Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold Watch Out as Price May Be Staging New Momentum Base In Preparation For A Big Move Upwards - 18th May 21
Why the Demand for US Real Estate Licenses May Soon Fall into a Sinkhole - 18th May 21
Semiconductor Equipment Maker ASML Is at the Center of the Global Chip Shortage - 18th May 21
Could This Be The Hottest Investment Sector For 2021? - 18th May 21
TESLA Tech Stock Bubble BURSTS! Stock Price Heading for CRASH to below $400 - 18th May 21
The Most Exciting Biotech Stock Of The Year? - 17th May 21
Gold Mining Stocks Fundamentals - 17th May 21
Junior Gold Miners Should be Rallying – What’s Holding Them Back? - 17th May 21
Stock Market - Should You Be In Cash Right Now? - 17th May 21
Learning the Financial Markets - 17th May 21
INVESTING IN HIGH RISK TECH STOCKS - ALL OR NOTHING - 16th May 21
Is Stock Market Selling Madness About Over? - 16th May 21
Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
Budgies Birds of Paradise Indoor Grape Vine Singing, Chirping and Flying Parakeets Fun 3D VR180 UK - 16th May 21
Wall Street Roiled by Hot Inflation Data: Is This REALLY “Transitory”? - 16th May 21
Inflation Going Stag - 16th May 21
CHIA Coins After 1st Week of Plotting 140 Plot 14tb Farm. Crunching the Numbers How to Win - 15th May 21
Tips to Create the Best Cross-Functional Teams - 15th May 21
Gold: Lose a Battle to Win the War - 14th May 21
Are You Invested in America’s “Two-Hour Boom” Fast Shipping Stocks? - 14th May 21
Gold to Benefit from Mounting US Debt Pile - 14th May 21
6 Solid Signs You Should Have Your Smart Device Repaired Right Away - 14th May 21
Ways to Finance Your Business Growth - 14th May 21
Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
How Much CHIA Coins Profit from 100 Plot 10tb Farm? Hard Drive Space Mining - 13th May 21
Stock Market Bulls Getting Caught in the Whirlwind - 13th May 21
Legoland Windsor Mini land and Sky Train Virtual Tour in VR 360 - UK London Holidays 2021 - 13th May 21
Peak Growth and Inflation - 13th May 21
Where’s The Fed? Watch Precious Metals For Signs Of Inflation Panic - 13th May 21
Coronavius Covid-19 in Italy in August 2019! - 13th May 21
India Covid Apocalypse Heralds Catastrophe for Pakistan and Bangladesh - 13th May 21
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

To Save Europe, Free the Markets

Economics / Economic Theory Oct 19, 2013 - 12:38 PM GMT

By: MISES

Economics

Frank Hollenbeck writes: 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.

Land-use reforms in France would cut development costs by much more than 50 percent and create a mini construction boom in almost every major French city. In the French suburbs of Geneva, housing units would spring up like mushrooms.

This does not necessarily mean we should dispense with environmental laws, but we should not let concern for the environment be a pretext to do nothing. There is an enormous demand for affordable housing in many parts of Europe, but environmentalists would rather see tons of chemicals dumped on agricultural land year after year instead of seeing families better able to put a roof over their heads.

There are literally thousands of similar supply-side policies that would easily spur growth in Europe. But first we’d need to stop talking about“boosting demand,” or “making labor laws more flexible,” or “encouraging entrepreneurship.” Those are empty slogans. It’s time for European leaders to take bold actions, because the alternative is a train wreck.

Frank Hollenbeck, PhD, teaches at the International University of Geneva. See Frank Hollenbeck's article archives.

You can subscribe to future articles by Frank Hollenbeck via this RSS feed..

© 2013 Copyright Frank Hollenbeck - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in