For 20 years, bureaucrats in Brussels have monitored the curvature and shape of more than 40 types of vegetable and fruit.
Rule-makers claimed that this protected European consumers from poor quality, but it is hard to argue that a lump on the side of a potato alters its flavour or nutritional value in any way. A welcome respite came on 1 July 2009, when 36 classes of produce were deregulated.
European risk-aversion is built on the complacency that comes with good fortune. Companies have accepted high taxation, used for social entitlements, in exchange for protectionist agreements.
The credit crisis has exposed an interdependency that confounds unemployment targets, raises prices, and leaves state finances mightily exposed to the experiences of a small number of national champions.
With their political and economic support in disarray, lobbyists have had a ready ear amongst politicians. The most successful are from the motor industry. France, Italy, and Germany, amongst others, have all launched scrappage schemes to support the sale of new cars.
The argument for this favouritism is straightforward. Motor manufacturers are large employers and they are in danger of collapsing under the weight of their inventories and falling consumer demand.
With state support, car makers get to sell new cars and governments get to promote employment and investment, while also reducing carbon emissions from old cars.
There are many arguments against the subsidies. Many people would have bought cars anyway. The sales period has simply been compressed, leaving a precipitous drop later. All tax payers are subsidising new cars for a few.
These are fair comments. But they are misleading, giving the impression that supporting an economy involves supporting specific industries within that economy.
Governments are meant to be custodians of a nation’s wealth, both present and future. An investor who only ventures his own money can take as many risks as he likes. One who represents the multitude needs to take greater care, ensuring that their risk is evenly spread.
Unfortunately, like compulsive gamblers, governments have chosen to bet once more on a small number of industries in the hopes that they’ll recover their losses with a new throw. By biasing their support, governments are stating, unequivocally, that they believe consumers are wrong and should be paid to keep buying things they may not want. That Germany and France are now, tepidly, emerging from recession will only reinforce the view that such guess-work is brave leadership.
Yet the crisis is a tremendous opportunity to confront voters with the need for substantial economic restructuring. While the crisis has focused people’s attention, politicians have the space to introduce a plethora of reforms that have been held in abeyance; from raising the retirement age, to healthcare reform, to ending innovation-sapping and trade-distorting subsidies.
Markets may fail, but their capacity for constant reinvention and experimentation ensures that new ideas can become successful as old ideas are found wanting. The bounty coming out of the stimulus bills could have been used to gracefully collapse obsolete industries and pay for the retraining and further education of those with a chance of finding new jobs, or covering those who cannot.
By choosing a single winner, governments have yet again put off the difficult decisions for later.