As the EP election day on June 7 draws closer, and the campaign gathers speed, the European socialists are intensifying their polemics against the EPP, still hoping that they can somehow profit from the financial and economic crisis by blaming it on the EPP family and its majority among EU member state governments and in the European Parliament, as well as on the Commission under President Barroso. Beginning with the rather lofty “People First!” election manifesto of December 2008 and, so far, culminating in the “15 falsehoods” of the EPP enumerated on the PES website of last week, socialist polemics is intensifying. It is ostentatiously directed against “conservatives”, by which the PES means the EPP family which is, as we all well know, on the party level composed mainly of Christian Democrats and centrists. But the semantics of labeling the competitors is only the first element. On the national level, the PES manifesto claims that “where the left is in power, we can see real evidence of what socialists and social democrats can achieve.” At closer look, out of the few EU member states where socialists and social democrats are, or were until very recently, ruling alone or in a leading role, the left’s track record looks pretty abysmal. Spain under José Luis Zapatero has, with close to 18 %, Europe’s highest unemployment. In Hungary – with, among many disasters, one of Europe’s worst credit ratings - the government of Ferenc Gyurcsány has just gone down in flames and given way to a caretaker government. In Slovenia, the socialist-led coalition under Borut Pahor is perilously close to falling apart. And Britain’s Labour government led by Gordon Brown is one that most European socialists would rather not want to be seen with in bright daylight, anyway. So much for the real evidence. What’s more, EU-wide opinion polls in the run-up to June 7 are not giving the socialists much hope, because even in countries with the left in opposition or in government as the junior partner, there is no “surge” in sight. So far, Europe’s left is simply not profiting from the crisis. There are many reasons for this, ranging from internal disputes to the lack of a clearcut and generally acceptable political alternative to centre right economic policies (see the first “Watchtower” commentary from January 12, 2009). One of them, and certainly not the least one, is the real evidence from the countries where the left is in power.
THE REGULATORS' ROUGH RIDE
What caused the financial crisis? President-elect Barack Obama had a simple answer during the campaign: eight years of policies that have shredded consumer protections, loosened oversight and regulation and encouraged outsized bonuses to CEOs while ignoring middle-class Americans. In other words, deregulation and conservative ideology are to blame. But the data show the exact opposite, says Kevin Hassett, director of economic policy studies at the American Enterprise Institute.
According to Hassett, there is a simple analysis to test Obama's view:
Countries around the world have wildly different regulatory structures; some, like the United States, have relatively light regulatory structures, and rely more on free markets to discipline institutions.
Others, including Germany and Turkey, regulate a good deal more.
If Obama's thesis is correct, then the economic crisis should be worse in the countries that have looser regulations fueled by a "failed ideology." However, an international comparison of stock market performance over the last year shows that countries that were economically free, while still suffering downturns, have fared better than more regulated economies, says Hassett.
Looking at a measure of economic freedom:
If Obama were correct, the line measuring economic freedom would slope downward indicating that countries that are economically free would have had bigger collapses in their stock markets.
However, the line is upward-sloping, which implies that over the past year, countries that are economically free have suffered less than countries that are not.
Therefore, there is no country that went unscathed over the past year; even the most aggressive European regulatory states suffered terribly.
As we consider regulatory changes, there is no successful country in the Organization for Economic Co-operation and Development (OECD) that the United States could consider copying. We already know that countries that were less free fared worse, says Hassett.
Source: Kevin A. Hassett, "The Regulators' Rough Ride," National Review, December 15, 2008; based upon: Kevin A. Hassett, "The Regulators' Rough Ride," American Enterprise Institute, December 1, 2008.
