On Europe's Unsustainable Welfare State

Tyler Durden's picture

Authored by Danielle Lacalle via The Mises Institute,

Angela Merkel used to say that “the European Union is about 5% of the world’s population, about 25% of its GDP, and about 50% of global welfare spending.”

The real data is more concerning.

The European Union is:

  • 7.2% of the World Population.
  • 23.8% of the World’s GDP.
  • 58% of the World’s Welfare Spending.

Something has to give.

The EU average tax burden on workers is 44.9%. The average worker in the EU spends half a year working for the tax man.

Taxation accounts for 41% of the euro area GDP.

Ease of doing business remains below the leading economies of the world.

Bureaucracy is asphyxiating. The EU approves on average 80 directives, 1,200 regulations and 700 decisions per year.

The main EU economies remain significantly below the leaders in economic freedom.

At the same time, despite massive tax burden and constant confiscation of wealth, the EU’s average debt to GDP is 90%. Continuously making science fiction estimates of tax evasion and calling to tax the rich as a mirage, has led to unsustainable levels of government burden on the real economy and hinders investment and capital investment as policies are increasingly aimed at taxing the productive to subsidize the unproductive.

Using unrealistic estimates of tax revenues made by politicians — that are always missed — for very real expenditures — which are consistently above budget — has made the EU miss its debt reduction expectations.

The cost of hyper-regulation and excessive taxes to job creation, investment, and innovation are evident. The EU has an unemployment rate that almost doubles the leading economic peers, and taxation hinders the growth of SMEs (small and medium enterprises), which shows a ratio of development to large companies that is half the same ratio in the US.

The EU has many positive things, as I explained here. But we cannot let bureaucracy and confiscatory taxation take over a worthy project. Because ignoring those risks, we would make the EU implode.

Unless the EU politicians change their mindset of a model built on massive taxation and bureaucracy and start putting at the forefront of policy cutting taxes, slashing red tape, more open business, more economic freedom, focusing on job creation and attraction of capital, the welfare state will implode.

The EU’s welfare state can only be protected by defending growth, investment, and job creation. However, it will likely be destroyed by the same ones that say they defend “the public sector.” By making it unsustainable.

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oak111's picture

While Europe is far from ideal, and there are many things to correct, it is disappointing that the author/Mises Insitute has not a more differentiated view of this issue: It is not only WHAT YOU PAY (in taxes), but also WHAT YOU (or society, and you are part of society, even if that is not obvious to everyone) GET!

lancia11's picture

To get money for doing nothing does not create welfare. It's the production that's creates a welfare state, not the money (they can print that as much as they want). What gets the average worker in the EU from the state in services or products for his tax-money?

Singelguy's picture

The only flaw in your argument is that those that pay the MOST, the hard working middle class, get the LEAST! If the government keeps taking MORE taxes from the most productive, it will end up with a lot LESS, when those people finally reach the point where they say, why am I busting my ass so the government can take the majority and give it to the lazy fucks who don't want to work? Then they pack up and leave or stop working and the government ends up with NOTHING except a bunch of lazy fucks.

waspwench's picture

Too many people, and increasing.

Too few jobs, and decreasing.

Too many people who are dysfunctional (drug addicts, unhealthy, low IQ) and, therefore, require assistance but do not contribute, and increasing.

Too few people who are functional and able to produce the necessary surplus needed to support the dysfunctional, and decreasing.

Obviously this cannot continue and it will be necessary to cull the herd.

We have to reassess eugenics.  

