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And so we get the inexorable move down the ramp to
the fundamentalist type of society as represented in the US by the current
government. The young may move from Italy and Germany but when
they want to go home to live a sensible and fine old age, it will be
gone. Changed forever. So what is
left? Closed economies, more walls so that a sensible life can
be built? Constant economic wars and raids across cyber
boundries? Political economy? Of
course. A humane sensible life where you can build a future, I think
not. It merely demonstates the spiritual and intellectual bankruptcy
of the West. You can forget about the Aesthetic. They
lost that 75 years ago and if this program succeeds in disembowling the glories
of German performing arts and the gorgeous Florentine amenties then we will know
the root of the word Philistine and who their parents were as
well. Nothing could be more clear than the beautiful
performance of Maggie Smith in the HBO movie "My House in Umbria" where it was
the older woman who rescued the child destroyed by a terrorist bomb while the
only choice for the academic insect watcher capitalist Uncle was to put his
sister's only surviving child in a public institution where she would not be a
bother to anyone.
You have to be kidding! Is that the
best the Scotsman can do? This all began in Scotland didn't it?
REH
----- Original Message -----
Sent: Thursday, May 29, 2003 2:49
AM
Subject: [Futurework] Exit ramp for
Europe
A French think-tank, the Institut Francais des
Relations Internationales, thinks that, for Europe, "A slow but inexorable
movement onto history's exit ramp is foreseeable." At the same time, those who
want a United States of Europe have brought forth a Constitution which is now
being fiercely debated. This is the background for an excellent article by
Hamish McRae, the economics editor of The Independent. For those interested in
Europe or of the likely scope of government welfare spending generally in the
future, the following article from yesterday's paper will be well worth
reading.
<<<<
EUROPE CAN'T BUCK THE MARKET
Hamish
McCrae
When economics and politics clash, economics usually wins.
Whether or not the proposed European constitution means that Brussells will
have a say over British taxes -- and there is so much obfuscation that I don't
think it is possible to know at this stage -- economic pressures seem likely
to push down Europe's taxes to UK levels, maybe beyond. The politics may be
for higher taxes but the economics are for lower ones.How so?
Well,
the pressure on governments across the whole of the continent will be huge for
the next two generations. Government will be under tremendous pressure to
spend more but also will find it harder and harder to raise
revenue.
This is the result of the clash between two forces, demography
and mobility. The first story can be told quickly. Continental Europe will
become, after Japan, the oldest region in the world in terms of the proportion
of people over the age of 65. The UK becomes older too, but at a rather slower
rate. The effect of this is that, whereas there are currently just under three
workers for every pensioner in Germany and France, in another decade there
will be only two and a quarter. In 2050, when young people now entering the
workforce are drawing their pensions, there will be fewer than one and a half
workers for each pensioner. In Italy and Spain the ratios are even worse, for
there will be more pensioners than workers by 2050. In the UK they are
rather better: we are, as a country, getting older, but more slowly than the
Continent.
European governments are well aware of the implications of
these changing ratios on their finances for, not only will the bulging ranks
of pensioners need their state
pensions, they will also be a charge on
health and care budgets. However governments find it hard to make even modest
changes. The present bout of French
strikes is one response to minor
revisions to pension entitlements. If the protesters knew the extent to which
their benefits would have to be cut, they would be rioting, not striking. The
big fights are still to come -- and if the pressure is serious in France it
will be greater still in Germany, Italy and Spain.
If demography adds
to the cost of government, mobility cuts its revenues. One form of revenue,
company taxation, is already in serious decline, as corporations have started
to move their activities to low-tax countries. For the winners this has been
wonderful. Ireland has transformed its economy by attracting mainly US
companies with tax holidays. It does not get revenue directly from the firms,
but it does from the people they employ locally.
The next stage looks
like being the movement of company headquarters. There have been examples of
German companies moving to Switzerland and US ones to Bermuda. But the
greatest gainer may well be the States, with this administration's new plans
to cut tax on dividends.You can see why the European Union is anxious to have
a reasonable measure of company tax harmonisation to stop Ireland scooping
more than its share of Europe's pool of foreign investment. But the big game
is not within Europe; it is between Europe and North America and it is hard to
see much tax harmonisation there. For a firm such as DaimlerChrysler or
GlaxoSmithKline, the legal headquarters could rationally be on either side of
the
Atlantic. If the tax advantages became big enough, they could
move.
Over the past 10 years there has already been a sharp fall in
company tax rates. This,
I suspect, is a trend that has only just begun.
Company taxes are, however, only a small proportion of government revenues.
Here in Britain the rate is less than 8 per
cent. The big money comes from
income tax (including social security contributions) and consumption taxes, in
particular VAT. So what matters is where people earn money, and where they
spend it.
For the very rich, the choice of where to live is already
very largely determined by tax. Tax havens including Monaco and the Channel
Islands do a great business. There are people who live in the Channel Islands
but work, in effect, a full week in
London without, technically, ever being
there for tax purposes.
Much more significant is the mobility of the
young. You can see this best in London,
which has become a magnet for young
professionals from all over Europe and indeed North America. The South-east of
England has the largest expatriate professional community on the globe.
Continued professional inward migration is one of the reasons why me UN now
expects the population of me UK to grow by 12 per cent over the next
half-century. This compares with a rise of 8 per cent in France and falls of 4
per cent and 22 per cent in Germany and Italy.
Tax is not the only
reason for professional mobility but it is a significant one. Young
professionals are a hugety attractive proposition for any country They bring
skills, they create growth, they pay tax both on their income and their
spending -- and they are not big burdens on social security systems. I suspect
that one of the main areas of competition within Europe will be for just these
people and, of course, with the EU's single job market they are free to move
anywhere.
If that is great for Britain, it is not so much fun for, say,
Italy or Germany. The nigh-eartimg young move out, leaving an even greater
burden on the taxpayers who stay. The only way to keep them will be to cut
taxes. And the more the European economy becomes like the American one, the
greater the mobility of labour.It follows that if Europe is to become a more
dynamic economic region, the result will be population movements that force
down tax levels everywhere.
You can see early signs of this already. In
Sweden, the highest-taxed country in the
world, spending has afready fallen
from its 1993 peak of 67 per cent of GDP to about 52 per cent. The top
marginal tax rate is down to about 60 per cent (it varies depending on where
you live), me same as Britain in the 1980s.
In a more or less closed
economy, countries are free to choose the size of the state sector -- if they
want to pay higher tax and get better services they are free to vote for that
But in an increasingly open economy this choice closes off. It is already, in
effect, closed for company taxation. It is starting to dose for personal
taxation too.
So whatever the provisions of the European constitution
on tax powers, the reality will be set by the market. Of course it can try to
buck that market. The result could then be rather on the lines suggested by
the Paris think-tank, the Institut Francais des Relations Internationales. In
its recent report World Trade in the 21st Century, it warned that the
EU, even after enlargement, might shrink by 2050 from its present 22 per cent
of the worid economy to a mere 12 per cent. "A slow but inexorable movement
onto history's exit ramp is foreseeable." It painted other somewhat more
optimistic scenarios -- but it makes a sombre backdrop to grand ideas about
the European constitution.
>>>>
Keith Hudson,
6 Upper Camden Place, Bath, England
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