Not to worry, your eyes aren't playing a trick on you. The graphic illustrations that figure in this article also appeared in full-dress form in the previous article. Why their rebirth here?
Well, for one thing, if you've read the previous article in this series on the innovative performance of the US economy --- a sustained effort to explain why the US has been the richest country in the world since 1880, a good half the time since the industrial revolution of the late 18th century --- it might not hurt to focus your attention anew on the US's superior ability to innovate in ICT, information and communication technologies, compared to Japan or the EU, its main rivals. For another thing, the buggy prof wanted to stick the diagrams on the home buggy page; nothing more, nothing less.
As you'll see, the gaps in innovation and --- no less important --- the pay-off in rising labor productivity between the US on one side and the EU and Japan on the other aren't due to differences in the percentage rates of investment in either ICT or overall R&D. Those differences are generally negligible across the three regions. What then accounts for the big differences? The answer to that, sketched in already in earlier articles in this series --- and spelled out briefly once more at the end here --- lies in what we can call different systems of national innovation, the main subject of this series (now in its 8th article) and the focused theme of the next three articles.
BRIEF INTRODUCTORY REMARKS
The main twist in the previous article's argument can be crisply summarized: US superiority in technological innovation is a puzzle for standard neo-classical (mainstream economics).
In perfectly competitive markets, if other firms are doing something better than your firm, either you quickly emulate those best practices
--- whether they're more advanced technologies or better managerial practices, including superior marketing, or a better quality product --- or your own firm will suffer a loss of customers and profits and eventually go bankrupt. Competitive processes in such markets should guarantee that outcome. The same then applies to the firms in other countries, particularly those close to your own leading-edge ones near the frontier in technology. Best practices
should quickly radiate through an emulation-effect across national boundaries.
If they don't, then all neo-classical economists can infer is that something is preventing perfect competition from operating. The inference isn't so much wrong as either tautological or platitudinous. Apart from everything else, perfectly competitive markets --- large numbers of firms, easy entrance and exit, no excessive long-term profits ("rents" in technical terms) --- are rare in the world. Almost all markets reflect degrees of monopolistic competition, nothing less; and there are good reasons why that's the case: above all --- the key reason for our concerns --- the need to reward risk-taking entrepreneurs who innovate boldly by enabling them to earn "rents," higher-than-average profits. (Its those "rents" that cover all the costs of innovation and risk-taking and benefit success. That success, in turn, emboldens other entrepreneurs to dream their dreams and seek fame and fortune in the future.)
What we want to know is what, precisely, those barriers are in Japan and the EU that prevent emulation effects from operating. As it happens, the concept that we'll be using in the next articles to explain these barriers --- different systems of national competition --- is anything but platitudinous. Such systems, as we'' see, are a combination of three influences that vary noticeably across countries:
- Institutional structures: political, administrative, legal-and-regulatory, financial, corporate governance, and educational;
- Policy differences, especially in the degree of openness to foreign trade and investment, regulations that further or block market competition at home, vividly different levels of taxation and welfare transfers, and social expenditures in general;
Sidebar Clarification These cultural attitudes, to the surprise of most economists, vary markedly across countries: more precisely, if such variation does exist, it should be overshadowed by proper market-oriented incentives that all rational economic agents will respond to in a similar manner. That's just not the case. And the fall-out from such cultural differences can be severely retarding for innovation.
- Cultural attitudes toward two related things: 1) toward risk-taking and entrepreneurship; and 2) toward radical economic and social change that, if adapted to quickly, allows the Schumpeterian forces of creative destruction to operate freely, for all the dislocations such change entails to the status quo.
In particular, without support for risk-taking entrepreneurship, radically restructuring innovations will be rare in a society. Failures --- which are inevitable --- will likely be seriously punished; success will be scorned as a sign of brash pushiness and social-climbing . . . money-grubbing by the awful arrivistes, the upstart parvenus. In Britain today, as we'll see in the next article in this series, the vast majority of people turn out to regard entrepreneurs in this snobby way. Similar remarks apply to attitudes toward change. Without widespread social and cultural flexibility and an optimism about change in a society, the dislocating tumult that almost always accompanies revolutionary technological breakthroughs --- which change drastically the ways we live and work and leave well-established firms and industries increasingly obsolescent or bankrupt --- will tend to swamp the benefits of these breakthroughs and lead to sharp backlashes among the defenders of the status quo.
