NCPA - National Center for Policy Analysis

Europe Lists To Port

June 20, 1997

In a curious about-face, voters in France, Britain and Canada have recently elected neo-socialist governments. Some political analysts believe that reason is that center-right incumbents promised lower taxes, economic growth and more jobs, but failed to deliver -- prompting disillusioned voters to boot them out of office.

This happened to President Bush when he abandoned his no-new-taxes pledge. In Europe, right-of-center governments initiated austerity programs and increased taxes as the time for entry into the European monetary union approached.

  • In France, the effect was to increase unemployment from 11.5 percent in mid-1995 to 12.8 percent recently -- while taxes increased from 44.1 percent of gross domestic product to a record 45.7 percent last year.
  • During British Prime Minister John Major's tenure, taxes rose from 34 percent of GDP to 38 percent, according to the Organization for Economic Cooperation and Development.
  • While Britain's unemployment rate is low compared to other European countries, it is still higher than it was under Prime Minister Margaret Thatcher.
  • Right-of-center coalitions in Japan, Canada and Italy also raised taxes and went down to defeat.

However, there are a few notable exceptions to this trend:

  • Spain last year threw out its socialist government after 13 years in power.
  • And the Netherlands recently cut income tax rates and has enjoyed a spurt of economic growth.

Economists say government deficits can be cut by reducing spending and raising taxes, or cutting taxes to achieve economic growth and higher revenues. The ousted conservative parties pursued the first course, while Ronald Reagan, Margaret Thatcher and others followed the second.

Source: Peter K. Pfabe, "Behind Socialism's Resurgence," Investor's Business Daily, June 20, 1997.


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