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Thursday, February 15, 2007

European lies about unemployment rates

EU economic data are political statements and have little to do with reality.

by StFerdIII

European governments, aided by bad publications like the Economist magazine, always distort EU economic data. A classic example is employment. In the US and Canada unemployment rates are 4.9% and 6.7% respectively. In Europe the aggregate EU number is supposedly 7.5% - far worse than the US and only slightly higher than statist Canada. It does not sound so bad. But parse the numbers, look at the countries that are producing jobs, analyze real employment rates and you will see the EU lie for what it is – politically managed propaganda.

It is well known that EU governments lie about unemployment rates. In virtually every EU country unemployed data ignore people who are paid to sit at home with ‘back pains’; those on more than 4 hour per week government programs; those who are paid to attend a few hours of re-education per week; and those who have been out of work for more than 18 months. In fact the rate of chronic or long-term unemployment in Europe is a large multiple of what it is in the US. Statistically most unemployed in the US find another job within 6 months. Not so in Europe.

When you add in the various government programs; the sitting at home ‘in-pain’ worker; and other accounting illusions the real EU unemployment rate is double the official rate. Holland for instance is famous for its low unemployment rate of 3-5 % even though in a country of 8 million adult age workers, over 1 million sit at home with ‘psychological’ or ‘back pain’ problems. Hundreds of thousands more are on flimsy government make-work projects to officially take them off the unemployment list. Holland’s real unemployment rate is probably closer to 15 %. One can verify this by visiting a pub at 2 pm on any weekday in any Dutch city – it will be full of healthy people that should be working.

In Europe unemployment rates are political statements, not statements of economic reality.

You need to look at employment rates for a truer picture of economic health. The EU employment rate is less than 60 % on average. This average rate covers France with a 55% employment rate and Holland with a slightly more robust 63% rate. In the US the employment rate is 74% and in Canada just over 70%. This means that in France for example about 40% of the total population is carrying the entire burden of the state, high taxation, massive social programs, and fat union pay checks.

As the EU government itself admits:
“…the EU rate [has dropped to] 60.5%, whilst that of the US had increased to 74%, a spread of almost 14 percentage points - equivalent to about 34 million jobs.”

In an EU of 350 millions, a 34 million job creation gap means that fully 30% of potential EU job seekers are out of luck. This lack of economic dynamism might be obscured by government lies, but the reality is that EU GDP growth and productivity growth have lagged the US for 15 years. Average EU GDP growth per year on average is less than 2 % and yearly productivity growth has averaged 1 % or less. The economic cost and wealth loss for Europe is staggering.

In France the official rate of unemployment is 8.5%. This is laughable. Amongst the under 35 crowd the real unemployment level is probably 20-25%. Instead of addressing the real issues of economic weakness – corruption; high taxation; government regulated markets; poor education systems etc. – the French elite confirm the opposite. More social spending; more government programs; 35 work week regulations; and hints of higher taxes to come, are French solutions to state inspired problems. Sad.

It is clear that the only countries producing sustained job growth in the EU are those that have hacked back the socialist safety systems. The further the welfare state and onerous taxation is reduced, the faster the economy will grow. A faster growing private economy translates into more revenues, a longer term reduction in inflation and thus interest rates and of course more job creation. By transforming the economy the mind-set and culture of the population is transformed from demanding other people's money to help 'me', to engaging in more productive enterprise. Economic change forces political and cultural change.

And Europe needs a lot of political and cultural change. The EU suffers from capital rigidity; labor rigidity and the incestuous love triangle of big business, big government and big unions. The 1992 common market was an attempt to redress this economic killing paralysis. It has failed to do so. In fact national champions, politically important sectors and businesses with allies in high office are more powerful than ever. This distorts the EU mind set and dampens cultural and political dynamism.

In a recent OECD study the countries with the highest employment rates are the ones with the least rigidified labor-product and capital markets. The employment winners are thus the U.S., Britain, Australia, Canada, New Zealand, Spain and Denmark. Only two EU countries – Spain and Denmark – have bothered to Anglo-Saxonize the economy. In France, Germany, Italy, Belgium, Portugal and elsewhere, the mere mention of Anglo inspired market capitalism leads to riots, tears, and demands for protection.

So what is the real cost for the average baguette-munching, beret wearing Euro? Rigidities lead to higher prices; less competition; a lower standard of living; stultifying wages and less innovation. New markets are not explored and opened up, and dynamism is replaced with fighting over state money to sustain certain industries or classes. Populist statism becomes the political norm and ever higher taxation and spending the only politically correct program. In short people become poorer, and politicians and their friends more powerful.

Will Europe change? No. Anti-Americanism, anti-capitalism and anti-reality programs have dominated Europe for 2 generations. When young people stay in university until the average age of 28 indoctrinated into Marxist-socialism, there is little hope for reform. Europe’s welfare state will not shrink, it will only grow as demands for protectionism increase in virulence.

Expect therefore more socialism, less jobs and a further decline in EU living standards, followed of course by more rhetoric about European superiority - and more government lies about ‘unemployment’ rates and other economic data.

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