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Europe: New Challenges, New Directions

by John Brian Shannon | August 30, 2016

Europe is at a crossroads and it’s time to make some decisions

Very conveniently, however, there are really only 3 problems with Europe.

Map of Europe includes the EU and non-EU nations.

Map of Europe includes the EU and non-EU nations. EU nations that aren’t part of the Eurozone (the euro) are light blue. Image courtesy of Wikipedia Commons.

I: The trickle-up economy continues to move trillions of dollars out of the bottom 4 quintiles and place it into the hands of the top quintile. This remains a recipe for failure, and the longer it continues the more draconian the solutions will need to be.

In 2016, half the world’s wealth is concentrated into the hands of the 1% — but by 2030, three-quarters of the world’s wealth will be concentrated into the hands of the 1%.

That’s wholly unsustainable. And nobody is even talking about it.

Unless addressed, Record Inequality will become Social Breakdown. And that will be the end of Europe as we know it.

II: Globalization is a truly wonderful thing. It continues to bring cheap goods to consumers since the Arab Oil Embargo in 1974, which caused millions of Americans to buy cheaper, more fuel efficient cars. That was the beginning of it, but the flood of electronics, textiles, and other goods soon followed.

For one such example of this; Each iPhone would retail for over $2000. with some sources asserting each iPhone would cost $3000. if manufactured in the United States.

But globalization has piggy-backed on Record Inequality to the detriment of workers and families in the West and it looks like (however fairly or unfairly) ‘The People’ are sick of globalization.

Declining living standards due to Inequality and Globalization have ‘The People’ thinking that change is necessary.

And change will come. The People always get their way. Maybe not with Perestroika and Glasnost, but the will of the people eventually becomes reality.

III: “You are leaving the American Sector”

We all remember those signs in postwar Europe. But what is actually happening is that America is leaving the American Sector in Europe.

Yes, America has realized that 58% (and growing) of all global trade is happening in the Pacific and the Americans are lowering their commitment to Europe and the Middle East.

Europe should be all grown-up by now, and the Middle East is a rambunctious, late-teenage, regional power. You should try to get along.

Prior to the Brexit referendum, the normal course of events would have been for the U.S. to become the Pacific Power and for the EU to become the Atlantic Power.

However, for that to happen, the EU needed Britain (which is by definition) the world’s seafaring nation and Britain is leaving the EU.

Consequently, history is still happening as the logical course of action post-referendum is for the UK to become the dedicated Atlantic Power, while the EU becomes the dedicated Mediterranean Power.

And that means strong (and fair) linkages with MENA nations and it means a strong invite to join the EU for every single southern European nation.

As 97.1% of Crimeans voted to rejoin Russia, it also means ‘Hands-Off Crimea’ but either Turkey or Ukraine (sans-Crimea) will eventually join the EU. But not both.

Russia won’t allow the EU to have both, so choose the option you prefer and get it done with as little upset as possible. The EU already has too much on its plate — troubles with Russia is the last thing the EU needs — especially in view of decreased American commitment to Europe.

The next 10 years will be a vulnerable time for the EU; Meaning, this is not the time for the EU to go shooting itself in the foot with a Russian gun.

Summary

Europe has only three problems. The ways I’ve outlined are not the only ways to solve them. However, they align with what is already happening.

What I’m saying, is that instead of governments being steered by events European leaders need to steer the thing even if it means continuing on with what was already going to take place anyhow.

Which is:

a) Friendly divorce with Britain.
b) EU lowers Atlantic commitments and ramps up linkages and commitments in the Med and MENA.
c) All southern European nations join the EU.
d) Choose either Ukraine (sans-Crimea) or Turkey and make one of them an EU nation, ASAP.
e) Friendly relations with Russia are imperative — if the present leadership can’t get it done, Fire Them and get new leaders — it’s that important.
f) Friendly relations with the Middle East (stop bombing your neighbours)
g) Address Inequality in no uncertain terms.
h) Stop using the word globalization and seek Win-Win bilateral trade agreements exclusively, where that trade actually benefits both sides — instead of just dumping your goods in other countries and getting the loot. You need (true) Interdependence instead of Globalization.
i) Harmonize EU economic policies around the best existing model in Europe (Norway) where deficits are limited to 4% of GDP, plan for a 3% unemployment rate, free university education for residents, low crime rate, high productivity, very high SPI and UN Happiness Index scores (and those two metrics drive all other positive stats) revenue surpluses directed to a sovereign wealth fund, and so much more.

