Remarks on the European Refugee Crisis and the Fall of the Roman Empire

October 13 2015

In writing this article, my goal isn’t to proclaim a political or ideological opinion about the European refugee crisis. Rather, I want to know what the future has in store for us. Today, I want to show how some (sincere) 'do-gooders' have no idea how they are 'helping' Europe towards the verge of collapse. Moreover, I want to demonstrate that drawing a parallel of the current situation with the fall of the Roman Empire isn’t as crazy as it might seem.

This Isn't Mass Migration as We Know It

In a way, there’s nothing new about the current situation. Mankind has been migrating since the beginning of time. Still, the current situation is very different compared to previous mass migrations.

As an example, take the United States: it is a mix of, among others, European refugees like the Irish. In the past, almost 5 million Irish have put their lives on the line to go to America, in a similar fashion as the Syrians now.  

But in what way is the current situation different?

From the perspective of Dutch society, the big difference is our gigantic welfare state. Since the 1970s, the Bismarck model has been the norm in the Netherlands. At some point in the 1990s, up to 10% of the Dutch workforce received benefits under the 'Sickness Benefits Act,' more than double of other European countries. Were the Dutch actually more 'ill'? They weren’t, but the paternal government was so generous that Dutch workers collectively tried to get themselves declared 'unfit to work' in order to receive welfare benefits. After the recessions in 1983 and 2008, the Dutch became more realistic. But the welfare state still thrives on; welfare benefits, subsidies and free healthcare are still considered to be natural rights.

During the Irish’ mass migration to the United States, they didn't 'have a claim' on anything. They were dependent on charity and their own will in order to succeed. Family was important, and support was found with relatives. But this support wasn’t unconditional or guaranteed. To take care of each other was primarily considered a duty, in the hope that they would later return the favor. Working hard was rewarded, and people accepted all jobs in order to earn money or improve one’s social position.

Later, this would be called the 'American Dream.' An Irishman like Andrew Carnegie was one of the prime examples: he grew up in poverty in Ireland, but eventually became a rich steel magnate. But when the Carnegie family arrived on U.S. shores, nobody gave them shelter or a guaranteed income.

On the contrary, the Carnegie family was never - and especially not before they left - guaranteed anything.

'No Free Lunch'

The welfare state is based on the best of intentions. .However, we're not living in the Garden of Eden. We live in a world of scarcity; every euro that the welfare state spends is raised by one of the following methods of government financing:

  • Taxation
  • Borrowing
  • Inflation

Eurozone members like the Netherlands don’t have direct access to the printing press; as not the Dutch Central Bank, but the European Central Bank has control over the money supply. Moreover, historically speaking, the Dutch have only made occasional use of 'inflation' to finance government spending. The Bank of Amsterdam is possibly the only example: after gaining worldwide fame during the 17th century, it was at some point plundered by the municipality of Amsterdam.

Borrowing the required funds is even more problematic. Not because we don’t want to 'shift the burden to our grandchildren,' but because it is equivalent to "heating your home by burning the furniture," as the brilliant economist Ludwig von Mises once said. After all, governments finance their current expenditures – consumption – using these loans. The interest on government debt is paid by today's producers, but the money has been spent already. It no longer generates any additional wealth. It is a burden, not a boon. It is a disinvestment, not an investment. It is a form of capital consumption, not capital formation. In short, the more a government borrows, the more it will burden the productive layers of society.

And then there’s taxation. But as producers are taxed more (the only ones capable of paying taxes, and actually paying them), the less of them will be left at the end of the day. Some of them may liquidate and consume their company's assets, and others may move their funds abroad because they (a) get to keep more of their money and (b) cannot compete with countries that have a favorable fiscal environment, especially for specialized workers.

Am I overreacting? Well, as recent as in 2007, no less than 123,000 people left the Netherlands, mostly for fiscal reasons. That is almost 2% of the Dutch workforce in one single year! And a significant part of this group consists out of highly educated Dutch who have to contribute the most to the welfare state.

But argument (a) is the most important, as it encourages people to invest abroad. After all, the returns on an investment will be higher in countries with a fiscally favorable environment than those lacking one.

It is important to note that this is relevant regardless of who pays the taxes. Even if we could tax the 'rich' without limits, the aforementioned effects would still be the result. And the concept of solidarity that many Dutch adhere to (all immigrants should have access to our wealth, but the 'rich' have to pay), is conditional on not having to pay the bill themselves.

All three options have perverse consequences, and if government spending gets out of hand, these consequences will materialize.

