that it is the least racist nation on earth.
Much has been written about how people all around the world are celebrating the victory of our Hussein — Barack of Illinois, whose first name means “blessing” in Arabic. It is, indeed, a blessing that so many people in so many places see something of themselves reflected in Obama, whether in the color of his skin, the religion of his father, his African heritage, his being raised by a single mother or his childhood of poverty. And that ensures that Obama will probably have a longer than usual honeymoon with the world.
But I wouldn’t exaggerate it. The minute Obama has to exercise U.S. military power somewhere in the world, you can be sure that he will get blowback. For now, though, his biography, demeanor and willingness to at least test a regime like Iran’s with diplomacy makes him more difficult to demonize than George W. Bush and Dick Cheney.
That's exactly right. Who among the noisy elites of the world loved Carter or Reagan or GHW Bush or Clinton? None of them. Hopefully, Obama will suffer the same fate, as the adulation of America's critics is not worth using as a gauge of the quality of America's policies.
“If you’re a hard-liner in Tehran, a U.S. president who wants to talk to you presents more of a quandary than a U.S. president who wants to confront you,” remarked Karim Sadjadpour, an Iran expert at the Carnegie Endowment. “How are you going to implore crowds to chant ‘Death to Barack Hussein Obama’? That sounds more like the chant of the oppressor, not the victim. Obama just doesn’t fit the radical Islamist narrative of a racist, blood-thirsty America, which is bent on oppressing Muslims worldwide. There’s a cognitive dissonance. It’s like Hollywood casting Sidney Poitier to play Charles Manson. It just doesn’t fit.”
That's a bluddy funny comparison.
But while the world appears poised to give Obama a generous honeymoon, there lurks a much more important question: How long of a honeymoon will Obama give the world?
To all those Europeans, Canadians, Japanese, Russians, Iranians, Chinese, Indians, Africans and Latin Americans who are e-mailing their American friends about their joy at having “America back,” now that Obama is in, I just have one thing to say: “Show me the money!”
That's it! The pathetic ingrates who have sponged off the American taxpayer that has paid for world stability since WW2 really need to now put their hands in their pockets and start contributing to making the world a better place.
Don’t just show me the love. Don’t just give me the smiles. Your love is fickle and, as I said, it will last about as long as the first Obama airstrike against an Al Qaeda position in Pakistan. No, no, no, show me the money. Show me that you are ready to be Obama stakeholders, not free-riders — stakeholders in what will be expensive and difficult initiatives by the Obama administration to keep the world stable and free at a time when we have fewer resources.
Examples: I understand any foreigner who objected to the U.S. invasion of Iraq and the gross mishandling of the postwar. But surely everyone in the world has an interest in helping Obama, who opposed the war, bring it to a decent and stable end, especially now that there is a chance that Iraq could emerge as the first democracy, albeit messy, in the heart of the Arab-Muslim world. Obama was against how this Iraq war started, but he is going to be held responsible for how it ends, so why don’t all our allies now offer whatever they can — money, police, aid workers, troops, diplomatic support — to increase the odds of a decent end in Iraq? Ditto Afghanistan.
The U.N. says it doesn’t want Iran to go nuclear and doesn’t want the U.S. to use force to prevent Iran from going nuclear. I agree. That’s why I want all those people in China, France, Russia, India and Germany who are smiling for Obama to go out and demand that their governments use their tremendous economic leverage with Iran to let the Iranians know that if Tehran continues to move toward a nuclear weapon, in opposition to U.N. resolutions, these countries will impose real economic sanctions. Nothing — and I mean nothing — would more help President-elect Obama to forge a diplomatic deal with Iran than having a threat of biting Chinese, Indian and E.U. economic sanctions in his holster.
President Bush, because he was so easily demonized, made being a free-rider on American power easy for everyone — and Americans paid the price. Obama will not make it so easy.
So to everyone overseas I say: thanks for your applause for our new president. I’m glad you all feel that America “is back.” If you want Obama to succeed, though, don’t just show us the love, show us the money. Show us the troops. Show us the diplomatic effort. Show us the economic partnership. Show us something more than a fresh smile. Because freedom is not free and your excuse for doing less than you could is leaving town in January.
At least Friedman gets the fact that freedom is not free and has been paid for in blood and treasure by previous generations, unlike most Western Europeans who think it's a birthright.
They should talk to some of their Eastern European brethren and get a real understanding of what it means to have government run every aspect of your life.
In the meantime, as Friedman says, show us the money!
The funny side of the distinctly unfunny financial markets turmoil is the impact it's having on Big Green.