These are not big challenges compared to the challenges faced by WWI and WWII leaders, and by leaders in the immediate postwar era. These are tiny challenges.

But these challenges will require persistence by leaders who can keep the main objectives in the forefront of their mind, even as (seemingly) everyone else wants to go in different directions.

The question is not; “Does the EU have good leaders?” (Of course it most certainly does or the EU wouldn’t have ever existed, nor would it still remain)

The question is: “Does the EU have the leaders it needs to actually accomplish the remaining goals?”

Related Article:

The Secret of Norway’s Success

by John Brian Shannon | December 15, 2015

Sweden, Norway, Finland and Denmark (collectively the Nordic countries) have a combination of high living standards and low income disparity that has captured the world’s attention. At a time when the growing gap between the rich and poor has become a political hot button in developed nations, the region known as Scandinavia has been cited by many scholars as a role model for economic opportunity and equality.” — Investopedia.

Norway flag

Norway has captured the world’s attention with its high living standards and its low income disparity. Norway flag. Image courtesy of www all-flags-world com

There isn’t a country in the world that shouldn’t be able to match the high living standards set by Norway

Norway provides us with an example that all nations should strive to meet or exceed within a few years’ time

In fact, if we’re doing it right, the stellar Norwegian example will come to be seen as the standard for successful economic policy, instead of the outlier

But first, let us count the ways that Norway succeeds:

  • The highest accumulated revenue surplus in the world, worth $1 Trillion (held in a sovereign pension fund)
  • Strong and steady GDP growth (see chart below)
  • Very low Debt-to-GDP (see chart below)
  • A #1 to #4 ranking on the UN Happiness Index (varies by year)
  • A #1 ranking on the Social Progress Index (see chart below)
  • Typically a #1 or #2 ranking on the highest per capita income in the world
  • In the Top 5 worker productivity rankings in Europe (and by extension, the world)
  • One of the lowest crime rates in the world
  • One of the ‘least corrupt’ nations. Ranked #5 on the Corruption Perception Index
  • An average 2.5% unemployment rate (except during the global financial crisis where it shot up to 5.5%. Not to worry, it’s already fallen to 3.0%)
  • Free university tuition for all citizens and residents
  • Free universal healthcare ranked 7th in the world (It would rank higher, but maintaining full-service Hospitals in remote regions with tiny populations is uneconomical)
  • Virtually 100% of the country is powered by renewable energy except for some remote settlements where a microgrid (natural gas power) is the only choice
  • Unparalleled diplomatic credentials. Everyone knows Norwegians are among the best ‘honest brokers’ in the diplomatic world making Norway the ‘go-to’ arbitrators for nations in crisis
  • A favorite country of the Olympics committee having hosted successful games twice in recent years

Do you think Norway’s success only happened since 1990 when oil and gas began to be extracted off the Norway coast? Do you think Norway’s success happened by accident?

Well, you’d be wrong on both counts.

The economy of Norway has grown at a rate better than that of any developed nation stock market, just as it was designed to do. And growth rates were steady prior to the large-scale extraction of petroleum in the country, and remain steady.

Say again?

Yes, you heard right. The growth rate of the Norwegian economy beats many stock market indices as measured over the decades.

Who wouldn’t want to invest in Norway’s public/private investments, in Norwegian business generally, and in the highly educated workforce with its high productivity rate and so much more?

Norway GDP from 1960 - 2015

Norway GDP growth from 1960 – 2015. Source: tradingeconomics.com

Successive Norwegian governments have limited deficit spending to a maximum of 4% of GDP during ‘bad years’ — and used budgetary surpluses to paydown government debt during ‘good years’

Here’s what that looks like.