Among those intransigent defenders, note quickly, will figure those at the top of existing social hierarchies, the main beneficiaries of the status quo. No surprise. Successful entrepreneurs --- the gauche, ultra-pushy upstarts --- will invariably threaten their inherited status-and-prestige, itself a source of wealth and power. They're to be scorned, these brash new-rich --- put down and ostracized. Or worse; yes, much worse. A good deal of the support among European aristocrats for extremist right-wing movements in the 19th and early 20th centuries --- fascists, Nazis, violent reactionaries: almost all of them virulently anti-Semitic --- derives from these wrought-up fears about new challengers and sources of wealth and influence in their societies.
For some elaboration of these remarks, see the final part of this article.
Back To Mainstream Economics: The Solow Twist
The argument in the previous article, you might recall, also looked at the alternative neo-classical explanation of why something like US superiority in technological innovation shouldn't be sustained for very long, let alone 125 years now. It comes out of Solow growth-theory, for which Robert Solow of MIT would justifiably win a Nobel prize. For our purposes, what counts is that the theory that technologies are like public goods
: once one private firm generates them in any country, it is virtually impossible, the Solow claim goes, to prevent the firms in the same country or elsewhere from using it too.
A variety of transference-mechanisms assures that result, in particular:
1) Licensing the technology from the innovative firm (which is protecting it with a patent),
2) Or inviting the firm to implant itself as a multinational extension in your country,
3) Or using reverse engineering around the new machines that embody the innovative technology (a Japanese specialty for 125 years too),
4) Or simply ignoring patents and letting your firms pirate it --- a Chinese speciality these days.
Our Conclusion Here?
The Solow variant doesn't account any better than standard neo-classical micro-economics for the failure of EU or Japanese firms to innovate with nearly the same speed as American firms . . . this despite their own impressive level of R&D spending, their engineering and scientific talents, and their overall investment levels. No need to delve into the reasons why. If you're interested, see the previous article in this buggy series.
A brief sidebar clarification of a different sort is in order. The Solow growth model, you'll remember --- these days usually just dubbed the neo-classical growth model --- stands in contrast to endogenous growth models that seek to directly account for technology's role in explaining the growth rates of per capita income. These endogenous models emerged in the 1980s, mainly to deal more effectively with the impact of technological progress --- especially innovation --- in driving economic growth forward in the long run, over generations and centuries. Paul Romer of Stanford is rightly regarded as the pioneer theorist. By endogenizing the impact of technological progress as an explanatory variable of growth, Romer's work --- and that of hundreds of others these days --- is able to focus directly on what institutions and policies facilitate both technological innovation and imitation (transfers of the innovations).
In the Solow growth model, by contrast, technology influences economic growth as an exogenous variable. Operating from outside the model's explanatory variables --- capital investment and labor force growth --- it offsets the invariable tendencies over time of diminishing returns to exceed new investment levels as an economy's capital stock accumulates. Thanks to such technological innovation, an economy is kept from becoming stuck in a postulated stationary end-state of slow or zero-growth. More technically put, in growth-accounting models that use the Solow variables, technology's beneficial impact shows up as the error-term in the statistical results; at any rate, that is how it is usually interpreted. The Solow model, you might recall, was briefly explained in the previous article.
For an excellent, easy-to-read summary of the Solow and Romer models, see the informative interview with Romer that appeared in 1999.
In it, he claims that Solow --- a much older economist --- told him that he had tried to endogenize technology in his original modeling; but given the methodological toolkit of the mid-1950s, he couldn't figure out how to do this. Romer also notes that technology isn't a public good. It's a private good; the innovating firm can appropriate the gains and exclude others from freely acquiring the innovative technology, at any rate as long as the patents around it last. Technology, though, differs from an ordinary private good in a key respect. Like public goods in that respect, its use by others is non-rivalrous: when two or two thousand firms around the world uses it by either legal or illegal means, the technology isn't exhausted in the least. Jointly consumed, by the way, is another name for a non-rivalrous good.
If it helps to grasp this last point about non-rivalous usage, think of technological innovation as progress in applied knowledge --- either embodied in machines or entirely new products and industries, or showing up as better work-force skills and managerial know-how in running firms and marketing products. Knowledge isn't exhausted if 2 or 200 million or 2 billion people use it simultaneously.
SOME EXPLANATIONS FOR THE GAPS IN US, EU, AND JAPANESE INNOVATION
THAT DON'T FULLY WORK
If Standard Neo-Classical Economics Can't Explain The Gaps In Innovation, What Might Then
Do The Trick?.
