Self Preservation

Le Monde of 29 July leads with a discussion of a “report(link to Sapir report, PDF 1.6 meg)”: by a group of economists chaired by Professor AndrZ Sapir (University of Brussels) that has detailed the nakeness of the European Emperorto howls of derision and denial from the European Commission and its entourage (e.g. “this(link to Agence Europe editorial)”: editorial from Agence Europe—the self-appointed mouthpiece of French agricultural policy).
The Sapir report explains that the enormous economic resources put at the disposition of the European Commission are largely wasted on an agricultural policy that is difficult to defend on any rational economic grounds and on huge development subsidies to ‘backward’ regions of Europe that have had no visible economic effect. bq. Within the current budgetary limits, growth-enhancing expenditures on research, higher education and infrastructure, as well as on institution-building in the new countries that will join the EU next year, can increase only if spending on traditional policies – chiefly, agriculture and regional aid – is cut

AndrZ Sapir in the “Financial Times”:

You might think that the debilitating effects of these boondoggles would be as difficult to hide as the imperial nudity. In fact, the Commission spin machine regularly fends off dozens of similar academic analyses. What has prompted their spite on this occasion, as the article in Le Monde explains, is the fact that the report was published by the office of the President of the Commission—Romano Prodi—who, like the Commissioners themselves, is an un-elected official. “A little dose of transparency and democracy”, as the Le Monde calls it, has prodded the imperial pooh-bahs in the sensitive organs of self-preservation. Charles Wyplosz, professor of international econmics at the Geneva Institute of International Studies and author of the Le Monde article explains—in Sapir’s defense—that there’s much that is scandalous but nothing that is new in the report’s catelogue of waste. bq. “What, basically, does the report say? That 80% of the Commission’s budget is absorbed by regional policies and by the common agricultural policy (CAP) and that these two programs are nuisible. What does the report propose? To redeploy these funds to boost a European economy that is dragging itself along with great difficulty at a rate of growth too small to significantly reduce the level of unemployment” In Sapir’s defence, Wyplosz points out that the heads of government of Europe in their Lisbon summit in 2000 identified as their primary objective precisely the need to escape from this economic bind. At that time they directed the European Commission to to come up with a plan to make Europe the dynamo of the world economy. Even if you think the goal is a bit ambitious, says Wyplosz, you need to be ready to sacrifice a few sacred cows in order just to move in this direction. bq. “The [Sapir] report explains how and why the CAP is a costly failure. It has slowed neither the reduction in the number of farmers nor the accumulation of products that are unsold and unsaleable because they are too expensive. It blocks the development of agriculture in poor countries, despite this being one of their few areas of comparative advantage. It cossets the largest and richest farmers at the expenese of consumers and poor countries. This diagnosis has been confirmed by hundreds of economic studies… bq. The idea [of the Regional Funds] is to give [regions of Europe identified as ‘backward’] the funds necessary to improve their infrastructure. These regions have been flooded with cement and bitumen, but what has emerged in terms of growth? Monsieur Barnier (the Commissioner responsible) cites one internal study that proves that regional growth has accelerated. Unfortunately dozens of other studies, conducted by impartial observers, find nothing of the sort.” Europe’s sagging growth and obese support programs are a sad state of affairs not only for Europe but for the rest of the world, too. We are all the poorer when the world’s almost equal biggest economy fails to grow as strongly as it might.

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