John Quiggin has a post on an article by Milton Friedman that discusses the demise of socialism in recent decades, and a similar increase in "welfare" spending (the article is for subscribers, so I have to take his word for it).

Quiggin is a social democrat so, naturally, he sees the recent gains in capitalism (neoliberalism in his lingo) as just making the sectors where capitalism succeeds smaller and making the increase of government interference an inevitability due to capitalism’s own successes. For instance, he lists agriculture and manufacturing as areas that are appropriate to capitalism, but healthcare and education, not so much.

Europe will get increasingly economically weak for the next several decades and almost all of it can be accounted for in their demographics, not their philosophy. If their philosophy stays exactly the same, they will see much more government. That's not a philosophy that's ascendant; rather, one that is stuck in its own demographic constraints.

Like Quiggin, I’m influenced by my own views and disagree with his. He sees increased government interference, and he’s probably right about most of the rest of the world, but the U.S. is still an open question as I see it. Europe will be experiencing dramatically increasing median age, which will propel its welfare states even higher than they are now as a percentage of GDP (typically around 50%, as opposed to 32% for the U.S.). The only real hope they have for immigration is from the Middle East, from a culture largely untouched by the Enlightenment. In my opinion, it’s far more likely that we’ll be seeing a Europe in the future that’s far more illiberal (in the classical sense) if they accept new immigrants, and economically so even if they don’t.

The Economist has an excellent population survey from a couple of years ago that sheds a bit of light on the situation:

For 50 years, America and the nations of Western Europe have been lumped together as rich countries, sharing the same basic demographic features: stable populations, low and declining fertility, increasing numbers of old people. For much of that period, this was true. But in the 1980s, the two sides began to diverge. The effect was muted at first, because demographic change is slow. But it is also remorseless, and is now beginning to show up.

America’s census in 2000 contained a shock. The population turned out to be rising faster than anyone had expected when the 1990 census was taken. There are disputes about exactly why this was (more on that shortly). What is not in doubt is that a gap is beginning to open with Europe. America’s fertility rate is rising. Europe’s is falling. America’s immigration outstrips Europe’s and its immigrant population is reproducing faster than native-born Americans. America’s population will soon be getting younger. Europe’s is ageing.

Unless things change substantially, these trends will accelerate over coming decades, driving the two sides of the Atlantic farther apart. By 2040, and possibly earlier, America will overtake Europe in population and will come to look remarkably (and, in many ways, worryingly) different from the Old World.

In 1950, Western Europe was exactly twice as populous as the United States: 304m against 152m. (This article uses the US Census Bureau’s definition of “Europe”, which includes all countries that were not communist during the cold war. The 15 countries that make up the European Union are a slightly smaller sample: they had a population of 296m in 1950.) Both sides of the Atlantic saw their populations surge during the baby boom, then grow more slowly until the mid-1980s. Even now, Europe’s population remains more than 100m larger than America’s.

In the 1980s, however, something curious began to happen. American fertility rates—the average number of children a woman can expect to bear in her lifetime—suddenly began to reverse their decline. Between 1960 and 1985, the American fertility rate had fallen faster than Europe’s, to 1.8, slightly below European levels and far below the “replacement level” of 2.1 (the rate required to keep the population steady). By the 1990s American fertility had rebounded, rising back to just below the 2.1 mark.

They go on to list the details of the change in median age, which are simply astounding:

According to Bill Frey, a demographer at the University of Michigan, the median age in America in 2050 will be 36.2. In Europe it will be 52.7. That is a stunning difference, accounted for almost entirely by the dramatic ageing of the European population. At the moment, the median age is 35.5 in America and 37.7 in Europe. In other words, the difference in the median age is likely to rise from two to 17 years by 2050.

Read the last sentence again: “the difference in the median age is likely to rise from two to 17 years by 2050”. Europe will get increasingly economically weak for the next several decades and almost all of it can be accounted for in their demographics, not their philosophy. If their philosophy stays exactly the same, they will see much more government. That's not a philosophy that's ascendant; rather, one that is stuck in its own demographic constraints.

The U.S. is not settled by a long shot. First, we had a chance to follow Europe towards social democracy in the 1970s. Instead, we elected Reagan and enacted tax cuts—very steep ones which were partially repealed in the coming years. We’ve done something similar with President Bush who has been characteristically headstrong in his refusal to raise taxes as the boomers start to retire. He’s pushing for reform of social security and has already implemented MSAs on a limited basis. He’s right to do it, as well. I would far rather experience some short-term pain—even excruciating pain—rather than suffer slow decline, which will surely happen with the expansion of government that Quiggin envisions.

He’s an Australian and I’ll wish him well in his country’s little adventure. I just don’t want us to follow them.