Norway Debt-to-GDP

Norway Debt-to-GDP. Generally, Government debt as a percent of GDP is used by investors to measure a country’s ability to make future payments on its debt, thus affecting borrowing costs and government bond yields. Last updated on December of 2015. Source: tradingeconomics.com

Norway’s success didn’t happen by accident, nor did it occur after suddenly striking it rich in the undersea oil and gas fields

Other countries have struck it rich by discovering oil (or other massive resources) and haven’t experienced the positive outcomes seen in Norway. Where are their UN Happiness Index ratings, or productivity stats, or their per capita income stats? Nowhere near Norway’s, that’s for certain.

So why Norway?

Maybe the question should be, “Why only Norway and not every country?” — as every country could and should be seeing the same level of success as Norway.

Some people might question that their particular country, large or small, could excel like Norway.

But low ambition is the enemy of great accomplishments

If you aim low you’ll surely meet your goals. Conversely, if you aim high, you’re likely to excel. The Norwegians aimed high and succeeded — and good for them!

Aiming High

Many years ago, everyone believed that it was impossible for a human to run a 4-minute mile. And with each retelling of that erroneous belief it became that much more true.

After all, if it was that impossible, why bother trying?

Yet, one man, Roger Bannister from England, decided that he would aim high and run a mile in less than 4 minutes. And not long after making that decision, he did.

Since Sir Roger exceeded that expectation, many thousands of athletes have. It’s almost commonplace nowadays for professional athletes to run a 4-minute mile as part of their overall training programme to prepare for competition.

Norway is the Roger Bannister of nations!

By getting the fundamental economics right, Norway set itself up to succeed every time an opportunity to succeed, appeared. And that in a nutshell, is the measure of successful governance.

Norway with its smallish, mostly ice-covered landmass and its tiny population of only 5.1 million residents has $1 Trillion dollars in the bank!

It’s true. The Norwegian government has carefully invested its revenues and sharply limited government spending to the point that the Norwegian government may not (by law) run a budget deficit of more than 4% in any given year.

By limiting spending in this way, it allowed government revenues to accrue ‘during the good years’ while the economy was booming, and it limited spending during the lean years.

“But Norway is rich because of their offshore oil and gas revenues.”
If oil and gas are the reason Norway is doing so well, then why was Norway wealthy and well-governed prior to the exploitation of their offshore oil and gas?

“Well then, Norway was rich because of its offshore fishing industry.”
But Norway was wealthy and well-governed even before large-scale commercial fishing fleets ruled the seas.

“Norway must be rich from its tourism industry.”
Yet the booming Norwegian tourism industry is only a recent development.

“But Norway must have been rich because of its strong timber industry.”
The same applies. Norway was a wealthy and well-governed country prior to large-scale mechanized forestry.

This conversation could go on for some time… so let me shorten it up for you.

The reason that Norway excels is because Norwegian politicians of all stripes agreed long ago that Norway should ‘live within its means’ and bank surplus government revenues for use in later years

And it has worked wonders for the Norwegian economy, for Norwegian citizens and non-citizen residents, and for global investors.

It isn’t all about the resources! It’s all about the good stewardship!

By strictly applying the Norwegian model of governance every country could see similar levels of success.

Some people might say, “Well fine. But our country has no resources.”

But every country has resources of some kind. There isn’t a country in the world that couldn’t maximize its resources to match or exceed Norway’s stellar example.

And Hey! Citizens are a ‘resource’ too. Just look at Taiwan’s success! And that high level of success occurred despite it being a land of very limited natural resources.

I challenge anyone to make the case that their country couldn’t excel given 10 years of strict application of the Norwegian economic model

You can’t win that argument. Even ice-covered Norway with only 5.1 million citizens, is an easy winner in the competition for the most successful nation as measured by per capita statistics.

They Began with the End Result in Mind

Including the most important statistics of all — the ones from which all positive stats flow; A very high ranking on the UN Happiness Index and the Social Progress Index. (Say that three times, to let the profundity of that statement sink in)

Social Progress Index 2015

It’s Norway (again) taking the Number One spot on the Social Progress Index.

