To Save Europe, Free the Markets
2013-10-22 0:00

By Frank Hollenbeck | Ludwig von Mises Institute

The current European economic strategy is to kick the can down the road.

Debt levels in almost all European countries continue to rise and growth seems to be a long forgotten memory. The day of reckoning is around the corner, as Rudi Dornbush once warned, “[t]he crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought, and that’s sort of exactly the Mexican story. It took forever and then it took a night.”

To get real results fast, European leaders need to ditch austerity and focus more on policies that enable the private sector to provide the right supply at the right prices.

A good first step, which may even be politically possible, would be to change the land-use laws, allowing owners of agricultural land to dispose of their assets as they see fit. Land-use legislation in France is a perfect example of the worst of Soviet-style planning. It all began with a 1967 law requiring major cities to establish zoning plans. At first, those plans were only limited to large cities, but were soon extended to most cities. The regulatory framework on land, helped by EU laws and regulations, exploded during the 1980s and 1990s with the creation of coastal laws, wet zone laws, biodiversity laws, and nature zones preservation laws. Environmentalist groups were instrumental in the enactment of many of these new laws.

All these regulations stifled construction. From 1997-2007, France had a housing bubble, but, unlike Spain, there was very little construction since zoning laws left very little land to build on. Housing prices increased 140 percent over this period which was 90% faster than households’ incomes. Yet, construction cost only increased 30 percent. This was clearly a land-oriented bubble, and the main culprit was land use regulation.

Today, most zoning plans are for 15 years, and generally become inadequate almost immediately. In the early 1980s, a revision to a plan took two or three years. Now, the minimum is three years. However, if environmentalist groups get involved, changes can take well over a decade. Many small cities have been struggling seven years in judicial battles to add a measly 50 acres of new developable land into a plan. For example, it took six years for the 20-cities metro area of Nantes (ranking #10 in France) to elaborate their latest plan. Currently, there are 40,000 acres of agricultural land outside Nantes, but only 750 acres are planned for new buildings for the next 15 years. This is a pittance for the nearly 1 million inhabitants of this growing region.

People love freedom for themselves, but fear freedom for others. Planners fear that free markets would lead to anarchy and environmental disasters. Politicians fear the evils of urban sprawl. During the 1950s and 1960s the French government created 700 “urban ghettos,” which were dehumanizing Soviet-style suburbs, without many basic amenities like libraries, high schools and so on. In a free market, land developers bring to market what people desire. If people don’t want to live in Soviet-style bunkers, they won’t be built. It is possible for a developer to make a mistake, but he will probably only make this once, not 700 times.

The planners fear it, but anarchy is a term that could be used to describe the impossibility of determining exactly how preferences will change over time. Yet, a free market will ensure the least amount of anarchy since price and profits are the best way to have resources channeled to produce the goods and services that society most urgently needs. No government planner can compete with the resource allocation efficiency of a market system.

Zoning laws are the political reflection of these fears, and crony capitalism thrives in such an environment. Well-connected entities regularly design personal gains into zoning plans, and then use regulatory barriers in such plans to restrict entry. Also, since the 1980s, European law has made it more difficult for governments to provide services that could be supplied by private contractors. France now has at least 30,000 full-time public servants whose only job is to oversee private consulting firms which are paid for elaborate plans. Crony capitalism and socialism are very good bedfellows.

Today, land for construction is about 200 times more expensive than agricultural land in France, and as high as 500 to 1,000 times more expensive near major cities. Demand is there! Regulation has simply kept it bottled up, and it needs to be liberated.

[...]

Read the full article at: mises.org



Related Articles


Latest News from our Front Page

ABC Is Hiding Details of Killer Vester Flanagan's Manifesto ...(Must Be Littered With Liberal Propaganda)
2015-08-29 3:45
Killer Vester Flanagan was a big Obama supporter. But, you’d never know it from the liberal media. The media is hiding Flanagan’s political leanings from the American public. ABC has yet to release Flanagan’s manifesto. It must be littered with embarrassing liberal propaganda. The Tatler reported, via Instapundit: Two days ago, ABC News reported that Vester Flanagan, the murderer of two WDBJ employees, sent a 23-page ...
Austria, Libya count dead as number of migrants crossing Mediterranean soars
2015-08-29 1:37
Austria said on Friday 71 refugees including a baby girl were found dead in an abandoned freezer truck, while Libya recovered the bodies of 82 migrants washed ashore after their overcrowded boat sank on its way to Europe and scores more were feared dead. The U.N. refugee agency said the number of refugees and migrants crossing the Mediterranean to reach Europe ...
Financial Times Calls For Abolishing Cash
2015-08-29 1:07
liminating physical currency necessary to give central banks more power The Financial Times has published an anonymous article which calls for the abolition of cash in order to give central banks and governments more power. Entitled The case for retiring another ‘barbarous relic’, the article laments the fact that people are stockpiling cash in anticipation of another economic collapse, a factor which ...
Serbian government bans anti-mass immigration protests, and plans ahead for mass immigration
2015-08-29 1:52
Nebojsa Stefanovic, Serbia’s Interior Minister said protesters who are concerned about “an EU plan” to settle thousands of illegal immigrants into the country, will not be allowed to voice their concerns in a protest march on Monday, 31st of August. “We will not allow the expression of intolerance and hatred to be something that is characteristic of Serbia” said Stefanovic. “The Ministry ...
Germany asks Facebook to remove 'racist' anti-migrant posts
2015-08-28 20:32
Heiko Maas, Germany's justice minister, says social network should remove xenophobic posts in the same way it deals with nudity Germany is calling on Facebook to remove “xenophobic and racist” anti-migrant posts from its website and apps. Heiko Maas, the German justice minister, has written to the company to demand an urgent review of its policy over hate messages. “Photos of certain ...
More News »