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

Pressure from the United Patriots Front Stops Mosque Plan
2016-04-28 20:10
Pressure from the United Patriots Front appears to have killed off a mosque development in Narre Warren North. The City of Casey council now looks likely to withhold planning approval for the development in a special meeting set for Tuesday night. A council report, to be considered by councillors on Tuesday, recommends that the approval be blocked. The mosque opponents’ cause has been helped by councillor ...
Police face questions over the influence of the Freemasons
2016-04-28 20:48
South Yorkshire Police today face questions over whether powerful 'secret society' the Freemasons held sway over the force at the time of Hillsborough. Families of victims say that officers who were Masons were promoted into powerful positions despite being ill-equipped, including match commander David Duckenfield. Duckenfield told the fresh inquests he had been a Freemason since 1975 and became head of his ...
England Bans its Own Flag to Avoid Offending Muslims
2016-04-27 2:23
St. George's Cross "racist" towards immigrants Government officials said their city was ‘too multicultural’ to celebrate St George’s Day, England’s version of the 4th of July. The council said that displaying the English flag may have been seen as “racist” towards immigrants.
Half of Western European men descended from one Bronze Age ‘king’
2016-04-27 2:09
Half of Western European men are descended from one Bronze Age ‘king’ who sired a dynasty of elite nobles which spread throughout Europe, a new study has shown. The monarch, who lived around 4,000 years ago, is likely to have been one of the earliest chieftains to take power in the continent. He was part of a new order which emerged in ...
"Local Residents" Are Filmed Stealing Dozens of Bottles of Water at London Marathon Stop
2016-04-25 23:10
Editor's Comment: "Local" residents? Why bother blurring their faces? We know who they are. ... London marathon runners were robbed of dozens of bottled waters when thieves raided a refreshment area armed with trolleys during today's race. Nearby residents - including parents with children - were captured on camera piling up crates of free water handed out by volunteers during the 26-mile event. Marathon ...
More News »