Europe is Screwed. Is it worth it?

Two quick meditations on the EU. This is a long one, because the EU is simultaneously a horrific problem, and an incredible promise. I’m going to put the “read more?” extenders on this one, because it’s going to be long enough to monopolize the entire blog page.

The Problem

We went shopping over the Christmas holiday with my father-in-law, on our yearly “let’s take a perfectly good day and get up at 4:45 a.m. so that we can sit in a car for five and a half hours driving way too slowly in the fog so that we can watch Daddy shop.”

Daddy-Shopping is cute, because he’s simply overjoyed that all these nice things are there to be produced and enjoyed by humble Mom’n’Pop restaurant owners like himself. And he’s perfectly justified in feeling this way: his dad was a Calvinist Parson, aka, a class enemy, and treated as such, by the Hungarian Communists. Nothing like having everything you own taken away from you, avoiding being thrown into a concentration camp only because of the determination and boldness of your wife, and then having nowhere to get your toddler out from under the rain except staying with some gypsies in a barn. Daddy was that toddler, and has perfectly good reasons to enjoy getting out there and engaging in a little “retail therapy.”

But what was telling was actually shopping. This was in the “southern shopping city” just outside of downtown Vienna. Big mall from hell, in terms of square footage probably on a par with the Galleria in Dallas, and in terms of retail profile, somewhere between the Irving Mall and Grapevine Mills. If you don’t live in the area, but know real-estate, you can get the numbers out of your MSA search utilities, and if you don’t have those tools, think of it as a rock-solid middle class mall. And what was telling about the shopping, was the reaction of my wife, who has slowly assimilated to the US, and shops more than I do. (For y’all strangers, I am a classic male “buyer” rather than a “shopper.” I don’t mess around with this nuts and berries crap: I go out there, kick the moose in the butt, throw it over my shoulders and take it up front so I can flirt with the cashiers.)

My wife’s reaction was “this is nice stuff, but I couldn’t let myself buy it at these prices.” To which I gave my husbandly “how so?” Well, we went into several stores, but let’s just pick one, by far the fanciest, highest-end store in the Mall: Peek & Cloppenburg. “Peek” is one of those places where you walk into the store by passing through 150 square feet of men’s dress shirts, ranging from “I work with investment banker scum” to “I can wear this without a tie, but it’s a nice pattern and long-sleeved, so if I’m in a rush I can use it under a jacket w/o totally screwing my profile.” Up on the third floor are the classic European “I live in a pseudo-caste society, so if I want to climb the corporate ladder, I’d better damn look the part” suits. Nice stuff.

The problem is that for the same quality of shirt in the US, you’d go to Wal-Mart or Target, and pay about 15 bucks. These were on sale at an exchange-rate adjusted $35-40. Now, exchange rates give a highly-illusory picture, so let me say for all you clever monkeys out there, that in this case it works out about the same in terms of buying power. Now, don’t get me wrong: Wal-Mart gets a lot of shit about its quality, and a lot of it’s undeserved. You’re an idiot if you buy furniture there. On the other hand, a lot of their clothes are actually very high quality. I have business-casual shirts from Wal-Mart that have lasted me three years and still look pretty good: the half-dozen awesome-looking shirts from Peek & Cloppenburg were falling apart after a year. And you can’t buy a suit there.

On the other hand, you can’t buy car batteries and power tools at Peek & Cloppenburg. Wal-Mart is an unabashedly working-class store, which is why they’re making headlines with $4 generics in their pharmacy. Peek & Cloppenburg is pitched at the Central-European equivalent of the folks here in the US who can actually afford to patronize today’s YMCA. In terms of quality, “Peek” should crush Wal-Mart (and Target). Instead, you can find similar-quality goods, from shirts, to skirts, to leather jackets, in every product category that both stores carry… at half the price here in the US. And this isn’t a matter of taste: when I describe quality here, I’m talking about loose threads, uneven stitching (or obviously broken stitches), bad cuts… okay, that one gets into taste, but when a jacket sleeve literally can’t hang correctly from the shoulder, you know something’s wrong.

Everybody at Peek & Cloppenburg is clearly happy with these goods, and equally happy with these prices, for merchandise that would either be sold as “seconds” here, or else worn by folks a full social class below where it’s being sold in Europe. Don’t even start to put this stuff side-by-side with the Dillard’s in Irving Mall, let alone Macy’s or Needless Markup. When you see what’s on offer with the third-floor suits at “Peek,” that’s a perfectly fair comparison… and I’m picking on “Peek” simply because it was the latest example of it. The pattern seems to hold true all over the place once you’re looking for it. Anything custom or specialty is of amazingly-high quality, but standard middle class goods are notably shoddy. The monopoly-capitalism, “socialism lite” of the EU is literally providing its countries’ citizens with second-class goods. And my wife, who’s European, then spends days talking to me about how difficult it is to simply express the fact that there’s a difference, let alone the degree to which the difference holds, to somebody who has never spent any time across the pond in the USA. The shopping experience alone made my wife want to go run to Irving Mall for no other reason than to make sure she wasn’t hallucinating.

