No useful answers

Who’s afraid of the big bad wolf?

Europeans fear rampant capitalism. Americans fear unbridled socialism.

Current events suggest that our respective economic systems offer poor protection against the economic evils of both. The “economy” itself is something of a fairy tale, something humans invented and then made horribly real, like paper money.

European economic systems favour socialism with some moderated capitalism. The American economic system rejects most socialist policies and instead errs (oh, how it errs these days) on the side of capitalism. Which is system is the weakest? It depends on which way the wind blows.
The straw house: Socialism and moderated capitalism

In Belgium, excellent health care and social welfare programmes are affordable for each individual. Doctors and medications are easy to access and no employee would risk contaminating his colleagues by working when sick. Illnesses, large and small, are covered by the state, and no one worries about receiving care in sickness, health, or old age. The marriage of citizen and state is a match made in a medical haven.

However, in Belgium, innovation and entrepreneurship among the average citizens are discouraged. Taxes escalate with income. In such a system, making more money becomes, at some point, imprudent. Taxes act as a state-imposed restraint on progress.

The economic system encourages a large, mediocre middle class of people who spend a lot of time inventing ways to avoid paying taxes rather than ways to make money. In Belgium, the State makes employment difficult for both would-be employees and their employers.

Highly skilled and educated interns and trainees sell their services for a song. Interns hope to eventually be “officially employed”. The fairy tale ending for these underpaid and under-resourced non-employed employees is that some day, somewhere, some prince of a company will commit to the poor intern’s health, wealth, and future in an official employment contract. The miller’s daughter in the tale of Rumpelstilskin had similar dreams when she tried to spin straw into gold.

And, like a marriage in the realm of fairy tales, an official Belgian employment contract is all about commitment. Belgian employers are required to substantiate this commitment with a salary and numerous “extra-legals” like reimbursed travel expenses, company meal tickets, and company-funded vacation and sick leave. Not surprisingly, most already over-taxed Belgian employers act like dedicated bachelors. They flirt with interns, date trainees, and make false promises to stagiares. Why pay for the cow when one can get the milk for (almost) free? Especially when buying the cow is so expensive.

Belgian employers understandably abhor the company contract. The contract is a document that binds the employer to the employee and to the Belgian state. In Belgium, as in France, Germany, and several other EU Member States, job security within the contract is iron-clad. It is usually cheaper to maintain a non-productive employee rather than fire him or her. The severance pay that a Belgian company is legally obligated to give a fired or laid off employee is astronomical. When a company must pay such high prices to hire and even higher prices to fire an employee, the company is far less likely to grow in size, products or services offered—harming the business’s customers and employees.

It’s not just the system of employment or the high taxes that discourage innovation. The high level of regulation and state involvement in the Belgian business sector inhibit the flexibility demanded by an innovative private industry. There are thousands of pages dedicated to the regulation of food production within the European market alone, not to mention additional Belgian legislation regarding the implementation of said regulations. It’s hard to maneuver, much less grow, in the midst of so many forms to fill out and rules to follow.

It’s the nature of innovation to outstrip established institutions and conventions. But the Belgian market is not generally a place that provides room for ideas to grow. At the same time, within a contract, the Belgian market is one of the most secure places of employment.
A house of sticks: Capitalism

Meanwhile, across the Atlantic, capitalism has run amok.

The current American financial crisis suggests that if everyone is out to accumulate immediate cash, no one invests in a sustainable, trustworthy system for the entire society. I get mine, you get yours, and somebody somewhere gets screwed. What do you or I care about the number of nameless victims that are too stupid to profit from scamming the system?

But what happens when that number of nameless victims escalates? Now responsible taxpayers are being called upon to bail out both the economic elite and the idiots, er, victims, off whom they profiteered. (Note: the elite are NOT idiots. In America, successful scammers are just smart.)

Capitalism is about making money, not regulating security. Loopholes in the business and financial sector in the capitalist United States are legendary. In the United States, “regulations are traditionally flexible so as to encourage and escalate creative business practices and market growth”.

On the plus side, American-style capitalism has led to a lot of innovative business practices. Private industry based in the USA has traditionally led the world in technology and advanced research. These businesses have developed incredibly useful (and useless) advances in industries that include health, technology, education, entertainment, and, perhaps regrettably, finance.

Modern sarcasm observes that Americans can create a market for anything almost anywhere. They buy and sell everything from jokes to Jaguars with very little government interference. And Americans like it that way.

Or so they thought. More and more, the average American is irritated by the fact that almost forty percent of the United States’ wealth is in the hands of one percent of the population (those successful scammers…). And while all Americans are optimistic about investing in the future, individual American students are increasingly appalled at the debt that a person must acquire when investing in one’s future.

Debt, in fact, is a mundane fact in the daily life of most Americans. Americans buy what they can’t afford because they were never really able to afford anything. They live surrounded by items that are borrowed, mortgaged or charged. Even the services that American businesses buy and sell are rarely paid off. Americans live on IOUs. The system works like this: I-owe-you-what-she-owes-me-what-he-owes-her-what-they-promised-him-what….

Think, for example, of the immensely successful American pharmaceutical industry. It takes a pharmaceutical company an untold amount of funded research trials to produce one practical drug. It seems to take a phenomenal amount of underfunded US citizens to produce one incredibly successful millionaire.

So how does the average US citizen cope?

Not well, it seems. People sacrifice future gains for immediate cash. Individuals give up their health insurance to pay the mortgage on their house. Employers use legal loopholes to limit their obligations to employees in areas like health, workload, and wages. Then they invest in the future of their business—not the future of their employees.

In such a system innovation is necessary and change is required. People are constantly insecure, condemned to eking out a creative living because no one, not employers, not the community, and certainly not the government, is going to give them any help. There is no Prince Charming and fairytale marriage in American capitalism, just overextended and dangerous liaisons.

Living on credit becomes quite easy, actually; if nothing about tomorrow is guaranteed, overspending today doesn’t seem like such a big deal…until tomorrow becomes today. Yet in a system like Belgium’s, living to preserve the status quo and limit change is not exactly productive. How to bridge the gap between innovation and stability?

Can we build a brick house?

The current crisis has been blamed on American capitalism. Yet it is the separation of private and public that seems to be saving the American banking system. In Iceland, where the State was heavily involved in the financial sector, the country and the corporations went bankrupt together. In Europe, where economic systems are neither blameless nor invulnerable from the current economic crisis, different States are moving to protect their private markets with combined packages of new regulations and additional market freedoms—more socialism and more moderated capitalism. More of the same.

The answer may lie in the ability of the leaders involved to dialogue in search of a better solution.

In the current crisis, arguing who is at fault is useless. If no system is immune, then all systems are in need of alteration. The real success of the current crisis will be if we learn to stop looking at each other as economic threats. None of us are perfect.

When it comes to money, we’re all pigs.