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Why the Euro will NOT make Europe like the USA!
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The USA is often cited as an example of a successful economy with 250 million
people and a single currency. The clear implication is that the economy of
Europe, under the Euro, will have similar characteristics and performance.
There are numerous reasons why this will not be the case.
The USA is a relatively new country, with a small indigenous population.
The majority of the population can trace their roots back to some other
part of the world, including Europe, Africa, South America and Asia.
If you ask an American where their ancestors came from, invariably the
response will be; one quarter English, one quarter Dutch and half Irish (all
Americans seem to be at least one quarter Irish, especially on St. Patrick’s
Day!). What this means is that most of the population are descended from
people who made the choice to go and live in a new Country. In doing so
they accepted that they would be living in a melting pot of cultures and
could not expect their own ideas and customs to necessarily dominate. This
is not what we have in Europe. The European people are fiercely proud of
their cultures and ways of life. There is nothing wrong with this as long
as they do not expect to impose their culture on other countries. If
European integration continues it is inevitable that the necessary
harmonization across Europe will step on someone’s cultural toes. As an
example, the saying states that “an Englishman’s home is his castle”, meaning
that the typical Englishman values home ownership. This is reflected in the
level of home ownership in England that is much higher than in, for example
Germany, where hardly anyone will buy a house before getting married. Why
this is the case, I do not know. It may be that parents subconsciously
instill the value of 'bricks and mortar' in their children, or it may be
that mortgages are easier to obtain. Whatever the reason there is a cultural
difference. Clearly, in a united Europe it will be difficult, if not
impossible, to set a common level of Property Transfer Tax that will be fair
to everyone.
The USA has English as its common language. This makes it much easier to
conduct business and move around the country. Europe on the other hand
has numerous languages that hamper business and cultural exchanges. The
likelihood of adopting one language is negligible, especially when
considering the laws that the French have passed to preserve the French
language. Putting it bluntly, how can a partnership be expected to last
when the parties cannot even speak the same language?
The US has extremely company friendly labor laws compared to Europe. The
“hire and fire” culture was born in the US. This means that as regional
variations arise in the US economy companies can relocate their factories
and if necessary their workers with little bureaucratic hindrance. Since
this is the case, companies are willing to invest in the new and possibly
prosperous areas, knowing that they can bail out if the regional economy
takes a turn for the worse. In contrast, Euroland has worker and Union
friendly labor laws. Once a company hires someone in France or Germany it
is extremely difficult and costly to 'get rid' of them. The consequence of
this is that companies are unable to be as flexible to changing economic
conditions as they would like to be.
And it seems to work! More jobs were created in the USA in 1999 than in
the whole of the Eurozone from 1990 to 1999.
In Europe only 1% of the population live outside the country where they were
born. Therefore it is no surprise that when a job is advertised in Europe
there are on average less than 1% of job applicants from another European
country. This is in contrast to the USA where approximately 20% of job
applicants are from outside the state. Of course there are good reasons for
this - the main one being the single language.
Britain in the 1980 went through a structural change and many of the old
manufacturing and mining industries of the North closed. The families of
those made redundant had lived in North for many generations and resented
any idea that they should move to the more prosperous South. It is just
reality that Europeans have deeper roots than our friends across the
Atlantic. Is it really likely that in the next twenty years we can expect
worker in Wales to move to Spain in order to find work?
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Tax Redistribution
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Contributed by Chris Wright
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Finally, the USA is a real country and as such collects taxes (~30% of GDP).
These can be used to help the poorer states. Currently in Europe there is little
central taxation and therefore no mechanism for supporting the poorer regions.
The result of this is that tax centralisation within Europe is inevitable.
So, in summary - yes we should be looking at America and asking what makes it so
successful. But it would be a big mistake if we concluded that the single dollar
currency was the reason for the success as the culture and business environment
play a much bigger part!
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