The EU technocrats’ dreams of being a first-rate economic power isn’t going to hold, because over time, quality counts. And the Eurozone’s economic problems are already well-noted, with the mandates of the currency giving several member countries fits. Then when you get into the “harmonization” procedures, in which the technocrats do exactly what that sounds like… to make every place just like any other. So when the Hungarians do come into full regulation, there’s a serious chance that all the little aunties will have to give up their “mákos” poppy-seed pastries to EU regulation, because of the threat that their little baeglis pose to international peace and harmony.

Is it worth it?

The Promise

Almost exactly a year ago, I wrote an article for Publius Pundit titled “Eurocracy: Inadvertently wiping away an Ugly Legacy?”

The same premise holds true now as it did a year ago. The historical injustice done to Hungarians at Trianon (imagine everything west of the Mississippi and south of the Mason-Dixon line chopped off of the US in order to satisfy some foreigner’s ideas of political philosophy… frequently carried out by literally cutting villages in half and cutting off the local church or well from the people who used them), combined with the establishment of self-rule and nation states of the ethnic minorities of the Austro-Hungarian Empire, which is, on the other hand, in the abstract, a good thing, and you have the recipe for long-term, bitter resentments, which have been paid and repaid back and forth throughout the 20th century between Hungary and its neighbors. Say what you like about the Austro-Hungarian Empire (and there was certainly a lot wrong with it), but said Empire was so far ahead of its time in terms of multiculturalism that you couldn’t stay in office in 21st-century America by proposing the kinds of things that were taken for granted prior to WWI, such as money and public signs printed in six languages.

And if you doubt this is a serious issue, check the comments section and the immediately harsh feelings provoked by said article.

Now, the EU’s grand promise, which gives the Technocrats a moral stick with which to whack the Aunties and their pastries, is the reduction of inter-state conflicts. So because Romania and Bulgaria have now joined the EU, the Transylvanians who are ethnically Hungarian can hop the border to get medicine and the like without having to submit to the kind of crap that would cause race-riots in the States. Similarly, it’s good for Romanians, because now when they go to Austria, they go into the EU line, and the Austrian border guards won’t be able to mess with them on general principles. One assumes that they’ll make up for it by being even more disgusting to the Turks than they are normally.

Now, an EU-wide common labor market has yet to materialize. And it probably never will, because the technocrats in charge generally have a view towards controlling people, rather than unleashing them. (Which is a pity, because it’s the one step that would give the EU an actual chance to compete with the US and the Asian economic powerhouses in the 21st century. Otherwise, it doesn’t take an economic genius to see the EU playing third-or-fourth-string fiddle in the world economy soon.)

In other words, there is a serious, legitimate question: is being forced into a socialism-lite run by unaccountable bureaucratic elites a reasonable price to pay for slowly putting the simmering conflicts of the 20th century to bed? Certainly the European Left thinks so: they “were Tranzis before Tranzis were cool.” How about for the Aunties and their pastries, or the Romanian guy from Ploiesti who just wants an honest day’s work for an honest day’s pay a little west of home, without being treated like crap in the process?

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12 Comments

  1. Alex Morgan

     /  January 1, 2007

    You’ve been busy on your return.

    What makes you think the shoddy goods at “Peek” were really produced nearby, or even in the EU for that matter?

    I’m betting that the goods were REALLY produced elsewhere at minimal expense to allow HUGE European style profits. Sounds oxymoronic doesn’t it? But consider the fact that most EU companies have better profit margins than US ones (outside the energy sector) and you’ll see why more capital is being invested in the EU than the US. And then the EU gets a killing in taxes through the VAT on all this…everyone profits EXCEPT the consumer. It’s almost enough to make a true plutocrat on either side of the Atlantic giggle with glee.

    As for the EU socialist state righting past wrongs – I don’t know. It might be worth it if for no other reason it prevents more Balkan-style conflicts in Europe.

    Reply
  2. Mike

     /  January 1, 2007

    Feh, Europe can’t right past wrongs. They couldn’t prevent new ones. They are still working off of the “if we are nice, and can find the other nice guys on the other side we can talk” theory. Which if you live in Care Bear Land works great because the nice guys are in charge. Instead of real life where the mean, nasty violent guys are actually in charge (except in places where we have had a democracy for a while and can actually have an election without shooting someone. I.E. US). This is why Turkey has such a time when its trying to enter the EU, they actually have to deal with real live nasty people and have that healthy respect for what an execution can do for the pro-side of law and order. Unlike the EU that views it as barbaric.