On the one hand they're delighted that capitalism seems to have shot itself in the foot but on the other it's led to a distinct aversion to countries slashing their economic wrists by the introduction of stricter emissions targets.
Of course, because 'big E' environmentalists don't understand either markets or human nature they may not yet realise that the turmoil will right itself in a relatively short timeframe, which will leave them with the galling prospect of things returning to normal but without having achieved their own plan of damaging the economies of Western nations.
There are now more and more politicians in Europe looking for exemptions and rules-bending in the EU's latest round of economy deadening emissions targets.
Politicians really aren't what they used to be.
The European Union's French presidency sought on Thursday to defuse mounting opposition to EU climate goals by offering opt-outs for some industries and countries that fear economic damage, angering environmentalists.
Some eastern European states have assembled a blocking minority to carbon dioxide curbs they fear will stunt economic growth, while Germany is fighting hard to protect its industry from added costs.
But France recommended opt-outs for industries facing competition from unregulated overseas rivals and for some countries' power sectors, prompting environmentalists to accuse President Nicolas Sarkozy of back-sliding.
The European Union has ambitious plans to cut carbon dioxide (CO2) emissions by a fifth by 2020, compared with 1990 levels, partly by making power generators and heavy industry pay for permits to pollute in its emissions trading scheme (ETS).
But some eastern European states have threatened to derail the proposal, saying it puts a costly burden on their highly polluting communist-era coal-fired power stations.
Heavy industries, such as steel, aluminium and chemicals have also raised opposition, saying they will lose out to rivals in neighbouring regions that have less environmental regulation and therefore lower costs.
BusinessEurope, which represents 20 million European businesses, called in a letter to French ecology minister Jean-Louis Borloo on Wednesday for the most efficient factories to get all their permits to emit CO2 for free until a global deal has been reached.
France sought on Thursday to defuse industry's opposition, preparing a draft paper -- which is still under discussion -- to present to EU leaders at a summit in Brussels next week.
"Sectors or sub sectors exposed to the highest risk, must be able to receive 100 percent of emission quotas for free," said the document seen by Reuters.
That would give sectors like steel an easier deal than proposed by EU lawmakers on Tuesday, when they said factories should start paying for 15 percent of the permits in 2013, increasing to 100 percent by 2020.
France has failed to match the ambitions of lawmakers, said Tomas Wyns of Climate Action Network Europe, a coalition of environmental groups such as Greenpeace.
"At the start of his presidency, Sarkozy presented himself as a climate leader -- now he is prepared to dump effective climate policy for the sake of protecting some polluting industries," he added.
France also sought to ease the concerns of eastern European states that fear their economies will suffer from soaring electricity prices when power generators are forced to pay for all their CO2 permits from 2013. "Derogations limited in scale and time may be granted when specific situations linked notably to an insufficient integration into the European electricity market justify it," said the document.
France is keen to sign-off the climate legislation by the end of this year, but Poland has assembled a group of East European states backed by Greece that threatens to delay it into next year if their fears about power prices are not dealt with. "We are working really hard to work this climate package into something that would not be a dramatic problem for the whole of our economy," Polish Foreign Affairs Minister Radoslaw Sikorski told TVN 24 television.
The EU is hoping other nations will follow its lead by agreeing on an international deal, mindful of U.N. warnings that climate change will lead to more droughts, flooding and rising sea levels.
A Polish diplomatic source told Reuters the French concessions did not go far enough. "This is just the beginning, we are not satisfied with the French Presidency's draft conclusions of the summit," said the source.
Rather than regarding it as a fell hand that stifles innovation and competition leading to both reduced employment opportunities and standards of living, Europeans seem to think that government is the only instrument that can improve their lives.
The consequences of this attitude have been for left wing governments to implement policies that supposedly address 'justice' issues whether it's social justice, economic justice or a myriad of made up terms that ensure one group or another can be labeled as victims thus requiring government to come and save the day.
Around the world, left wing elites in the media, universities and activist organisations look to the Europeans for guidance on how to create a fair society. Perish the thought that we Aussies or those rambunctious Yanks are well ahead of Europe in the fair society stakes.
In the same way that modern day Marxists, be they environmentalists or university professors or whatever, make excuses for the catastrophic failing of their ideology in the Soviet Union, China, North Korea and Cuba etc, today's Europhiles praise that continent's lofty intention of equality and turn a blind eye to the rank failures of multiculturalism and socialist policies that have led to many nations significantly underachieving their potential.
Barack Obama does seem to be a Europhile.
