The European economic crisis has already caused widespread financial hardship across the continent. Roughly estimated, about one hundred million Europeans are affected, either directly by having lost their jobs or having no prospect of finding a job this side of the Second Coming; or indirectly as government cuts or eliminates entitlements that they have become critically dependent on. The fact that taxes remain constant or even go up only adds insult to injury: government creates a net drainage of resources from the economy that the private sector would have made very good use of.
This human suffering is of course the most serious consequence of the crisis. Beyond that, there is a great political irony in this. The very purpose of the welfare state was to eliminate this kind of suffering in a recession, yet when it came down to business and the economy got bad back in 2008, the welfare state did not pass the test. It let people down, right and left, and as the crisis continues, it continues to default on promises to take care of the poor and needy.
During this crisis the welfare state has failed to do the one thing that we were told it would do. It is hard to find a more serious, systemic failure of government than this.
At almost every turn, this failure leaves Europe in much worse shape than it otherwise would have been in. I have reported on numerous such examples on this blog, and one more is added below. But before we get there, let us look at one of the very rare positive effects of the squeeze on government spending. Der Spiegel reports:
The debt crisis is finally catching up with wind energy, once a fast-growing sector in Europe. After more than a decade of double-digit growth, austerity, rapidly changing energy policies and skittish investors are putting a damper on the industry. It is often the elephant in the room at any conference on renewable energy. Sometimes, it’s mentioned simply as the “s” word and other times it’s not mentioned at all. But subsidies remain crucial, with wind energy still struggling to achieve price parity with coal and natural gas.
If it was not for the global warming hoax, there would have been no subsidies to wind energy in the first place. But thanks to Medieval-level fear mongering among “scientists” and more than a little lack of responsibility on behalf of countless politicians, taxpayers have been forced to waste hard-earned billions both in Europe and in America on a form of energy production that, obviously, cannot stand on its own two feet on the free market.
Once again, there is an element of irony in this. The statists who wanted to look good by promoting wind energy now pull the plug on it because they want to look fiscally responsible. Yet the need to look fiscally responsible is caused in good part by the kind of reckless spending that wind energy subsidies represent. Of course, the big waste bucket is the welfare state itself, but wind subsidies exemplify the same kind of do-goodery that the welfare state is built on.
When it matters, the do-gooders run away from their commitments.
One problem, of course, is that wind energy subsidies have created a new class of tax moochers, namely the bureaucrats whose entire careers are devoted to fighting the global warming windmills (pun intended…). Back to Der Spiegel:
This week in Vienna, at the European Wind Energy Association’s annual conference, subsidies came up right away. This time, it was the source of the comments that was unexpected. During the opening keynote, Fatih Birol, the chief economist at the International Energy Agency, proclaimed fossil fuel subsidies to be the “Public Enemy No. 1″ of sustainable energy developments. This, from a man who just eight short years ago was urging “substantial” increases in new oil and gas drilling investments. His argument was simple. Renewable energies right now are suffering from a dual problem: Governments around the world are slashing aid for clean energy, and massive subsidies propping up the fossil fuel industry are making it impossible to compete with the cheaper energy.
He is wrong, at least when it comes to America. Here, the federal government is stifling traditional fuel production, with new and rather ridiculous regulations on coal. The federal government has also made itself such an unreliable, not to say hostile, partner in extraction and production of oil that its lease sales in Alaska have hit historic lows two years in a row. Lease sales on state lands in Alaska are doing well, though, and that without subsidies.
The oil boom seen in, e.g., North Dakota is entirely due to the fact that the drilling is taking place on private lands. So if anything, the American increase in oil and natural gas production is happening despite the “involvement” of the federal government.
Der Spiegel again:
Even in an [alleged] uneven playing field, the wind industry has been growing rapidly in recent years. There are now 22 countries with at least a gigawatt of wind power installed (enough to provide electricity to 200,000 homes). In the European Union, countries installed 11.6 gigawatts of new energy capacity last year, up from 9.4 gigawatts put in place in 2011, according to the European Wind Energy Association (EWEA).
And here is an example of what kind of complete waste of money that this expansion leads to. But as Der Spiegel reports, that does not stop the wind energy industry from demanding even more money from taxpayers:
Wind has long since become a mainstream player in the global energy market. The problem is that the gains Europe made this year came mostly from orders placed before the debt crisis that has gripped Europe since 2010, Kjaer said. And if national policies aren’t adjusted to reflect a changing reality, the growth rate is expected to drop to 6 percent by 2020 and 4 percent by 2030, according to a report released in November by Greenpeace and the Global Wind Energy Council.
In other words: more money into the black hole created by the global warming hoax.
While Europe’s envirocrats continue to demand more money from taxpayers, retirees are taking a beating from the perennial recession. From EU Business:
Retirees in the United Kingdom are feeling the pinch as annuity rates continue to fall to historic lows in a trend – given momentum by Europe’s economic woes amongst other factors – that shows little sign of reversing. Beginning with the credit crunch in 2007, annuity rates in the UK have been steadily declining over the last five years, leaving people with the prospect of reduced incomes in retirement. Several compounding factors are cited as the cause of this by experts. The eurozone crisis and poor UK gilt returns, as well as increasing life expectancies are working synergistically to suppress rates of income on both fixed and investment-linked annuities,says James Daly, annuities editor at the Banking Times. There is no one factor to blame but the questions surrounding the European economy are without question one of the biggest influences on the poor annuities market.
This goes for private retirement investments as well as government-run retirement systems (except the most rigid, traditional pay-as-you-go versions).
The turbulence in stock markets, largely caused by questions over the solvency and state of the Eurozone economies, is causing increased demand for UK government gilts which are seen as a relative safe haven for investors. High demand for gilts results in their prices being pushed up and causes a decrease in their relative interest payouts thus affecting the returns offered for annuity purchases.
How about that? Government over-spends, then imposes taxes that depress growth and aggravate a recession, then add insult to injury with reckless austerity policies, thus driving large segments of the labor force into unemployment – and retirees into poverty.
A socialist Swedish prime minister once said that poverty is endured more easily if it is shared by everyone. They tried that in the Soviet Union. I don’t think that in hindsight we can say that the experiment worked very well… That aside, the suffering among Britain’s retirees – which is not very different from the experiences of retirees in other European countries – is yet another reminder of what damage big government does. Even when it is not directly involved in your life, its clumsy, misguided activities in the economy inflict harm on much more than just those who immediately depend on it.