    I am willing to bet that the goods are probably sweat shop rejects from China or South America. Feh, I think Europe’s understanding of how American style capitalism works is much like their concept of Rock and Roll: they try hard but just don’t quite get it. Example: the British can produce Punk Rock, but they also created the Beatles and John Lennon.

    No, I am NOT a Beatles fan and I think its a great example.

    Reply
  3. Mike’s right: not produced in the EU. The EU doesn’t *have* any real garment industry left to speak of at this level. On the other hand, there’s a huge difference between putting something to rest, and fixing it. Euro politics don’t ever really fix things, they just pawn it off onto somebody else’s bank account. Except for the border thing… that really does potentially fix some things.

    Reply
  4. Chris - Wichita

     /  January 2, 2007

    Does anybody have a worthwhile garment industry outside of the third world anymore?

    I got a gift card to Brooks Brothers for my law school graduation from Katie’s parents…. I ended up getting 3 dress shirts on sale, 3 for $150.. all made in Malaysia…. You’d think that for the price, they’re either made of gold thread, or would be made in the first world…

    Reply
  5. Speaking of which, congratulations, and I’ve got a sabre you need to see…

    Reply
  6. Alex Morgan

     /  January 2, 2007

    Mike, don’t sell the Europeans short on capitalism and making money. Remember – they invented the concepts and created most of the institutions that led to the socialist revolutions that they’re stuck with today. While I agree the EU is pathetic at foreign policy, they’re very good with economic policy, especially when it comes to scientific R&D. The EU will be an economic super power (you could argue they are already) along with the US and eventually China and they will give everyone a serious challenge. Underneath all the “touchy-feely” policies is a very strong economic system – each part of the EU may have its own strengths and weaknesses, but together the economies of scale and combined strengths make the EU an economic threat.
    And in an interesting twist – countires that don’t like the US and have lots of oil assets are dumping dollars and replacing them with Euros. The only reason they haven’t dumped the currency into the Yuan is that they know the Chinese control their currency to strongly to be trusted. This increases the economic power of the EU at the expense of the US, and the EU is glad to have the additional power.

    Reply
  7. Yes, this is true to an extent. The EU excels at top-down macroeconomic management. The problem is what happens to all the small fish on the bottom. Look at airbus — it’s a classic example of the inevitability of what happens to your industry when you base your company’s strategy based on what’s convenient for central planners, versus the needs of your buyers’ actual customers.

    The customer gets screwed in the EU, and over time, that tells.

    Reply
  8. The real question is, will it matter? We over here have the opposite problem: we’re very happy to hand our customers enough credit rope to hang themselves twice (the debate’s out on whether we have or not, but per-capita public debt is $30,000, not to mention the credit-cards, home-equity draw-down and reverse-amortizing mortgages (WTF?!) ).

    It may not be my particular cup o’ tea, but Europe may not be screwed — they may simply have a very sustainable mediocrity. Given the Herculean task of slowly integrating other states, plus their history of slitting each others’ throats, I’ll bet to many people that doesn’t sound all that bad.

    Reply
  9. Alex

     /  January 2, 2007

    “The customer gets screwed in the EU, and over time, that tells.”
    Sounds like normal capitalism to me. 🙂

    I don’t think Airbus got into the problem is has now due to “central planners”. Instead they couldn’t deliver a brand new technology on time and the markeplace punished them for it. The idea was good, but Airbus screwed up the execution, not the EU. The big difference is that Airbus gets subsidized by the EU, and given that factor, Airbus royally screwed up the execution since their corporate risk factor was lower than Boeing’s. Since Boeing didn’t have US subsidizing, and they succeeded at showing the 787 as a deliverable model, this is why they’re leading now over Airbus and the market is rewarding them appropriately.

    Reply
  10. Airbus *definitely* got into trouble because of EU factors, the funding being paramount. Airbus is effectively an EU flagship product. Therefore it doesn’t make standard economic decisions the way an Asian or US manufacturer would.

    And Boeing, for all its many faults, based the 787 model upon its research, carried out in order to determine how customers wanted to fly. Turns out most folks don’t want to do the node-hub method, but would much rather hop a smaller jet on a direct flight…

    Reply
  11. Alex

     /  January 2, 2007

    Hmm…

    Well, maybe this was a marketing failure rather than a technology failure as I had originally read. In the EU I can see the advantage of huge airplanes due to the amount of success low-cost airlines have had in Europe, and the A380 fits very well into that model.

    But outside the EU – besides destinations that huge numbers of people want to go to, the need for the A380 disappears. So if the EU goverment really did skew the marketing/development focus, then this is indeed a flaw in the EU economic model.

    Reply
  12. Happycrow

     /  January 5, 2007

    You betcha, and I’m not pulling this out of my tail. It’s all very well documented, and known-biz for the folks in the industry. Recall that the A380 was primarily designed to knock Boeing out of the airplane business for the next decade…

    Reply

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