Small government wins another election in Europe

Forgive me for being a broken record on this, but the right has won yet another election in Europe, this time in Estonia. Last June, I wrote that Keynesianism is dead in Europe as a political force. This weekend, the Estonian right has won another election fought over government spending. The coalition of the right went from 44% of the vote in the last parliamentary election in 2007 to over 50% in this one. The New York Times made it very clear that the left’s attack on the government was that it cut too deeply.

The vote reflects approval for a government that continued to embrace laissez-faire capitalism during the painful months after the global downturn. After Estonia’s economy shrank nearly 15 percent, the state reduced its budget by the equivalent of 9 percent of gross domestic product. Demand fell steeply, and unemployment crept up, early in 2010, to 19.8 percent. […]

Meanwhile, the economy has been projected to grow by 4 percent this year, and unemployment has dropped to around 10 percent, according to the Estonian Unemployment Insurance Fund.

The opposition leader Edgar Savisaar, the mayor of the capital, Tallinn, and head of the Center Party, argued during the campaign that the government had overlooked the suffering of average people in its drive to join the euro zone.

Just to reiterate this now-tired fact: Keynesianism is dead as a political force in Europe. Small government and economic liberty has been winning elections throughout the continent.

We need to learn the lesson here.

Keynsianism is dead in Europe

The G-8 and G-20 meetings in Canada were remarkable in historic terms. European governments criticized the United States for being spendthrift. Brazil provided political cover to the US on behalf of the developing countries. This has been a consequence of something truly remarkable happening in Europe. Keynsianism has lost in Europe. There is no political support for it. And Barack Obama got hit in the face with this reality.

Since the beginning of the financial crisis, conservative and liberal parties have defeated socialist parties in nearly every election in the European Union. They won the European elections and elections in the UK, Italy, Belgium, Germany, the Netherlands, the Czech Republic, Hungary, etc. A reformist, pro-market right has beaten a traditionalist right in Poland. There is no credible political voice for more spending in Europe. The Greek and Portuguese financial crises have destroyed a political argument for deficit-funded stimulus packages. (note that this opportunity is not being wasted: European countries are raising retirement ages and trying all sorts of other strategies to cut their extensive entitlement systems)

Furthermore, the only European Union members with Socialist governments are Portugal, Greece, and Spain. (note that Austria has a “Grand Coalition” where the right and the left share power) You will note that this is three of the four “PIGS” countries that are the weakest economic performers in Europe. Furthermore, the Greek Prime Minister is the leader of the Socialist International, which coordinates policy and political positions internationally across all the parties of the left. How is that working out?

It is pretty astonishing that Barack Obama went to this crowd to demand that they spend more. It was both tone deaf about the epochal changes in European politics and indicative of a broader incompetence in our foreign policy.