Again, it isn’t about the resources it’s about advanced governance

In Norway, it’s about helping businesses to thrive — while putting the well-being of citizens and residents first!

It’s about ensuring a strong, stable, and vibrant society, and it’s about ensuring excellence in economics and governance.

And that, my friends, is the secret of Norway’s success.

Related Articles:

In Sweden, Nobody Sleeps in Dumpsters

by John Brian Shannon | June 24, 2015

In Sweden, nobody sleeps in dumpsters. Not one.

And everyone who visits Sweden wonders why.

The simple answer is that human beings in Sweden are treated as the country’s number one resource. In Sweden, people are ranked #1 while everything else in the economy is considered less important

Strange system, isn’t it?

Holger.Ellgaard - Own work CC BY-SA 3.0

Stockholm, Sweden financial district. Holger.Ellgaard – Own work by CC BY-SA 3.0

That’s not to say that Sweden’s various economic sectors and segments aren’t important, it’s just that ‘people come first’ with the Nordic Model — while companies and government come second and third, respectively.

“Are there any jobs?”

Well yes, there are! In fact, if you want to work, you work! However, some job-sharing may be involved, depending on your industry.

“Are you saying the unemployment rate in Sweden is 0 percent?”

Almost. Historically the unemployment rate hovers around 2 to 3 percent. But since the global financial crisis hit, Sweden’s unemployment rate shot up to a record-high to 8 percent in August, 2013.

But things are not always what they seem. And this is one of those times.

In Sweden, there are employed and unemployed people just like anywhere else — but the difference is every worker is employed for at least 6 months of the year, as the country has mandatory job-sharing for those industries that can’t fully employ their workers.

“So nobody is unemployed for longer than 6 months per year?”

Yes, that’s true. There is unemployment, but each worker knows that they will get re-hired and they know the exact day when they will be re-hired — usually at the same company that they have worked for the past number of years.

It’s a very temporary unemployment rate in Sweden, and there are zero ‘discouraged workers’ — those who’ve given up looking for work. (Unlike the situation in North America!)

The bottom line? It’s a simple case of making certain everyone gets to contribute to the Swedish economy over the course of the year — which has many benefits for workers, their families, corporations and for Swedish GDP.


“Why do Swedish workers, corporations, and the government like this arrangement?”

The benefits are many.

First, corporations love this setup as some industries cannot employ all of their workers year-round, or in industries where the work is seasonal, corporations can easily lay-off their workers and know that their fully-trained workers are guaranteed to return to work on the very day the corporation requests them to return.

Swedish companies always have a waiting list of employees who want to return to work. These workers are temporarily receiving unemployment insurance, but have worked for the company within the previous six-month period.

It’s a simple case for companies of figuring out how many people they need for the coming weeks or months, and sending out the appropriate number of emails to ‘their’ (temporarily unemployed) workers.

Without any further ado, those people show up on the dates requested and they quite willingly return to their ‘old job’ — the job they had before they were laid-off.

Whether their job was canning herring, cutting down trees, teaching science class at High School or working at IKEA, they simply show up and resume their previous duties.

Sometimes, this means that other workers are temporarily laid-off to make room for the returnees, but in the case of seasonal workers or during busy times such as the Christmas shopping season, nobody gets a layoff notice AND the many returnees are simply added to the weekly work schedule.

Sometimes it happens that two people will share a certain position for decades, trading it back and forth every six months.

Remember, the unemployment rate historically sits at 2-3 percent. So, people are mostly employed anyhow.

Second, corporations like having a large pool of already trained workers that are easily available to them.

Because these workers are never away from ‘their’ company for longer than six months (usually fewer months than that) they can return to their company with their skills intact and their familiarity with the policies and procedures of that company allow them to ease back into their ‘old job’ with only a half-day refresher course.

A large pool of fully trained workers with sharp skills, returning to their old jobs, exactly when and where requested, at any time the company wants. That’s a bonus for companies.

Third, not one person in the entire country who is capable of working is on ‘welfare’.

‘That’s funny,” you say, “because I learned that Sweden was a ‘welfare state’ when I was in school.”