As simple observation shows, most advanced technologies don't clearly radiate quickly around the world, or even --- for about two-thirds of the countries in the world that are not much developed in per capita income --- slowly so. And that, in turn, leaves the main issue at stake unexplained by neo-classical theorists, including the Solow model and its practitioners. After all, if technologies are truly public goods,
then we want to know what, precisely, are the obstacles operating in most countries that prevent them from all being at or near the technological frontier?
That there are barriers to even the rapid diffusion of ICT in the EU and Japan --- at any rate compared to the US --- can be easily shown by a series of . . .
Graphic Illustrations of Barriers To Innovation In The EU (and Japan)
Compared To The USA In ICT
Note: these three diagrams are taken from an EU Commission Study, The Role of ICT Investments in Solving Europe's Economic Problems,
by Erkki Liikanen, September 23, 2003. All references should be strictly made to the EU study, one of a series of impressive comparative works that the EU Commission regularly publishes, much to their credit.
(i.) Consider initially the growth of GDP, employment, and labor productivity in
the three regions since 1996.
If the US remains the most innovative economy these days, in an era of marked technological flux --- the tumult and change accentuated by the rapid spread of globalizing capitalism in above all Asia --- the differences between the US's big benefits as the pioneer of ICT and the knowledge-based economy on one side and Japan and the EU on the other can't be due to lower rates of R&D expenditures or lower rates of investment in those technologies. The differences in those rates are fairly negligible (save for tiny Sweden and Finland). American superiority in innovation --- something that goes back to the 1880s now, when US per capita income forged ahead of Britain's --- has to lie in other influences.
What those are is the subject of the next article in this series. As you'll see, they're multiple in number; and together, they add up to a different sort of system of national innovation in the US compared to its main EU and Asian rivals . . . including a much greater flexibility in labor markets as well as in people's attitudes and behavior when it comes to adapting to radical economic and technological change --- all part-and-parcel of what Joseph Schumpeter and his followers these days call "creative destruction."
SOME CLARIFYING REMARKS ABOUT THE CLASS CONFLICTS BETWEEN
ESTABLISHED UPPER CLASSES AND ENTREPRENEURS IN EUROPEAN HISTORY
At the start of the article, we noted that cultural attitudes toward entrepreneurial risk-taking on one side --- and toward major social and economic change on the other --- varied across countries, with a fall-out on how flexibile the overall national society is when it comes to adapting to such change or resisting it. The greater the resistance, the more the forces of creative destruction --- essential to diffusing bold, radically restructuring technologies --- will be blocked, with harmful results to economic efficiency and growth over time. Build up enough market inefficiencies this way, reinforced by socio-cultural hierarchies around the status quo, and ultimately one of two outcomes will occur:
- At worst, the country will be kept underdeveloped --- the fate of almost all African and Arab countries, ruled by inefficient predatory elites, full of corruption, nepotism, and patron-client networks as the main way to advance economically and socially.
One Piece of Clear Evidence
- Alternatively, on a different level if the country in question is already developed, its growth rate will bog down in stagnation . . . buried under self-created obstacles to restructuring and innovative modernization. .
The last 14 years of German and Japanese economic history are clear evidence of the latter fate. Oppositely, the ability of Britain, Ireland, Australia, and New Zealand to restructure their economies in major ways --- reduce taxes, welfare payments, and regulations, while adopting pro-business policies --- shows how what were once laggard countries compared to the Germans and Japanese can make themselves impressively competitive again. If you want more concrete evidence, consider how this group of countries --- plus the US --- has controlled overall government spending since 1960 compared to the others. No need at this point in the series to explain the table in detail. In the next article or two --- which will look in depth at differing systems of national innovation in the US as opposed to the EU and Japan --- we'll delve into it at length, along with several other sources of data.
You should note, though, that New Zealand, Australia, and Britain began dismantling much of their vast welfare-state systems only in the mid- and late-1980s. For their trends, look especially at the period after 1990.
Please note that this table is taken directly from James Gwartney, Randall Holcombe, and Robert Lawrence, The Scope of Government and the Wealth of Nations. All citations should be strictly to the original.
