The EU gives democracy a bad name

This piece by Anders Aslund in the Washington Post provides an interesting twist to one of my pet topics — the decline of Europe. The EU is set to admit 10 new members, most of them former communist countries. This year the 15 preexisting EU members are expected to post an economic growth rate of less than 2 percent, compared to 4.5 percent for the U.S. And the new EU members are already suffering from having adopted (as a condition of membership) Europe’s strict economc regulations, which create labor market inflexibility, heavy tax burdens, and bloated putlic sectors. Central European countries such as Poland, the Czech Republic, and Hungary have become “premature welfare states.” In Poland, the unemployment rate exceeds 20 percent. By contrast, the nine market economies in the former Soviet Union are thriving, with average growth rates in the past five years of more than 7 percent. Russia’s unemployment rate is 8 percent. Economists in Russia no longer look to Europe for a suitable model, but rather to the free markets of Singapore, South Korea and Chile. To them, says Aslund, “Europe is both inhospitable and stagnant.”
The sad twist to this story is that many in Russia draw the conclusion that democracy is bad for economic development, when the real culprit is overregulation. Thus, Aslund concludes that “the EU needs to liberalize its economy and reduce its fiscal profligacy, not only for its own benefit, but also for the reputation of democracy.”