He lauds Europeans' ability to speak more than one language (while not recognising that it is English that binds them together) and has called for a European style health system while ignoring the fact that the best health outcomes in the world are achieved in the United States. He ignores the fact that the so-called equality of Euro-health is a facade covering up long waiting times and rationed care meaning that the elderly, overweight and otherwise infirm actually receive a lower standard of care than does a sick 20 year old.
The top concern of voters this year is the economy, with 40 percent of respondents in a recent New York Times/CBS News poll rating the "economy and jobs" as their primary issue in the election and another 15 percent ranking the economic issues of "gas prices and energy policy" as their chief concern.
That combined total of 55 percent is more than double the 21 percent of respondents who ranked "terrorism and national security" as their chief concern.
The bad news for Republicans is that these surveyed voters said Barack Obama would be better than John McCain at handling the economy.
"Sixty-five percent of those surveyed said they were confident that Mr. Obama would make the right decisions on the economy, compared with 54 percent who expressed confidence that Mr. McCain would," reported the Times.
"Voters are more negative about the condition of the nation's economy in this election year than they have been at any time since 1992, when Bill Clinton unseated an incumbent president by running an 'it's the economy, stupid' campaign," reported the Times.
Moreover, nearly half of the poll's respondents said they expected Sen. McCain to continue the policies of President George Bush (while only 9 percent agreed that he should).
Obama, adding to the negativity about the economy in order to sell "change," regularly portrays the U.S. economy as in a state of near-collapse. "Economic disaster is already here," he declared at a recent campaign stop in Virginia.
In fact, the economy is not in a state of "disaster," and "change" in the wrong direction would only make things worse.
With high gas prices, for instance, the most likely consequence of Obama's calls for restrictions on drilling and higher taxes on oil companies would be less supply and even higher prices at the pump.
KEITH MARSDEN PROVIDES a more accurate and less-politicized description of the current condition of the American economy than the picture Obama paints at his rallies.
On the global level, Marsden, a senior economist at the International Labor Organization, a former economic adviser at the World Bank and a fellow at the Centre for Policy Studies, reports that "U.S. output has expanded faster than in most advanced economies over the eight years of George Bush's presidency."
More precisely, the latest Eurostat report from the European Commission regarding the change in economic growth in the second quarter of 2008 compared to the first quarter shows that the U.S. economy was up by 0.5 percent while the Euro zone taken as a whole declined by 0.2 percent. "It marked the first time since the early 1990s that GDP has fallen overall in the 15 countries that use the euro," reported the Wall Street Journal.
Moving in the opposite direction of the increase in growth in the U.S. economy, the percentage change in the growth rates in the second quarter of this year in Italy, France, Germany and Japan were universally negative at, respectively, -0.3, -0.3, -0.5, and -0.6 percent.
On income, the World Development Indications 2008 report from the World Bank shows national income per capita in the U.S. to now be approximately a third higher than in England, Germany or Japan.
Obama, arguing that the distribution of U.S. incomes is increasingly "unfair," is calling for redistribution by way of higher taxes at the top and more government subsidies at the bottom. In fact, the latest World Bank figures "show that the richest 20 percent of U.S. households had a 45.8 percent share of total income, similar to the levels in the U.K. (44.0 percent) and Israel (44.9 percent)," reports Marsden, while in "65 other countries the richest quintile had a larger share than in the United States."
With jobs, the U.S. unemployment rate averaged 4.7 percent from 2001 to 2007. "This compares with a 5.2 percent average rate during President Clinton's terms in office," reports Marsden, "and is well below the euro zone average of 8.3 percent since 2000."
Obama, pursuing "social justice," is calling for a euro-style economic strategy of more taxes, more protectionism, more unionism, and more regulations -- the exact formula of community organizing that's produced slow economic growth and high unemployment throughout Europe.
Failing multiculturalism. Sluggish economies. Climate Change nonsense. Inability to stand up to real evil in the world. Lack of will to defend themselves against Russian aggression?
EU regulators must have too much time on their hands to be considering a ban on so called sexist advertisements...
MEPs want TV regulators in the EU to set guidelines which would see the end of anything deemed to portray women as sex objects or reinforce gender stereotypes.
This could potentially mean an end to attractive women advertising perfume, housewives in the kitchen or men doing DIY.
Such classic adverts as the Diet Coke commercial featuring the bare-chested builder, or Wonderbra's "Hello Boys" featuring model Eva Herzigova would have been banned.
The new rules come in a report by the EU's women's rights committee.
Swedish MEP Eva-Britt Svensson urged Britain and other members to use existing equality, sexism and discrimination laws to control advertising.
She wants regulatory bodies set up to monitor ads and introduce a "zero-tolerance" policy against "sexist insults or degrading images".