Here, in what follows, we take up the thread that was left dangling in that earlier section about the resistance of traditional elites --- aristocrats, upper middle classes (lawyers, doctors, bankers, and merchants, all with roots in medieval Europe), or even as we'll see the professoriate --- to entrepreneurs and technological breakthroughs, the successful innovators regarded as vulgar upstarts, money-grubbers without culture and social savoir faire. The fall-out in Europe during the late 19th and early 20th centuries was disastrous, not just economically, but politically too. Enter virulent anti-Semitism. Though its causes lie deep in European history and are numerous --- some ancient, some far more modern --- one clear influence that flourished by the late 19th and early 20th centuries is relevant to our argument in this article: hostility to entrepreneurs, capitalist industrialization, and increasing Jewish competition in all the professions by the late 19th century.
Entrepreneurs, Capitalism, and The Old Order
The same remarks made earlier about the haughty, hostile reactions of European aristocrats and traditional upper middle classes to capitalist entrepreneurship apply equally to the prestigious professoriate in newly industrializing countries --- especially the German-speaking ones, but also Spain, Portugal, Greece, and Eastern Europe --- in the same period, roughly from the 1870s on, when industrializing change hit the Continent of Europe with full force.
The professors' scary, hyperkinetic fears about all the alleged horrors of the modern world --- industrialization, the spread of capitalism, the calculating rationalism in the business world that was driving out mystery and wonder from the world, not to forget the rise of the boorish masses --- emerged precisely in this period, especially in the German-speaking countries. Their jitters filled one philosophical, historical, and sociological tract after another, part-and-parcel of their world-outlook. The modern capitalist world was a disaster, we were told. We lived in an iron cage of rationality; endless work and idiotic acquisition pervaded our lives from head to toe; awe and mystery and spirituality had already been elbowed out and shoved to the precipice.
Where Did Things Go So Wrong For Europe, At Any Rate
in the Minds of the Critics?
Max Weber traced the rot back to the Protestant ethos and Benjamin Franklin. Martin Heidegger went further; the rot started with the ancient Greeks' succumbing to too much rationality. Nietzsche located it in the shift from Dionysian to Apollonian views and rituals in the Greek world . . . away from drunken orgies, ecstasy, and spiritual mysteries that had once pervaded Greek life and toward rationality and analysis with their opposition to heroic creativity. That was his initial view. Later, he traced it to the slave mentality inherent in the Judeo-Christian outlook on the equal worthiness of all human souls. Werner Sombert, as famous in his day as Max Weber, found it in the role of the Jews as capitalism's inventors.
Others, as we'll see momentarily, located it in the rise of the masses . . . hierarchy, aristocracy, deference, tradition, and order all threatened by the radical changes inherent in industrialization and capitalism. The boorish nouveaux riches were bad enough. The boorish urban working classes, growing in number as one country after another industrialized, were a menacing nightmare, inclined toward Marxist radicalism.
Cultural critics of capitalism were equally active on the left.
The Frankfurt School of critical theory --- led by Theodore Adorno --- insisted as they packed up their baggage and headed for America to escape Hitler and the Nazis that fascism was capitalism in its last cultural phase of modern mass society. In America, Adorno --- almost the parody of the snobbish European professor, right down to his convoluted prose so beloved by semi-literate left-wingers in universities these days --- was convinced that the spread of jazz already heralded the arrival of fascism in American life. Could it get any sillier? Apparently so. For Adorno, the salvation of modern life would be found in such rousing avant-garde artistry as Arnold Schoenberg's atonal music.
The Latin Countries No Exception
Such gloomy views pervaded Latin societies too.
Roberto Michels, Gaetano Mosca, and Vilfredo Pareto --- Italy's most famous sociologists and economists of the early 20th century, admirers of Mussolini one and all --- traced the rot in modern life to socialist and liberal attacks on qualified elites, the inevitable rulers of modern society no matter what democrats or Marxists claimed. Ortega y Gasset, a Spaniard who studied with Heidegger, found it in The Revolt of the Masses
, his well known book on the subject. A Spanish aristocratic follower of Franco put it more simply in 1937 during the Spanish civil war: "The people are swine. Only when large numbers are exterminated will Spain once again be a fit place for a gentleman (caballero ) to live in as he's been accustomed to."
In France, right-wing extremist thought flourished no less.
