We often think of the welfare state as government programs and spending. Yet, regulation can have even more debilitating effects on the economy, investment and entrepreneurship. This is implied in an essay today in the New York Times.
The author is a Morrocan Fench national and novelist. The point he makes, however, is that France is paralyzed by a welfare state that has created an illusion of stability and security. This has created a gulf between leaders--who understand the need for change--and the public, who are so vested in the welfare state they are fearful of anything that might threaten their highly regulated world.
France lives today, more than ever, in a utopian fantasy. The gap between the political leadership and the people is enormous. The elites seem to speak to us of outdated concepts, far, very far from reality. France can't deal with its "foreigners" who have French nationality and does little to integrate them into society. Islam is the second religion of the country, yet France cannot speak intelligently to its millions of Muslims; it calls us all the "Muslim community" as if there were only one way to be a Muslim.
France knows that it needs to change its economic system, but each attempt is blocked, as it was this week with Prime Minister Dominique de Villepin's bid to encourage businesses to give jobs to young people by loosening the strict labor laws governing their hiring and firing. It's often said that the French are all grumblers, and that clichÈ is more than true.
While the students who have been in the streets are right to protest against the precarious life that awaits them, it's also true that the French are timid, even frightened of change, as we saw last year in their strong reaction against the entry of Turkey into an enlarged European Union. Turkey, long considered part of Europe, suddenly didn't qualify, in the French view, for the rights and privileges of the union.
The regulatory welfare state effectively politicizes all aspects of the economy, making entrepreneurship and dynamism almost impossible.
The same effects can be seen in local communities in America where zoning and urban planning has created the illusion of security and stability. So-called community "visioning", combined with a host of strict regulatory controls on land use, create static places that are resistant to the changes necessary to make them competitive and adaptable in a dynamic environment.