MaxedOutMama
Friday, May 06, 2005
The Second Shoe Drops
The first shoe dropped when it became obvious that France's voters might not approve the EU Constitution. The reasons are largely the concerns of workers over enlargement and the services directive, both measures that force French workers to compete against the lower wages and benefits required by the Eastern European countries.
The second shoe is dropping in Germany, where a leftist politician is railing against foreign speculators (locusts) who invest in German businesses and cut costs (including workers), Deutsche Bank, which cut workers despite making a big profit last year, and those nasty eastern European countries:
Now one could wax eloquent about the arrogance underlying a socialist politician in Germany demanding that
another country raise its corporate tax rate in order not to present a competitive challenge to German workers, but I won't. I will merely point out one simple fact: the proposed solution of such politicians is demographically impossible, because the German population is not having enough children to sustain the country. Therefore, regardless of all the shrieking, Germany faces massive immigration to support the current workers when they become old. The only question is from where this immigration will come, and the Germans stole enough blond Polish children during WWII to probably prefer that option to the Turks. Q.E.D.
And finally I want to point out that Kerry did not understand the nature of the US divide from Europe. It was not caused by the Iraqi war; Bush was being slammed in the European press well before 9/11. It stemmed largely from the feeling that the culture of the US was a threat in and of itself to socialist Europe. They find American religiosity the mark of a primitive society, our capitalism offensive and our lack of consideration for their economic sensibilities unbelievably self-centered. In short, American populism is the threat. They know, after all, that we are not going to bomb them.
For another look at flat-taxes in Eastern Europe see this Christian Science Monitor article:
Now here is the center of one of my concerns about the leadership of the Democratic party. All of this trend also lays a competitive burden upon the US in the same way it does upon western Europe. True, we are in a more competitive position now, but if we stand still we will not retain that place. I personally would prefer to avoid the matter, but it appears that the sweep of history will force the US to revamp its tax policy very soon. I wonder if the Democratic leadership can be led to discuss this necessity or whether it will end up hedgehogging like the socialists of France and Germany. The current lack of proposals and initiatives on reforming Social Security from within the Democratic party worries me terribly.
The second shoe is dropping in Germany, where a leftist politician is railing against foreign speculators (locusts) who invest in German businesses and cut costs (including workers), Deutsche Bank, which cut workers despite making a big profit last year, and those nasty eastern European countries:
Critics say that Muentefering's words are aimed at disenchanted voters in North-Rhine Westphalia, which is due to have elections in just a few weeks. The area is a traditional labor-stronghold with high unemployment which has suffered from the negative effects of globalization: manufacturing jobs have moved to Eastern Europe and Asia while wages have fallen under pressure from cheaper foreign competition.The "new" European countries have pretty much gone to low flat-tax rates; thus the left in Germany would like to overrule their economic policies and their ability to compete. The traditional social consensuses of France and Germany are deeply threatened by the increasing competition from eastern Europe and abroad. In Germany the response is isolated on two fronts. There is the conservative crowd that wishes to become more competitive, and the socialist crowd which is profoundly tempted to adopt the Nazi solution. To see how intense this debate is getting, read the whole Spiegel article and then read this interview with an American investor.
Muentefering is however trying to prove to skeptics that his words are more than simply pre-electoral posturing: He has called for a raft of laws that would better protect the German market from wage dumping by introducing tighter controls on foreign companies, particularly those from Eastern Europe. He also wants business taxes to be standardized across the European Union in order to eliminate the competitive advantage enjoyed by countries with low corporate tax rates.
Wyser-Pratte: It's the same story all over Europe: If international investors didn't hold about 30, 40 percent of shares in European companies, you'd pretty much have a recession here.F.A.Z. attempts to rebut the anti-business rhetoric in this article entitled "The Positive Payoff Of The Locusts". Read it all, but the last paragraph is the most revealing:
SPIEGEL: Many Germans see it a little differently. They see speculators moving into their companies, letting people go, cashing in and then disappearing again. Higher stock values don't do them any good when they've lost their jobs.
Wyser-Pratte: Getting rid of people isn't the point. Again, that's just socialist nonsense. The problem lies in the calcified nature of German labor laws, which don't allow for any flexibility. These archaic structures represent a burden on those members of the population who want to work. That's the only reason you have 12 percent unemployment.
SPIEGEL: You can liberalize labor laws and collective bargaining rules until you're blue in the face -- but German workers will never be able to compete with Polish hourly wages.
Like all developed economies, Germany is dependent on efficient capital markets. The use of modern financing instruments is indispensable for successful structural change and risk control. How well the self-healing powers of the markets work even after shocks and speculative exaggerations can be seen in the reactions to the terrorist attacks of Sept. 11, 2001, the burst of the Internet bubble or the illegal enrichment of managers.What they are really talking about there is the US economy, not theirs. And F.A.Z. here ignores what else was done to recover from the 2000 period recession followed by the triple-shock. The Bush administration cut taxes, and cut taxes again, and cut taxes in way which highly favor business investment. And now Germany stares uneasily at a difficult fate, because it can't cut taxes without radically reworking its social programs, and yet it must, if for no other reason than the competition of the smaller European countries which have cut taxes and are now reaping the growth rewards.