Count Gobineau invented racist anti-Semitism in the late 19th century. The Action Francaise, an ultra-royalist, ultra-Catholic group, found the sources of French decadence --- a common theme in French life, brought to the fore by Marshall Petain in the Vichy collaborating regime after 1940 --- in the growing numbers of metiques, a variety of half-breed riffraff types that included Jews, fallen Catholics, Free-Masons, Protestants, and what have you. Louis Ferdinand Celine, now regarded as France's greatest novelist in the interwar period, found the root sources of decadence and pervasive degeneracy in the role of Jews, period. He was so wild-eyed and lunatic on the subject of Jews that, during the Vichy era --- invited to the German embassy for dinner --- he was kicked out when he insisted that even Hitler had to be a covert Jew, pretending to exterminate the scum because he, Celine, would see an occasional Jew still walking around Paris. What else could explain such an egregious monstrosity, a few nasty Jews still alive?
Drieu la Rochelle, another prominent French novelist, saw fascism as the only salvation for Europe and ranted that Vichy was run by old-aunt types who didn't have the stomach to initiate full-blast Nazism in France. When France was liberated by the Anglo-Americans, the vicious writer --- unable to stand the shame of it all --- killed himself by way of protest.
Not To Forget Left-Wing Extremism
Needless to add, just as the owners and managers of firms get the work-force they deserve, so national societies with intense class conflicts and social strife in their histories will engender not just extremist ideologies on the far right --- including exterminationist Nazism --- but extremism on the right. The two will feed on one another.
Small wonder, then, that all these countries just mentioned --- those in Latin Europe, the German-speaking ones, and in East Europe --- were also buffeted from the late 19th century on by ideological virulence on the left: revolutionary socialism, then communism after 1918, plus various degrees of anarcho-socialism in the Latin countries. The more the political right railed against capitalism, democracy, and socialism, the more the left tended to grow in number and threat. All the fascisms that came to power in the interwar period, starting with Mussolini's seizure of power in Italy in 1923, won large support from established elites, peasants, the lower middle class, and practicing Catholics or Orthodox members of the working class by claiming to stand for law-and-order and against rootless, cosmpolitan Marxisms of various kinds.
By contrast, in the small Scandinavian countries, plus Britain and Holland, such extremisms of either the left or right scarcely existed. Constitutional monarchies one and all, they were marked by adaptable class structures, a long evolutionary history of democratic development, and a strong sense of common citizenship that helped them deal with the dislocations of industrialization, urbanization, and the other forces of modernity. There's another influence too: all these countries are overwhelmingly Protestant --- an important factor, eliminating the usual intense frictions between clerical and anti-clerical forces that pervaded Catholic and Orthodox countries.
Subtract the constitutional monarchy from this formula, and Switzerland's moderation is also explained.
The Professors Rant On
The reference to Ortega and the swine a moment ago leads us to another of the professoriate's hobgoblin of mass society before and during the Nazi- and fascist-period after 1918.
The mass-man, the common argument went, was an irredeemable leveler, a vulgarian puppet in the hands of demagogues. Culture itself --- always spelled with an exalted capital letter in German, Kultur --- was in its death throes; commercial hucksterism had all but driven out the heroic ethos of warriors, adventurers, artists, thinkers, and --- needless to add --- the heroic cogitations of tenured, comfy-loving professors. All this hyped-up scare-stuff came to a head in a manifesto published at the start of WWI by the bigger-than-life professoriate and artists in the German world, several hundred signing their names to it. Its title? Helden und Haendler
: Heroes and Hucksters
(Merchants). Only a German victory in war, it turned out, would save the world from such leveling vulgarity, an American-like future. As a widely vented cliché of the time in German life put it, "An der deutschen Seele wird die Weltkrankenheit geniessen
: The German soul can alone save the world from its decadent sickness."
What lay behind these overheated heebie-jeebies of the German professoriate before and after WWI, plus their imitators in the Latin countries and elsewhere?
Not surprisingly, they sprang from the same sources as the turnip-ghosts that haunted the nightmares of the aristocracies and traditional upper middle classes all over Europe: in their specific case, the exalted status and positions of influence that they enjoyed in certifying all membership in their countries' civil service and traditional professions --- law, medicine, accounting, art, music, and architecture --- were no less threatened by full-tilt capitalist industrialization and new Jewish competition in all the professions.
Jews: The Embodiment of The Modernist Nightmare, Controllers of Communism
and Capitalism Alike
Enter the profusion of anti-Semitic trash of the time, rampant also in France, not just the German-speaking countries or East Europe.