Ms Svensson said: "Gender stereotyping in advertising straitjackets women, men, girls and boys by restricting individuals to predetermined and artificial roles that are often degrading, humiliating and dumbed down for both sexes."
She added: "Gender stereotyping in advertising is one of several factors that have a big influence in efforts to make society more gender equal.
"When women and men are portrayed in a stereotypical way the consequence may be that it becomes difficult in other contexts to see women and men's resources and abilities."
The Advertising Standards Authority however had said there are already checks in place to prevent "discriminatory or harmful" material.
A spokesman said: "Although the ASA supports the overall objectives of the report... the approach suggested is inflexible and impractical."
What sort of ads could actually be shown if such a ridiculous idea was implemented?
Would PETA want animal ads banned? Ads for meat and milk banned?
Would the Climate Faithful want ads for motor cars banned? Air travel? Tourism?
The totalitarian instinct of the left is on clear display for all to see.
After half a century of living under the protection of the United States' military Europe seems to have bred people who have no idea of what's important.
Michael Totten has provided some excellent background on the real situation of Russia's invasion of Georgia and in this piece from the WSJ we get another perspective of what went on:
'Anybody who thinks that Moscow didn't plan this invasion, that we in Georgia caused it gratuitously, is severely mistaken," President Mikheil Saakashvili told me during a late night chat in Georgia's presidential palace this weekend.
"Our decision to engage was made in the last second as the Russian tanks were rolling -- we had no choice," Mr. Saakashvili explained. "We took the initiative just to buy some time. We knew we were not going to win against the Russian army, but we had to do something to defend ourselves."
I had just returned from Gori, which was still under the shadow of Russian occupation. I'd learned there on the ground how Russia has deployed a highly deliberate propaganda strategy in this war. Some Georgian friends sneaked me into town unnoticed past the Russian armored checkpoints via a little used tractor path. We noted that, during the day, the tanks on Gori's streets withdrew from the streets to the hills. Apparently, the Russians thought this gave the impression, to any foreign eyewitnesses they chose to let through, of a town not so much occupied as stabilized and made peaceful.
However, if you stayed overnight after observers left, as I did with various locals, you could hear and glimpse the tanks in the dark growling back into town and roaming around. A serious curfew kicked in at sundown, and the streets turned instantly lethal, not least because the tanks allowed in marauding irregulars -- Cossacks, South Ossetians, Chechens and the like -- to do the looting in a town that the Russians had effectively emptied. Now that the Russians have made a big show of moving out in force -- but only to a point some miles to the other side of Gori toward South Ossetia -- they've left behind a resonating threat in the population's memory, a feeling they could return at any moment.
The damage in Gori's civilian areas, like the Stalin-era neighborhood of Combinaty, give the lie to claims made by Russia's Foreign Minister Sergei Lavrov in these pages that Russian forces "acted efficiently and professionally" to achieve "clear and legitimate objectives." Either that, or they fully intended -- as a "legitimate" objective -- to flatten civilian streets in order to sow fear, drive out innocents and create massive refugee outflows.
Gori's refugees are now flooding back. Many have returned also to Poti, a port city near Abkhazia, and far more strategic than Gori because it serves as a trading lifeline for Georgia and potentially offers future access to NATO ships. The Russians are digging in around the town and in the port area itself, and refusing to budge as the world looks on.
"I got a call from the minister of defense that Russian tanks, some 200, were massing to enter Tskhinvali from North Ossetia," Mr. Saakashvili told me. "I ignored it at first, but reports kept coming in that they had begun to move forward. In fact, they had mobilized reserves several days ahead of time."
This was precisely the kind of information that the Russians have suppressed and the world press continues to ignore, despite decades of familiarity with Kremlin disinformation methods. "We subsequently found out from pilots we shot down," said Mr. Saakashvili, "that they'd been called up three days before from places like Moscow. We had intelligence coming in ahead of time but we just couldn't believe it. Also, in recent weeks, the separatists had intensified artillery barrages and were shooting our soldiers. I'd kept telling our guys to stay calm. Actually we had most of our troops down near Abkhazia where we expected the real trouble to start. I can tell you that if we'd intended to attack, we'd have withdrawn our best-trained forces from Iraq up front."
According to the Georgian president, the Russians had been planning an invasion of his country for weeks -- even months -- ahead of time: "Some months ago, I was warned by Western leaders in Dubrovnik to expect an attack this summer," he explained. "Mr. Putin had already threatened me in February, saying we would become a protectorate of Russia. When I met Mr. Medvedev in June, he was very friendly. I saw him again in July and he was a changed man, spooked, evasive. He tried to avoid me. He knew something by then. I ask everyone to consider, what does it mean when hundreds of tanks can mobilize and occupy a country within two days? Just the fuelling takes that long. They were on their way. Would we provoke a war while all our Western friends are away on vacation? Be sensible."
