L,

European pandering to the OPEC countries of the Middle East started long before the debut of the euro in 1999 (or was it 2000?). You should read what Oriana Fallaci has to say about it. It appears that the "islamisation of Europe" began in the 1970's, as a response to the dependence of Europe on Middle Eastern oil and the '73 oil embargo. Modern economies are not only sensitive to the availability of oil, but also to its price. The europeans learned just how vulnerable they were back in the 1970's.

The europeans began their quest to create a currency to rival the dollar back in the 1970's, after the US went off the gold standard, and when the US made it clear that this was not a temporary, but a permanent measure. They first came up with the ECU, or Economic Currency Unit, which pre-dated the euro. And so on and so on...

The thing about creating such a currency and making such a big move is that they would not have done it without first checking with the big international players to see if this were amenable. OPEC is such an international player. Japan and China are others. Big committments are made which shape national policies for many years to come. We are talking about many trillions here. This is the whole ball of wax.

I have no doubt that the US also made concessions to other big players in order to win their cooperation, not just in keeping the dollar as a world reserve, but also to hold greater and greater amounts of US Treasury bonds. Military bases in Saudi Arabia? Shipping our manufacturing base to China and India? What do they get to keep holding onto as many dollars as they do? What about the OPEC countries? Remember the Dubai Ports deal? What other parts of the US are being auctioned off that we haven't heard about? How about the open border with Mexico? We seem to import a lot of oil from them too? Is it just about cheap labor? What about NAFTA and GATT? Was this done solely for our own interests?

(For those who don't know, a reserve currency means that Central Banks of the world hold a particlular currency as a sort of collateral, for the sake of, as L said, maintaining acceptable exchange rates between currencies. For instance, the chinese yuan's value is "pegged" at so many per dollar. The chinese do this to make sure their currency is cheap compared to the dollar so that they can sell so much of their stuff to us americans (undercutting our own american workers). They can defend this exchange rate in the currency markets with the gigantic amount of currency reserves in their Central Bank. Also, Central Banks really don't hold dollars, per se. They send the dollars back to the US by buying Treasury bonds, which earn interest. Having the role of the world reserve currency means that there are always many buyers for our government debt, at lower rates of interest. You can see that we are exploiting this situation to the maximum, by running gigantic debts here at home, and the rest of the world stepping in to fund that debt habit. The europeans want in on this game too, where the rest of the world sends us real goods and services, and we send them slips of paper IOU's. Just think of how much money european politicians could spend if debt were no object!)

Also, the OPEC countries are not really that concerned with where the muslims emigrate from, as long as they are Islamic. Many muslims emigrate from their own countries, which are resource and human capital poor, to richer welfare states. Free housing, education, medical care, and some spending money. I guess that beats life in Lebanon, and by a mile at that. Emigration wouldn't be so much of a problem if poplations were truly equal. The idea that most of the people immigrating to Europe are like the indian doctors or lawyers you know is quite false. Those people are the exception, not the rule. Many are unskilled and unschooled, and not really looking to assimilate or work hard. Just look at France.

Hip, hip, hooray for France! They have so much more backbone than we here have given them credit for! And this is just the beginning of the populist backlash in Europe!

Posted by: BTM on April 16, 2006 10:10 PM

Yeah, France is doing great. That's why so many people from economically depressed countries like the USA and UK are moving to France to work and start businesses.

2nd-hand anecdote: A property agent in Jerusalem says that now is a good time to sell, because French Jews are bidding up local prices.

Posted by: Jonathan on April 17, 2006 8:19 AM

Jonathan,

I never claimed that France was doing well. I hate socialism. All quotas are is just one more layer of ineffective, costly socialism. You'll note that the US and UK also have a great deal of governmental red tape. Less than Europe, to be sure, but much more than China and India, where it seems many US entrepreneurs are headiing. We're not exactly the end point for business investment these days.

By the way, I'm no euro booster. I love America. I just don't want it to be turned into a third world country, swinging unpredictably between socialism and unchecked capitalism, subject to the whims of foreign capitalists and powers. I fear our own socialism and debt is taking us there, and I hate it.