Eugenics has become a dirty word but but it will have to be rehabilitated.   Governments ought to be pursuing policies which discourage unproductive and undesirable  groups from reproducing.   Currently it is so profitable to have children that some families are able to live very well on the various allowances which are allotted to them by virtue of the fact that they have children.   Medical assistance is given to assist childless couples - sometimes couples who ought not to reproduce at all as they are passing on bad genes;  i.e. diabetics who produce more diabetics  whose care is an expensive burden.    Premature babies are "saved" at huge expense (often to live very unhealthy lives) and appallingly sick children are kept alive, suffering, because their parents refuse to face the fact that they have no quality of life.    One cannot blame the people who take advantage of this situation.   It is the way the system has been set up, but is is unaffordable.   These people live their lives at the expense of the others.   People have to be made to take responsibility for their choices.   If you cannot afford to care for children, or hope to have healthy children, then you cannot have them.   Government policy ought to encourage people to act responsibly.   There should be no child allowances.   Unhealthy people need to understand that it is irresponsible to have children,   The government has no obligation to assist anyone in becoming pregnant.   The government has no obligation to assist anyone with gender issues or to pay for surgery which is only for cosmetic enhancement purposes (as opposed to burn victims or those born with disfigurement or deformity.) 

Other matters which require massive reform are immigration and foreign aid.   The west should only be accepting immigrants who are literate, educated, healthy and have skills to offer so that they will be a financial asset.   Foreign aid should be reduced and be available only for real emergencies:  famine, epidemic, etc.  and it should be awarded only with very strict provisions and given only in kind - food and medications distributed by the donor countries - no cash payments which can be siphoned off into Swiss bank accounts.  Refugees should be supported in safe havens on foreign soil which would be far more cost effective than importing them into western nations and then having to support them in a western lifestyle.

Government policies and propaganda can effect changes in behaviour and can decide outcomes.   End child allowances.  Make it profitable to not have children - pay a lump sum for voluntary sterilization, offer free birth control.  Refuse support for bad choices.   Make it clear that it is not the responsibility of the western nations to save the world and, looking back over the years, it often seems that we have done far more harm than good with our interventions. This may seem harsh and there would be howls of protest, but if change cannot be effected by gentle means we will eventually find ourselves faced with far uglier solutions: forced sterilization, a one child policy, abandoning the third world entirely.   I don't even want to think about the other options.

Governments can act now with persuasion or they will have to act later with inhumane and draconian methods.   But perhaps that is what they want - an excuse to impose martial law and a police state?

 

Sauerkraut-Opinion's picture

Everybody can come to Germany and pick up social benefits and pension. Experts are estimating that according our law about 2/3 of the world population is entitled for political asylum in Germany.

Even members of Al-Schabab, Talibans or ISIS, who pretend to be persecuted in their homeland (e. g. by the  police). The border between German welcome-policy and madness hasn't got a straight line. You don't believe? Also in this case the full welfare state is guaranteed - now very trendy in Germany: 

https://www.welt.de/politik/article166675821/Zahlreiche-Fluechtlinge-zei...

Mimir's picture

Europen welfare states are among the richest countries in the world

European workers are among the most productive in the world.

Most Europeans accept the relative high levels of taxation because their tax provide free education, free healthcare for all, generous retirement schemes, and well developed public services. 

Europeans are among the happiest people in the world. 

We Europeans question how long the American's unsustainable model of society can continue to reject the legitime demands of its people for decent healthcare, affordable education and well functioning public services. 

css1971's picture

Countries are not rich, they have debts and deficits. Countries have nothing. They're negative. They just move money from one bunch of people to another.

Same with the populations. Our money is debt, so there's no net riches. There's plenty of wealth but it's all collateral.

What we do have is productivity and that's what pays for it all. Except... the populations are aging... Soon it'll be one retired person for every 3-4 workers. And the people they're bringing in to replace the non breeding population ... may not, be quite as productive. Rather the reverse.

Simply... You've mistaken inflation for wealth. It's going to hurt.

Mostly your children.

Anderson Coopers Gerbil's picture

The bearded men will look after the daughters

BlussMann's picture

It won’t be long before you will be using the past tense.

Anderson Coopers Gerbil's picture

At least when you go to the hospital to get  fixed up because your new muzzie neighbour stabed you it,s "free"

css1971's picture

I've run the numbers and I can't emphasise enough just how screwed European welfare states (and people) actually are.

If you're not a Baby Boomer, you're not getting it. It's pretty much as simple as that, and if you're not already making preparations you're going to be screwed.