I put it to Mr. Saakashvili that there was also the question of why now? Why did the Russians not act before or later? It was a matter, he said, of several factors coming together: the useful distractions of the Beijing Olympics and the U.S. elections, the fact that it took Mr. Putin this long to consolidate power, the danger that tanks would bog down in the winter.
But two factors above all sealed Georgia's fate this summer, it seems. In April, NATO postponed the decision to admit Georgia into the organization until its next summit in October. Mr. Saakashvili believes Moscow felt it had one last chance to pre-empt Georgia's joining NATO.
Finally, he says, the invasion had to be done before the situation in Iraq got any better and freed up U.S. forces to act elsewhere -- a matter not simply of U.S. weakness but of increasing U.S. strength. "If America thinks it is too weak to do anything about Georgia," said Mr. Saakashvili, "you should understand how the Russians see it, how much Moscow respects a strong United States -- or at least a U.S. that believes in its own strength."
This is all about Russia making sure that its neighbours don't join NATO. What Russia has to fear from NATO is not yet clear given that organisation's feckless history.
It's hard to make a claim that Russia was acting defensively when it has such a massive force ready to invade Georgia at a moment's notice.
Totten gets it right in his report:
Virtually everyone believes Georgian President Mikheil Saakashvili foolishly provoked a Russian invasion on August 7, 2008, when he sent troops into the breakaway district of South Ossetia. “The warfare began Aug. 7 when Georgia launched a barrage targeting South Ossetia,” the Associated Press reported over the weekend in typical fashion.
Virtually everyone is wrong. Georgia didn't start it on August 7, nor on any other date. The South Ossetian militia started it on August 6 when its fighters fired on Georgian peacekeepers and Georgian villages with weapons banned by the agreement hammered out between the two sides in 1994. At the same time, the Russian military sent its invasion force bearing down on Georgia from the north side of the Caucasus Mountains on the Russian side of the border through the Roki tunnel and into Georgia. This happened before Saakashvili sent additional troops to South Ossetia and allegedly started the war.
Russian apologists are also comparing the situation in South Ossetia with what happened to Kosovo.
The analogy is wrong. The correct comparison is with the Sudetenland.
The Independent has a great article describing the current issue of Europe's low birth rate.
On the one hand you have Big Green calling for less children in order to reduce CO2 emissions into the future while, paradoxically, also using "we're ruining the planet for the next generation" and "think of the children" propaganda to support the same cause.
Europe as we know it is stuffed.
Population decline will lead to a radical change in the cultures of many countries as the impact of mass immigration takes its natural course.
Europe prides itself on being more enlightened, more compassionate than its heathen US cousin, which is why it makes such high unemployment benefit payments.
Unfortunately, reality is going to bring compassionism to a screeching halt, as the current system requires an increasing population in order to fund social security benefits into the future, especially for retirees.
That would be no problem if the immigrants were capable of integrating into society and providing the replacement children that the incumbent populations are too enlightened, too post-Christian to have.
In many European countries, and most notably France, the indigenous population actively works against integrating its immigrants, which leads to high unemployment and social unrest (though those two things are not necessarily linked).
Contrast that with Australia's or the United States' attitude to immigrants. We don't care where you're from as long as you get with the program, integrate with our culture, take on our values and contribute to society. Our view is that if you don't want to do that then why would we enable you to be here?
Enough from me, read Paul Vallely's article:
A leading medical journal recently called for British couples to stop having so many children to 'reduce global warming'. But much of the rest of Europe has a different problem: declining birthrates and ageing populations. And trends across the traditionally more fertile developing world are just as uneven. Paul Vallely investigates the global demographic conundrum
Save the world! Stop having children! Such was the rather drastic solution to the problem of climate change proposed in an editorial in the prestigious British Medical Journal, no less, the other day. And since one of its authors was a distinguished academic – Dr John Guillebaud, emeritus professor of family planning and reproductive health at University College, London – we should consider the notion seriously.
His argument was straightforward. The mushrooming population of the world is putting extreme pressure on the planet's resources and increasing the output of greenhouse gases. Every single month there are nearly seven million extra mouths to feed. And because a child born today in the UK will be responsible for 150 times more greenhouse gas emissions than a child born in Ethiopia the obvious place to start cutting back is here rather than there.