In my opinion, people in America, especially conservatives, would better spend their time changing this country than trying to belittle France. Let the french choose their own way. And if they can cut out more socialism, and undercut their cultural destruction by non-western immigrants, so much the better. We could learn a lesson from them here.

Posted by: BTM on April 17, 2006 6:09 PM

BTM -- I wish more foreign capital were coming in to support my lifestyle.

That capital is almost certainly available for your use, you probably just aren't availing yourself of it. Specifically, US (and World) interest rates are ridiculously low because of the savings glut. If you're willing to go into debt (say buy a house with a big fat mortgage and join the housing bubble), then you're benefitting by about an extra 3-5% off (estimates vary wildly) your mortgage rate - a serious chunk of change.

Posted by: Tom West on April 19, 2006 6:13 AM

I'm with Mr. Chaffin on this one. I say we keep on telling everyone else how to live! Publish and be damned irritating, I say!

And oh, Mr. West--if foreign capital is keeping American demand artificially high, then that's a good thing for America's trading partners. Including, most certainly, Canada. (To say nothing of China.) We're all in this together, non?.

Posted by: Friedrich von Blowhard on April 19, 2006 9:49 PM

MB:

I don't quite get your update. M. le blogger Corbusier is probably harsher on the common Frenchman for evading risk and hoping (against hope) for a "jackpot" job offering guaranteed security for life than any right-winger I've read recently. Doesn't that contradict the whole spirit of your post?

Posted by: Friedrich von Blowhard on April 19, 2006 9:59 PM

it makes me doubt his good faith and distrust everything else he says.

For me it was Baker's tossed-off blurb at the end about French productivity being higher than American productivity. True on a per-hour basis...but the French work far fewer hours per week and so produce far less. Which is why their GDP per capita is almost $15000 less than America's today.

If you want to know what direction the vector of world politics is heading, you could do worse than look at the recent poll in the Economist on this topic. Only 30 something percent of Frenchmen think the free market is the best way to organize an economy.

But 70% of Indians and Chinese believe that (along with 70% of Americans). That tells you all you need to know about the trajectory of this century. The French riots are just epiphenomena.

Posted by: gc on April 20, 2006 9:57 AM

I think a lot of what irks some commentators is that according to their theories, France simply shouldn't function at all.

Does the French economy function? I mean, in a way that, were our own economy functioning in the same way, we would describe it as prosperity? You have a country with a per-capita GDP about equal to Arkansas, stagnant growth, and high unemployment. If you look at people voting with their wombs, most European countries are well below replacement rates.

I think you'd have a much stronger "In 1945 it was a poor country, now it's a rich country" argument if you were making the argument in 1970. Since then, the US has been steadily pulling away from Europe in per-capita GDP, to a large part because of reforms (reiterations? rededications?) similar to what commenters urge for France. Low taxes, deregulation, free labor markets and free trade are infrastructural improvements that really pay off if you look at things on a generational timescale.

Finally, I'll note a quote from the recommended article: "There is one other point that really should not be in dispute – other things equal, employment protections are GOOD."

I'll dispute the point. Job security based on your employer not wanting to fire you is very good. Job security based on your employer not being able to fire you even though they want to is very bad, and I have to think it's very corrosive to a society when people take it to heart that they can't be fired even if they deserve it.

Posted by: Zach on April 27, 2006 10:49 PM

Also, I think the oft-repeated statistic that France is more productive than the US in the last hour worked begs the question of why the last hour is the last hour.

Look at it this way: if Americans were as productive in their last hour worked as France is, employers would be battering down the doors to get people to work more hours. They'd be hiring people on the street to keep the good times rolling. And in fact, the American economy does this -- the workers spend significantly more time working, and there are significantly fewer unemployed.

High unemployment and low exploitation of highly productive laborers in a peaceful economy that's not in any particular recession strikes me as a sign that something is deeply out of whack. It's as though you walked into a factory that made great cars at high profit margins -- and was only operating at 75% capacity.

Posted by: Zach on April 27, 2006 11:07 PM






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