HoyeruNew's picture

but it's fine for EU to spend trillions on defense against big bad Russia. Welfare for the rich, just like th heaadline says  http://www.zerohedge.com/news/2017-07-15/deutsche-fed-has-created-univer...

Rick Cerone's picture

The welfare state is necessary for paving the way to the slave state. Remember, the greater good. Banks must be protected at all costs.

- Pope Francis

TRN's picture

The worst evil of the welfare state is that it's citizens forget to create and become totally dependent on the state. Ask the Greeks.

surf@jm's picture

Keep dreaming........

When one sector makes all the rules to benefit itself, at the expense of the other sector, nothing will change, until it all collapses....

The public sectors motto is.....When spending other peoples money, why care how much you spend?.........

JailBanksters's picture

The real story is WHO created the problem and WHY

Just like the Feral Reserve, they are clearly the ones responsible for the current state of the USA.

But they are going to blame the other 6 Billion on the Planet to save the 100 Families at the top of the Pyramid.

And to make sure the 100 Families stay at the top, they will steal every dollar from the 6 Billion.

mary mary's picture

Wealth = natural resources / population

European Socialists have "helped" Africa and the Middle East overpopulate to a state of unending misery, and are now ready to "help" Europe overpopulate, by importing as much African and Middle Eastern overpopulation as they can into Europe.  They call that importation "saving helpless refugees".

European Socialists are telling European citizens that "being charitable helps you", but it actually only helps European Socialists: the banks, the Church, Big Government, and the global consumer staples and utilities industries.

Again, the equation at the top of this comment.  Eventually, European citizens will lose enough wealth to feel enough pain to wake up.  "When I feel the heat, I see the light".  But they have already lost much and will lose much more before they take courage and get organized and drive out the European Socialists.

beijing expat's picture

Considering they have to pay all them migrants not to riot, this could get interesting.

Max Victor's picture

 

From the international banker's perspective -  moving vast numbers of people from poorer to richer countries makes very good buisiness sence.

If you lend the government of say NOGWANNA only $2,000 per person because that is all their country has credit rating for - and move youthful breeding people  to say Europe and have them debase the stock living in GREAT SHITHOLE -  you can now lend $80,000 or more per person.  Also that person is now poping childern out like a trooper - Can anybody else hear the cash register turning?

Why lend $ 2,000 when you can lend $80,000 ?

To keep the credit rating up in GREAT SHITHOLE the population average has to be less than 70 years for the plan to work – yes? BINGO!

 

snakedogs's picture

Haven't paid taxes in 25 years, even got a $500 gift from state and Uncle Sam this year. Pay $0 for health care, even get reimbursed for Part B from my city union contract (retired on tax free 75% disability also right on to tax free SSD). No deductibles either. free meds from VA along with my tax free 100% compensation. Suckers working paying taxes think the RINO's are going to cut taxes, the thieves in Congress will talk you to death as the bankers and Wall St. slave owners drain the last penny from all. The Democrat Communists will put BLM, Antifa, Occupy in the streets as their "Pipe Organs" prostitutes like Bezos and Slim scream Russia! They will hold up every Trump nominee and bill. After 4 years of Trump being stopped at every turn, he will be attacked like no other President and replaced. So get ready for Bush III or The crazies like Fake Indian Warren or Tiny Tim Kane from the insane Left. Keep running with the "Sheep" the wolves are hungry!

P.S. thanks for the 2.2% Social Security raise on the way!

wide angle tree's picture

By lowering everybody's standard of living everybody wins. Ha Ha

Education and Healthcare should be dirt cheap and occupy much less of our economies. What the TPTB don't want you to realize is education and healthcare are being used as an excuse to make you a slave to the system. Despite the massive expenditures on education and health everybody seems rather stupid and out of shape. Think about that for a while.

Sandmann's picture

Welfare Capitalism is about "living betwen the lines". The State is backed by the SALARIAT because that is where the well-paid Broker jobs are extracting money from the masses to divert to the favoured classes