Dr Malthus, thou shouldst be living at this hour. But, actually, this goes one better. When Thomas Malthus first published his gloomy Essay on the Principle of Population in 1798 he had others than himself in his sights. His argument sounded academically neutral. Human populations grow exponentially whereas food reproduction expands in a linear fashion (it's the difference in maths between multiplication and addition) so disaster always looms, in the shape of disease, war or famine, to balance the population out. But he wasn't looking to himself for the solution; those he had in his moral scrutiny were the lumpen poor, breeding mindlessly, careless of the demographic implications of their lusty loins.
Since then Malthusian disciples have continued to point the figure at a Them rather than Us. Zealots for population control have always had the poor in their sights. Until it fell out of fashion a decade or more ago, "population control" always targeted the hapless peoples of the Third World as the ones who we needed to stop breeding. Holland is the most densely populated major country in the world but there was rarely any talk of too many Dutchmen. It was always too many Indians and Africans. Dr Guillebaud has at least had the good grace to point the finger of blame at himself.
But hold on. All this anxiety is premised upon the idea that the population of the world is mushrooming. It certainly was throughout most of the 20th century. But, quietly, something has changed in recent years. The global population is continuing to grow. But, fairly suddenly, birthrates are falling all across the globe. In the 1970s women around the world had six children each; today they have just 2.7 children on average, and in some places that figure is as low as 1.
The implications of this will take a generation to work through, because the children born in the boom years have yet to have their own children, so there is a great deal of increase built in. Demographers call that population momentum. But the United Nations has had to revise downwards its prediction that the world population would reach 11.5 billion by 2050. The human race is now expected to peak, according to one of the world's top experts, Dr David Coleman, Professor of Demography at Oxford University, at 9.5 billion people. Then, around 2070, it will begin to decline. We have reached a demographic crossroads which will have dramatic consequences for large sections of the world – including us.
The magic figure for demographers is 2.1 births per couple. That, allowing for the fact that some girls die before they reach child-bearing age, is the figure at which a population replaces itself. In Europe the last time that fertility was above replacement level was in the mid-1960s. But now, for the first time on record, birthrates in southern and eastern Europe have dropped below 1.3 – well below the 1.5 which the United Nations has marked as the crisis point. If things continue the population there will be cut in half in just 45 years. In Italy, one recent survey put it at 1.2. Cities such as Milan and Bologna recorded less than 1, the lowest birthrates anywhere.
Things are as bleak in Japan. There the total fertility rate declined by nearly a third between 1975 and 2001, from 1.91 to 1.33. The average family size has remained the same, but there are fewer families. Half of Japanese women have not married by the age of 30, and 20 per cent of them are not marrying ever.
But it is not just the developed world. The birthrate is plummeting in east Asia, too, in countries which were, until three decades ago, considered poor. Overall in Asia the fertility rate fell from 2.4 in 1970 to 1.5 today. China's rate is down from 6.06 to 1.8 and declining. Thailand is now 1.5. Singapore, Taiwan and Burma are similar. The lowest is South Korea with only 1.1 children per couple.
"South East Asia has plummeted to levels it took Europe 150 years to reach in just 30 years," says Dr Jane Falkingham, Professor of Demography and International Social Policy at the University of Southampton. Alarmed by this extremely low fertility, South Korea has slashed government spending on birth control. Singapore is now offering tax rebates to couples with more than two children. Japan is piling money into nurseries and childcare.
But the New Demography does not mean that the population explosion may be about to become a population implosion. It is more subtle – and gives more interesting pointers about how we are to live – than that.
There is still rapid population growth in many parts of the world. Birthrates are still very high in Africa. At their peak in the 1970s Kenya had a growth rate of 4.1 per cent, which was doubling its population every 17 years. The rate is down but 11 African countries still have a whopping growth rate of 2.6 per cent a year. Populations in Uganda, Burkina Faso and Congo will treble or more by 2050. And India is set to leapfrog China as the world's most populous nation by 2050 when its population is expected to top 1,750,000,000 people. (China will be 1,400 million, and the third biggest, the United States, around 420 million.)
But there has been an unexpected upturn in birthrates in parts of Europe too. Populations may be expected to shrink in Italy, Spain, Greece and Germany (which is losing 100,000 people a year) and decline even more rapidly further east in Russia, Romania and Bulgaria, which is set to plunge by almost half. But in the UK, France, the Netherlands and Scandinavia birthrates, which declined steadily between 1900 and 1960, are creeping up again. In the UK, despite a rapidly declining population in Scotland, the overall fertility rate is 1.8 and rising. In Holland it is 1.73. Sweden's has risen to 1.9, with the rest of Scandinavia at 1.8. Because the figures are logarithmic, not arithmetic, these are significant differences.