Now one could wax eloquent about the arrogance underlying a socialist politician in Germany demanding that
another country raise its corporate tax rate in order not to present a competitive challenge to German workers, but I won't. I will merely point out one simple fact: the proposed solution of such politicians is demographically impossible, because the German population is not having enough children to sustain the country. Therefore, regardless of all the shrieking, Germany faces massive immigration to support the current workers when they become old. The only question is from where this immigration will come, and the Germans stole enough blond Polish children during WWII to probably prefer that option to the Turks. Q.E.D.
And finally I want to point out that Kerry did not understand the nature of the US divide from Europe. It was not caused by the Iraqi war; Bush was being slammed in the European press well before 9/11. It stemmed largely from the feeling that the culture of the US was a threat in and of itself to socialist Europe. They find American religiosity the mark of a primitive society, our capitalism offensive and our lack of consideration for their economic sensibilities unbelievably self-centered. In short, American populism is the threat. They know, after all, that we are not going to bomb them.
For another look at flat-taxes in Eastern Europe see this Christian Science Monitor article:
Leaders such as Chancellor Gerhard Schröder say that the Eastern European countries steal business with their low tax rates while at the same time benefiting from European Union (EU) aid.The article was published in March, but is already outdated. Later in March Poland announced its plan to cut all taxes, corporate or personal, to one flat rate of 18% by 2008. You might consider that outrageously rightwing, but that was the liberal proposal. The conservatives wanted a rate of 15%.
Last year, former French Finance Minister Nicolas Sarkozy said that if the new states were "rich enough" to introduce a flat tax they wouldn't need EU funds. France and Germany want to harmonize tax rates within the EU, and bring flat-tax rebels under a unified code.
With such heavy budget obligations, countries such as France and Germany reject flat taxes because they wouldn't be able to afford a cut in their tax revenues, says Wolfgang Wiegard, chairman of the German Council of Economic Experts.
Now here is the center of one of my concerns about the leadership of the Democratic party. All of this trend also lays a competitive burden upon the US in the same way it does upon western Europe. True, we are in a more competitive position now, but if we stand still we will not retain that place. I personally would prefer to avoid the matter, but it appears that the sweep of history will force the US to revamp its tax policy very soon. I wonder if the Democratic leadership can be led to discuss this necessity or whether it will end up hedgehogging like the socialists of France and Germany. The current lack of proposals and initiatives on reforming Social Security from within the Democratic party worries me terribly.
Comments:
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So when do I get to vote for Kinsley etc? I'm talking not about your Dem-on-the-stret, but the current political leadership. I know quite a few committed Democrats who are just as frustrated as I am about this. It still doesn't stop Pelosi from insisting that Social Security's deficits will begin between 2050 and 2100.
I agree with your recipe for stagflation. I agree that a country won't necessarily grow any faster if another country adopts stagflation policies. That is the German/French socialist argument, not mine.
But I totally disagree with your baseline argument. If you eliminate protectionist barriers between countries, a country with better tax/growth policies than yours will benefit at your expense.
The entire premise of capitalism is market efficiency. To put it another way, a company that adopts non-competitive policies will slowly lose its markets. Eventually it will be forced to cut jobs while other more efficient competitors gain markets and expand. The same is true on the larger scale.
You can see this phenomenon in the various states in the US. Those who have a lot of money will often establish their primary residence in a state whose estate or income taxes are favorable to their interests. A state that imposes a high sales tax and borders on another state with a low sales tax will get additional cross-border sales.
Georgia, for instance, loses sales when Florida runs sales tax free periods. Another classic example is Florio's decision to raise revenue in New Jersey by increasing registration fees for trucks in the 1990s. Despite the substantial increase, within a year New Jersey's registration fee income from the trucking industry had plummeted. It was cheaper for the trucking companies to change their states of ownership than pay the fees.
US states compete based on their economic policies, and EU states do too. That is why there is all the fuss about the origional services directive. It would open each market to a company operating under the rules of the company's home state. The French and German workers would lose their jobs rapidly under such an arrangement if a Polish firm could come into Germany, pay Polish wages and follow Polish work rules.
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I agree with your recipe for stagflation. I agree that a country won't necessarily grow any faster if another country adopts stagflation policies. That is the German/French socialist argument, not mine.
But I totally disagree with your baseline argument. If you eliminate protectionist barriers between countries, a country with better tax/growth policies than yours will benefit at your expense.
The entire premise of capitalism is market efficiency. To put it another way, a company that adopts non-competitive policies will slowly lose its markets. Eventually it will be forced to cut jobs while other more efficient competitors gain markets and expand. The same is true on the larger scale.
You can see this phenomenon in the various states in the US. Those who have a lot of money will often establish their primary residence in a state whose estate or income taxes are favorable to their interests. A state that imposes a high sales tax and borders on another state with a low sales tax will get additional cross-border sales.
Georgia, for instance, loses sales when Florida runs sales tax free periods. Another classic example is Florio's decision to raise revenue in New Jersey by increasing registration fees for trucks in the 1990s. Despite the substantial increase, within a year New Jersey's registration fee income from the trucking industry had plummeted. It was cheaper for the trucking companies to change their states of ownership than pay the fees.
US states compete based on their economic policies, and EU states do too. That is why there is all the fuss about the origional services directive. It would open each market to a company operating under the rules of the company's home state. The French and German workers would lose their jobs rapidly under such an arrangement if a Polish firm could come into Germany, pay Polish wages and follow Polish work rules.
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