Why is the failure of statism being foisted on us as a failure of capitalism?

On a local radio show I was asked to defend capitalism. I observed that it was interesting that capitalism was currently being attacked as a failed system based on the past four years or so. The irony is that rather than it being exhibited that capitalism had failed it was rather that statism had failed. Capitalism is not the bailouts of the financial institutions, the nationalization of Fannie Mae and Freddie Mac, the takeover of Chrysler and General Motors, the stimulus packages. the takeover of health care, cap and trade and the myriad of the intrusions of the federal government into the economy. I said that this is a recipe for permanent European levels of unemployment, inflation, low productivity and lower standards of living. What follows is more to that point.

From the Wall Street Journal
OPINIONMARCH 11, 2011

A European's Warning to America
The perils of following us toward greater regulation, higher taxes and centralized power.
By DANIEL HANNAN

On a U.S. talk-radio show recently, I was asked what I thought about the notion that Barack Obama had been born in Kenya. "Pah!" I replied. "Your president was plainly born in Brussels."

American conservatives have struggled to press the president's policies into a meaningful narrative. Is he a socialist? No, at least not in the sense of wanting the state to own key industries. Is he a straightforward New Deal big spender, in the model of FDR and LBJ? Not exactly.

My guess is that, if anything, Obama would verbalize his ideology using the same vocabulary that Eurocrats do. He would say he wants a fairer America, a more tolerant America, a less arrogant America, a more engaged America. When you prize away the cliché, what these phrases amount to are higher taxes, less patriotism, a bigger role for state bureaucracies, and a transfer of sovereignty to global institutions.

He is not pursuing a set of random initiatives but a program of comprehensive Europeanization: European health care, European welfare, European carbon taxes, European day care, European college education, even a European foreign policy, based on engagement with supranational technocracies, nuclear disarmament and a reluctance to deploy forces overseas.

No previous president has offered such uncritical support for European integration. On his very first trip to Europe as president, Mr. Obama declared, "In my view, there is no Old Europe or New Europe. There is a united Europe."


Barbara Kelley
I don't doubt the sincerity of those Americans who want to copy the European model. A few may be snobs who wear their euro-enthusiasm as a badge of sophistication. But most genuinely believe that making their country less American and more like the rest of the world would make it more comfortable and peaceable.

All right, growth would be slower, but the quality of life might improve. All right, taxes would be higher, but workers need no longer fear sickness or unemployment. All right, the U.S. would no longer be the world's superpower, but perhaps that would make it more popular. Is a European future truly so terrible?

Yes. I have been an elected member of the European Parliament for 11 years. I have seen firsthand what the European political model means.

The critical difference between the American and European unions has to do with the location of power. The U.S. was founded on what we might loosely call the Jeffersonian ideal: the notion that decisions should be taken as closely as possible to the people they affect. The European Union was based on precisely the opposite ideal. Article One of its foundational treaty commits its nations to establish "an ever-closer union."

From that distinction, much follows. The U.S. has evolved a series of unique institutions designed to limit the power of the state: recall mechanisms, ballot initiatives, balanced budget rules, open primaries, localism, states' rights, term limits, the direct election of public officials from the sheriff to the school board. The EU places supreme power in the hands of 27 unelected Commissioners invulnerable to public opinion.

The will of the people is generally seen by Eurocrats as an obstacle to overcome, not a reason to change direction. When France, the Netherlands and Ireland voted against the European Constitution, the referendum results were swatted aside and the document adopted regardless. For, in Brussels, the ruling doctrine—that the nation-state must be transcended—is seen as more important than freedom, democracy or the rule of law.

This doctrine has had several malign consequences. For example, it has made the assimilation of immigrants far more difficult. Whereas the U.S. is based around the idea that anyone who buys into American values can become American, the EU clings to the notion that national identities are anachronistic and dangerous. Unsurprisingly, some newcomers, finding their adopted countries scorned, have turned to other, less apologetic identities.

The single worst aspect of Europeanization is its impact on the economy. Many Americans, and many Europeans, have a collective memory of how Europe managed to combine economic growth with social justice. Like most folk memories, the idea of a European economic miracle has some basis in fact. Between 1945 and 1974, Western Europe did outperform the U.S. Europe happened to enjoy perfect conditions for rapid growth. Infrastructure had been destroyed during the war, but an educated, industrious and disciplined work force remained.

Human nature being what it is, few European leaders attributed their success to the fact that they were recovering from an artificial low. They convinced themselves, rather, that they were responsible for their countries' growth rates. Their genius, they thought, lay in having hit upon a European "third way" between the excesses of American capitalism and the totalitarianism of Soviet communism.

We can now see where that road leads: to burgeoning bureaucracy, more spending, higher taxes, slower growth and rising unemployment. But an entire political class has grown up believing not just in the economic superiority of euro-corporatism but in its moral superiority. After all, if the American system were better—if people could thrive without government supervision—there would be less need for politicians. As Upton Sinclair once observed, "It is difficult to get a man to understand something when his job depends on not understanding it."

Nonetheless, the economic data are pitilessly clear. For the past 40 years, Europeans have fallen further and further behind Americans in their standard of living. Europe also has become accustomed to a high level of structural unemployment. Only now, as the U.S. applies a European-style economic strategy based on fiscal stimulus, nationalization, bailouts, quantitative easing and the regulation of private-sector remuneration, has the rate of unemployment in the U.S. leaped to European levels.

Why is a European politician urging America to avoid Europeanization? As a Briton, I see the American republic as a repository of our traditional freedoms. The doctrines rooted in the common law, in the Magna Carta, and in the Bill of Rights found their fullest and most sublime expression in the old courthouse of Philadelphia. Britain, as a result of its unhappy membership in the European Union, has now surrendered a large part of its birthright. But our freedoms live on in America.

Which brings me to my country's present tragedy. The fears that the American patriot leaders had about a Hanoverian tyranny were exaggerated. The United Kingdom did not develop into an absolutist state. Power continued to pass from the Crown to the House of Commons.

Until now. Nearly two and a half centuries after the Declaration of Independence, the grievances it adumbrated are belatedly coming true. Colossal sums are being commandeered by the government in order to fund bailouts and nationalizations without any proper parliamentary authorization. Legislation happens increasingly through what are called standing orders, a device that allows ministers to make laws without parliamentary consent—often for the purpose of implementing EU standards.

How aptly the British people might today apply the ringing phrases of the Declaration of Independence against their own rulers, who have "combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws."

So you can imagine how I feel when I see the U.S. making the same mistakes that Britain has made: expanding its government, regulating private commerce, centralizing its jurisdiction, breaking the link between taxation and representation, abandoning its sovereignty.

You deserve better, cousins. And we expect better.

Mr. Hannan is a member of the European Parliament. This essay is adapted from the Encounter Books Broadside, "Why America Must Not Follow Europe."