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March 24, 2005
Competition Within Europe
The formation of the European Union allowed citizens of the member countries to legally live and work in any country within the EU. This policy of open immigration has had far reaching implication. Governments, in a sense, must now compete to keep citizens and businesses within their borders.
For example, in 2001, after Denmark's Brian Nielsen fought Mike Tyson, he promptly moved to Spain to collect his big payday. Why? It wasn't only to enjoy the Mediterranean lifestyle with his newfound wealth, but because taxes were lower in the Iberian Peninsula than in his native country. It follows that countries have quickly realized that a larger percent of nothing is much less than a smaller percent of something. Tax competition has ensued.
This table from a recent Wall Street Journal editorial speaks for itself with regards to the above. It should come as no surprise Ireland's economy is booming with an unemployment rate below 5%.
But the casualties of a mobile labor force have not been limited to high tax rates. Earlier this week France abandon their compulsory 35-hour work week. Originally, this policy was implemented with the flawed logic that shortening the work week for those already employed, would create jobs for the more than 13% of the population that found itself without work. The actually results were to make an already unfriendly business environment worse, and a system where government officials would routinely search the briefcases of businessmen/women as they left their places of employment to make sure they were not illegally bringing work to their homes to complete.
One question that remains is if Europe continues to move in this direction, how long will it be before the United States itself starts feeling the heat of economic competition from across the Atlantic?
Hat Tip: Hispanic Pundit
Posted by Peter Mork at March 24, 2005 10:53 AM
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The free movement of capital and labour within the EU puts competitive pressure on governments. [C]ountries have quickly realized that a larger percent of nothing is much less than a smaller percent of something. Tax competition has ensued.
The char... [Read More]
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