Maybe they should have spelled it; ‘Well-fare state’ or said it even more correctly; Sweden is the ‘fare-well nation’ — because they want ‘you the worker’ the number one resource in the country, to ‘fare-well’.

Very well, in fact.

Workers in Sweden are either; a) working, or b) on very temporary unemployment insurance. Say it slowly to let it sink in; In Sweden, there is no ‘other category’.

Disclaimer: People who are retired, or who are home-makers, or are on maternity/paternity leave, or those who have illness or permanent disability, aren’t classed as ‘workers’.

There is no such thing as people who’ve ‘given up’ looking for work and who have turned to other lifestyles, such as living in dumpsters.

In Sweden, if you want to work — you work!

Four, workers like it that they can choose to overpay their unemployment insurance contributions (via a special public/private company set up for that purpose) so that workers can top-up their government unemployment insurance benefits up to 99% of the full pay they received when they were employed.

For the equivalent of two cents per dollar, Swedish workers can voluntarily top-up their unemployment insurance account, to allow up to 99% of their normal salary to be paid to them as unemployment benefit payments while they’re temporarily unemployed.

It’s up to each worker how much they authourize to be automatically deducted from their paycheques. (Each equivalent of 1.6 or 1.7 cents per salary dollar earned, gets you another 10% top-up on your unemployment insurance payments)

Most people voluntarily choose to top-up their unemployment benefits to only 90 percent of their normal salary as they are no longer commuting to work, they don’t need the extra 10 percent to pay for gas or subway fare.

And unemployment insurance benefit payments automatically begin the day you are laid off. Hey, it’s your unemployment insurance — you paid into it. It’s not your fault your industry can’t keep you fully employed!

Just for the record, both the government UI system and the private UI system earn more revenue than they pay out to recipients. Both are profitable enterprises.

Five, unemployed workers can earn extra money ‘covering’ for employed people who call in sick.

I hope I’ve described things well enough that you’ve understood all of the above. Because I’m about to drop a bomb on you.

i) Let’s say you work for IKEA and you’re enjoying your layoff period with your (typical) 90-percent-of-regular-salary unemployment benefits.

ii) So, ‘Sven’ from IKEA calls in sick (skiing accident) and he will miss work for one week on Doctor’s orders.

iii) Your name is at the top of the ‘Do Call’ list because you have seniority at that IKEA location and let’s say that they call you to ‘cover’ Sven’s shifts.

iv) Not only do you continue to receive your full unemployment insurance payments while you ‘cover’ for Sven (typically equal to 90% of your full salary) you also get paid the normal hourly rate for Sven’s job description, which may be slightly more or less than your normal salary.

v) Thank you, Sven!

Many people are eager to get onto the voluntary ‘Do Call’ list for that reason. I wonder why.

(Yes, the private company that offers the top-up insurance investigates these occurrences, but fraud is rarely a problem with such a generous system. The top-up insurance company can cut you off from the top-up system for life. Which means that during your layoffs for the rest of your life, you will be forced to survive on only 66 percent of your regular salary which is what the government unemployment insurance benefit pays)

Six, workers like that while on layoff (at up to 99 percent of normal pay) you can apply to work for a non-competing industry, or take some university classes, or you can volunteer at a charitable organization.

Some people may want to broaden their horizons or they may need to amp up their résumé. Maybe they want a new job that is closer to home, or maybe they want to get into teaching.

If ‘your’ company (the one you normally work for) calls you back to work, you must return to work for ‘your’ company. But employers in Sweden are very good about simply calling the next name on the list if you’re actively enrolled in college, for example.

Seven, while you’re laid-off and receiving up to 99 percent of your normal salary, you may wish to go on a cruise to the Mediterranean for example. That’s expected.

But workers must notify their company ahead of time so that the company you normally work for doesn’t call you to ‘cover’ for Sven who has broken his ankle skiing. Again.

And look at you, suntanning in the Med, missing out on collecting ‘double pay’ just when you thought Sven had mastered the art of skiing. ‘Förbannat du, Sven!’ (Damn you, Sven!)

Life is tough when you’re a Swede.

Read about the healthy Swedish economy here