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Now What?

After the end of World War II, when the European Great Experiment really began, countries were faced with powerful demands for ever-increasing entitlements from the middle classes whose votes elected every government. The result was an ongoing and increasingly desperate search for ways to raise the revenue required to meet the demands. Fail, and another party would be elected that would certainly find a way to do it.

As we have seen, the main strategies employed by governments to meet rising entitlement demands were (a) seizing control of the means of production, (b) taxing wealth and income, and (c) borrowing. All worked for a time, but all eventually failed.

As this is being written, all eyes are on Europe, as the Continent struggles to avoid a domino-like collapse of sovereign countries and an associated collapse of the European banking system. But note that Europe's current troubles, calamitous as they are, are merely symptoms of the larger and vastly more formidable problem: The middle classes who elect governments are hooked on their entitlements, and those entitlements can no longer be afforded.

Yes, Europe needs to find ways to stave off its current crisis, but even assuming it is successful in avoiding the collapse of the euro and the banks and the EU, only then can it begin to deal with the larger, vastly more complex challenge of learning to live within its means. And note that almost anything Europe does to stave off collapse will likely constrain economic ...