"The span of fertility across countries has never been wider," says Dr John Cleland, Professor of Medical Demography at the London School of Hygiene and Tropical Medicine. "Both extremes cause their own problems. If Europe continues at 1.5 the population will halve every 65 years. If Africa continues with half its population under 15 it will continue to consume more than it produces making it harder to escape from poverty and illiteracy."
How seriously should we take all this? Prognosticators in this field are notoriously wild. After all Paul Erlich, in his 1968 bestseller The Population Bomb, predicted: "If I were a gambler, I would take even money that England will not exist in the year 2000." No wonder that in Dante's Inferno, a special punishment was reserved for diviners: their heads were permanently rotated to the rear, so those who in life sought to peer too far ahead into the future are condemned to study the past for all eternity. "All population projections are wrong," concedes Professor Coleman. "The question is by how much?"
A country's population is determined by three things: how many people are born, how soon they die and how many leave or enter the country. Fertility, as we have seen, is rising in Africa and parts of the developing world but falling in Europe and the Far East. Mortality, by contrast, thanks to medical advance, is falling almost everywhere: global life expectancy has risen from 46 in 1950 to 65 in 2008 and is expected to reach 75 by 2050; in Europe it will be 82 by mid-century. Migration, despite the heat it generates as a political issue, is a marginal factor in population issues. It would take massive numbers of immigrants – some 700 million throughout Europe – with unthinkable cultural and identity tensions, to counter the low-birthrates. Fertility is the key engine to population rise and fall.
The conventional wisdom – academics call it the demographic transition – is that when people are poor they have lots of children. When half your kids die before they reach adulthood you need to have lots to ensure there is someone to look after you in old age. If it takes one person all day to plough or weed the fields, or fetch the firewood, or find grazing for the goats, or carry the water and pound the grain, then you need a big family. And if there is no contraception available you don't have much choice anyway.
But when you get richer family sizes start dropping. The health of your children improves. You have savings for your old age. Girls go to school, get jobs outside the home, marry and have babies much later. Contraception becomes available. You move to the city where you don't need so many children to do the household chores. Make people prosperous and the population falls.
"That's the biggest lie that's ever been perpetrated," says Professor Cleland, who is something of a hawk on population control. "People are very bad at calculating survival probabilities. Twenty years ago fertility started to decline in Nepal and Bangladesh when they were still poor. Korea wasn't rich when fertility declined. By contrast the Gulf oil states continued with high birthrates long after they got huge wealth." It's even true in Western Europe, adds Professor Falkingham, where the upper class has more children than the middle class.
But the relationship between poverty and population is there, it's just more subtle, says David Hulme, Professor in Development Studies at Manchester University and Director of the Chronic Poverty Research Centre. He has specialised in studying Bangladesh where average family size has fallen from seven in 1981 to two or three today.
"There's been an extraordinary change in 20 years and it comes from a combination of factors," he says. "They have had 5 to 6 per cent economic growth over the past 15 years, and in areas like the textile industry that provides work for lots of ordinary people. A woman can earn $25-30 a month in a garment factory, that's big money, and if you have two daughters working ... It is delaying the age at which women marry. It used to be 14 or 15; now it's 21 or 22. Another factor is the success of NGOs [Non-Governmental Organisations]; 20 million households in Bangladesh have access to micro-finance, and in half of them, the money goes to the women. Then there has been education for girls encouraged by programmes that gave cereals to families whose girls went to secondary school and 'cash for education' female stipends." Bangladesh has now surpassed the Millennium Development Goal on education and now has more girls in secondary education than boys.
When girls go to school and women work they have fewer babies. "In Africa most women work in agriculture around the home," Professor Hulme says, "but in Bangladesh women get out and meet other women at work who may be using contraception. Getting outside the home fixes a new social norm. Prosperity and fertility are interlinked in a chicken and egg way."
But it is in Europe and Japan that the interaction between female emancipation and fertility has taken its most dramatic twist.
The world's highest fertility rates are to be found in the most religious countries. People there seem to adhere to traditional views of how the world works. "Food, sex and procreation are core elements of humanity and changes to them are often met with fierce hostility," says Cleland.
That is true of Christians in the US, Hindus in India and Muslims in many states. The more fundamentalist the leadership, the higher the fertility rate, says Kenneth W Wachter, the Professor of Demography and Statistics at the University of California, Berkeley. Is this because Muslim countries are by and large poor? "In my view the evidence is that there is something intrinsic to the culture. It's there in the rich Muslim states in the Gulf, in Saudi Arabia and in the Muslim provinces of the former Soviet Union. It is perhaps bound up with the status of women."