The irony is that the Dutch AOW - a guaranteed pension from the government - isn't financed by pension contributions. It is an unfunded system, paid by those working now.  This system is completely unsustainable as we are moving from 7 workers for every beneficiary, to 2 workers per beneficiary. Actually, migrants and open borders could help avoid a disaster for the AOW, something that political parties like the PVV (which fiercely opposes immigration) do not understand. Instead, they are striving for a lower retirement age, as well as the continuation of the current system, while also arguing for an immigration stop.

The Cold Hard Facts and Figures

When I referred to the 'do-gooders' that are bringing Europe on the verge of collapse, I meant the following: they want to give immigrants unlimited access to the wealth of Dutch tax payers. Their well-meant intentions are praiseworthy, but also naive. They fail to calculate, or underestimate, the sheer potential size and consequences of mass immigration.

The problem is that the combination of open borders and our generous welfare state are like water and fire. It’s a problem that nearly no one acknowledges. Everyone seems to think that the government has some kind of bottomless wallet, out of which it can finance everything out of thin air.

  • Each day, over 3000 migrants arrive at Kos (Greece) alone, amounting to 1,095,000 migrants per year.
  • Syrian refugees (including those pretending to come from Syria) are given, without exception, a residence permit.
  • On average, every Syrian will later bring one family member (a partner or child traveling to Europe to apply for asylum at a later point in time).
  • According to the EU, the Netherlands has to take on 4% of immigrants, which amounts to about 88,000 people just based on the amount of migrants who come to Europe via Kos (and the family they bring).
  • 6 of every 10 Syrians in the Netherlands are on benefits, and so are 7 of 10 Somalis.
  • Welfare benefits are €960 per month for single households (€11,520 a year). But the cost per individual on benefits is obviously higher. Additional costs are: rent subsidy (€2076 per year), government sponsored healthcare (between €3000-6000) and other forms of (financial) support.

On the basis of this quick estimation, this means an additional cost of 15 billion euros per year for the Netherlands. That means either:

  • Higher taxes
  • Or more government borrowing and thus a higher national debt

And as we have concluded before, both options are at the expense of producing layers of society. And that means that they are encouraged to consume capital, or to invest it abroad (free movement of capital). The route we have gone down several years ago is now heading towards the same direction the Roman Empire once went: to the verge of collapse. It is a welfare state collapsing under its own weight.

Similarities with the Fall of the Roman Empire

As you may remember from your history class, one the largest major ancient civilizations collapsed in the fifth century AD. Perhaps you have been told that the fall of the Roman Empire was caused by the barbarians, as they invaded the empire. But that should, at the very least, raise questions as to how the Romans were able to defend themselves against the barbarians for centuries, but then suddenly weren’t capable to do so anymore.

No, barbarians weren’t the reason for the empire’s collapse. The underlying problem was of similar nature as it is now: the welfare state.

The Roman poet Juvenalis called it "panem et circenses." Or, in other words, bread and games; it was the strategy used by politicians in the Imperium Romanum to win the favor of the masses. In Rome, free bread was given in order to keep the people satisfied. This free and guaranteed supply of food, combined with the free entertainment provided by the gladiators, is the equivalent of our 'guaranteed' state income and shelter that we have today.

And what happened when the Romans did this?

Obviously, the enormous government expenditures to finance the welfare state had to be financed. The Roman’s solution was simple: the printing press. They didn’t literally print money of course, but they did something similar. At that time, the Roman Empire had a metal coin standard. The metallic content of these gold coins were secretly curtailed little by little. What they scraped off these coins was remolten to make new coins. In short, the metallic value of each coin was reduced. The difference with the situation today is that the European welfare state cannot directly access the printing press. But indirectly – given that central banks buy enormous amounts of government bonds – you may see the similarities.

The barbarians only took advantage from the Roman mismanagement. Perhaps we’re not dealing with barbarians this time; however the 'guaranteed' 'European Empire' could come crashing down as hard as the great ancient civilization of the Roman Empire did.  

Epilogue: the Underlying Cause of the Immigration Crisis

I have intentionally spent little attention to what caused the current migratory wave. Of course, the NATO – Europe and the U.S. – has played a harmful role in Syrian’s instability, as well as in the entire Middle East. In their quest to remove the Syrian president Bashar al-Assed from power (who, by the way, isn’t exactly the nice guy himself), they have financed and armed rebel groups, many of which radical groups. Because the Russians seem to have achieved something in a few weeks which the NATO hasn’t been able to do in more than a year, the NATO risks losing face. In short, it is a recipe for geopolitical conflict. 

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