Spain has come up with an ingenious solution to economic underperformance—make it illegal.
Last week Spain proposed that the European Union set binding economic goals for its member countries, with penalties for those that don't meet the targets for growth and competitiveness. So Europeans anxious about recession and unemployment can relax—if Spain's Socialist Prime Minister José Luis Rodriquez Zapatero has his way, these troubles will soon be forbidden. Why didn't we think of that?
Mr. Zapatero is in the midst of trying to kick off his country's turn at the EU's rotating six-month presidency with a focus on the European economy. Specifically, Mr. Zapatero has set his sights on the EU's so-called "2020 strategy," which is the not-so-anticipated sequel to the "Lisbon Agenda." That, recall, was Europe's ill-fated plan to become the world's most competitive knowledge-based economy between 2000 and 2010. Despite more conferences, summits, and round-table luncheons than most taxpayers care to recall, average unemployment in the 16 countries that use the euro nonetheless hit 10% in November, its highest point in more than a decade. That U.S. unemployment now matches this level probably is no satisfaction to European businesses and leaders, and Japan's 5.2% unemployment rate in November is proof that Europe hasn't met its Lisbon goals.
The problem, according to Mr. Zapatero, is that the Lisbon Agenda's targets weren't compulsory. "It is absolutely necessary for the 2020 economic strategy... to take on a new nature, a binding nature," the European press quoted Mr. Zapatero as having said last week. He added that EU leaders meeting next month should discuss "measures including incentives and corrective measures for objectives set out in our economic policy."
Mr. Zapatero has declined to specify exactly what he means by "corrective measures," though he has insisted to reporters that these should not be characterized as "sanctions." But whatever you call them, the obstacle to European competitiveness has never been a dearth of regulations—just think of the Maastricht criteria—or a lack of ambition. Just as you can't push on a string, as the saying goes, you can't legislate innovation and growth except in the limited sense of creating an environment in which property rights and the rule of law are secure, and the rewards for creativity accrue to the creator.
In this regard, the creation and expansion of a relatively free, single European market has done more than any other European-level initiative to improve the dynamism of Europe's economies. The European Central Bank's stewardship of the single currency has also been a boon to the bloc's half-billion producers and consumers.
But, unsatisfying as it may be for a politician to hear, Europe's best bet for sending the fortunes of its citizens soaring is now to get out of the way—that means slashing taxes that discourage work and production, and freeing Europe's labor and product markets from rules that discourage growth and job creation. Innovators and would-be entrepreneurs don't so much need incentives from Brussels as they need national governments to stop taking their incentives away via marginal tax rates that in many cases still exceed 50%.
It's just possible that if the Obama Administration continues on its current course toward a European-style welfare state, the EU will accomplish its Lisbon objective—not because of progress in Europe but because the U.S. seems intent on lowering the bar. That assumes of course that the U.S. doesn't follow Mr. Zapatero's lead and legislate its own minimum economic performance goals.
The problem with the first 10-year plan was that it never showed any awareness of where innovation in an economy comes from. Based on Mr. Zapatero's start, the second 10-year plan will fare no better.
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