So you might expect, then, that in Europe fertility rates would be highest in the Catholic south. But intriguingly the opposite is the case. It has a more rapidly falling population than the Protestant north. "Not just in Catholic Spain and Italy but in Orthodox Greece the strong traditions ... are not boosting fertility rate as many might suppose," says Coleman.
Why is this? A clue lies in a 2006 survey by the EC which asked women how many children they would like to have. The answer averaged out at 2.36 – which is one child more than they are actually having. They get nearer to that in north-west Europe for two reasons. One is that – though women here may laugh at the notion – men in France, Britain, Holland and Scandinavia help out more at home than their Latin counterparts. The other is that the state, through child benefit, tax breaks (on which France is keen), maternity leave and nursery provision, makes it much easier for a woman to juggle the twin tasks of work and running a home.
In Italy and Spain and Greece, by contrast, the feminist revolution is not so far advanced. There has been economic change. Women get the education and even the jobs. But social attitudes remain rooted in a model of the woman as mother and the male as breadwinner, what the Australian demographer Peter McDonald, calls "out hunting the mammoth". But those Italian women who go out hunting the mammoth are still expected to change all the nappies; they do more than 75 per cent of the housework and child care.
As a result only around 50 per cent of Italian women work outside the home, compared with 75 per cent in Scandinavian countries. Women without their own income have very little bargaining power inside the home, but they can go on baby strike. The outcome is that, perhaps counter-intuitively, working mothers are now having more babies than those who stay at home full time. "The tradition that once boosted fertility," says Falkingham, "now undermines it."
The same thing is happening in Japan, which still has one of the rich world's most chauvinistic societies. Its first equal-opportunity law was not passed until 1985, and even then, it only "requested" that employers "make efforts" not to discriminate. It didn't officially outlaw sex discrimination until 1999 and the contraceptive bill wasn't legalised until 2000. On top of that is a work culture that demands very long hours and offers few child-care facilities. Then at home Japanese men spend just 17 minutes a day caring for their children, compared with 2 hours 39 minutes for women.
The result is what the Japanese demographer Shigemi Kono calls "the revenge of women on men". Japanese society has been scandalised by a new social class it calls "parasite singles" – women who live alone or with their parents, work, eschew marriage and shop a lot. "Until social attitudes catch up with economic change," says David Coleman, "many women in the developed world will become overloaded and respond by cutting down the number of children they have."
The US offers an interesting control in all this. Its birthrate at 2.1 – replacement rate – is very high for an industrialised nation. But the figure hides two distinct trends. The birthrate is high among conservatives (the influence of religion again) and among immigrant Hispanic women who are averaging slightly more than three children each. But there is steadily declining fertility among the white secular middle-class.
In the US, like Japan, 20 per cent of women born between 1956 and 1972 are childless and likely to remain so. The figure could rise to 25 per cent. Revealingly, the incidence rises with education and income. A third of women graduates in their late thirties have no children. And only 20 per cent of women with MBAs have kids, compared with 70 per cent of MBA men.
By contrast 40 per cent of college-educated American women are not in the workforce, but they are still not having many kids; the number of women with only one child has doubled since 1976. And in that same year 36 per cent of women had four or more children but less than 10 per cent do today. Childlessness is now a fashionable lifestyle choice, as it is in Germany where 27.8 per cent of women born in 1960 are childless, far more than any other European country. (In France the figure is just 10.7 per cent.)
The implications of all this are enormous. Low-birth Europe is faced with an ageing population, a pensions crisis, later retirement, changes in work patterns, shrinking cities and a massive looming healthcare cost. Nations of children with no siblings, cousins, aunts or uncles – only parents, grandparents, and perhaps great-grandparents – will face the burden of paying for the care of a massive older generation. The same prospect of an older, more conservative, less vigorous or inventive culture looms in China, Japan and much of the Far East.
Meanwhile high-birth Africa will remain stuck in a vicious circle unless it gets economic growth, agricultural reform, improved world trade terms, infrastructure investment, better health and education systems, more girls into school and a wider availability of family planning. A tall order, though the example of Bangladesh shows change can come.
But whether Brits limiting themselves to two children, as the BMJ is recommending, will do the trick is debatable, at the very least.
Baby boom?
The number of children born per couple in five nations. The 'replacement' fertility rate, to maintain population, is 2.1
Iraq 4.3 UK 1.8 USA 2.1 Afghanistan 7.1 Hong Kong 0.95