In Vienna, by the start of the 20th century, the official anti-Semitic party --- its name --- had taken full control of the municipal government. By the end of the Weimar Republic in the 1930s, Europe's established classes outside Britain, Holland, and Scandinavia were looking for a heroic savior from the Right --- Hitler, Mussolini, Dr. Salazar in Portugal (a professor as dictator), Franco in Spain, Laval and Petain in Vichy France, Quisling in Norway, Swiss bankers (opportunists to the core: "If you see a Swiss banker jump out of the 5th floor of a building," Voltaire quipped in the 18th century, "be sure to jump after him. There's bound to be a pot of gold at the bottom."), and every tinpot fascist or clerical fascist in East Europe from the Baltic Sea right through all the Balkans.
Read the anti-Semitic trash of the time, and you'd think Jews were a significant, highly menacing percentage of the national populations. Forget the menacing nightmare quality of these overheated fantasies. Focus on the actual percentages. When Hitler came to power in 1933, Germany had 60 million people; Jews numbered 523,000 --- less than 1.0% of the total. In Italy, the percentage was smaller still: 1/5 of 1.0%. In Spain and Portugal, courtesy of the mass-murdering Inquisitions, they hardly even existed except in people's wild, kinetically charged minds.
The German Soul To The Rescue?
By the early 1940s Nazi conquest of most of Europe, the world at long last found out what the German soul was capable of doing. Not that the Germans were alone.
All the governments in Nazi-occupied Europe save tiny Denmark's, tiny Bulgaria's, and tiny Finland's eagerly collaborated with the Nazis to send their Jewish populations to the gas chambers in the East. Switzerland, neutral and unoccupied, filled its banking coffers with money and kept the German economy fueled and running by laundering German money for scarce currencies, no independent country anywhere in the world willing to take worthless German Marks after Stalingrad and the allied invasion of North Africa and Italy in late 1942 and early 1943. The Swedes, also independent and officially neutral, allowed German trains to cross their territory to transport troops to and from Norway and Finland --- a violation of all neutral laws; not to forget their lavish trade in key mining materials that the German war machine needed.
Modern Day Europe and Anti-Semitism
Jump ahead 58 years. Last fall --- October of 2003 to be exact, not quite six decades after Nazism collapsed --- 59% of Europeans decided that tiny Israel, a country of 5 million Jews, democratic and under a rule-of-law, the only one on these scores found in the whole Middle East of 300 million Arabs, 70 million Turks, and 70 million Iranians, was the greatest menace to world peace. Even the hobgoblin of American aggression came in with only 53% support.
Israel is the same country whose Labour government signed a peace treaty in December 2000 with the Palestinian Authority, shepherded by Dennis Ross, our special envoy to the Oslo negotiations; the treaty --- rejected by Yasser Arafat despite being urged to sign by members of the Palestinian negotiating team --- gave the PA a new state, 95-97% of the West Bank, a corridor carved out of Israeli territory linking it to Gaza, shared rule over Jerusalem, a promise to demolish virtually all the Israeli settlements on the West Bank save those directly contiguous to Jerusalem, and a promise to pay $35 billion to Palestinian refugees from the wars of 1947-48 . . . wars that occurred when the Palestinian leadership, egged on by the surrounding Arab states that then invaded the new Israel, refused to accept a favorable partition to them that the UN overwhelmingly endorsed.
I have yet to find one European, whatever his or her professional status, who is aware of this follow-up to the Camp David offer that President Clinton offered to Arafat in July 2000, only to Clinton's astonishment to have Arafat reject it. See Ross's new book
that details the US role in the Oslo Process. For the first time, President Clinton openly criticized Arafat and wondered what the point of the Oslo negotiations were?
And Ross's own judgment? Yasser Arafat, he decided after December 2000, is a typical rigid revolutionary authoritarian, not interested in compromise and peace. He never even bothered to explain the terms to his people. Meanwhile, thanks not least to billions of dollars of foreign aid given by the EU, the US, and Arab countries to the PA, Arafat and his henchmen are --- like their fellow leaders in all the Arab countries --- up to their necks in corruption and nepotism, Arafat himself no doubt a billionaire.
It's the same PA leadership that President Bush said the US wouldn't deal with any more. That was in June 2002. Needless to say, the ultra-sophisticated diplomats in the major countries in the EU --- who apparently never seem to mind doing business with Arab dictators, even the most brutal and mass-murdering --- threw up their hands in dismay. It was in their world-wise view a typical cowboy gesture. Last year, the CIA concluded that serious negotiations for peace between Israel and the PA wouldn't occur for about two decades, by which time the Arafat generation would have died off.
The New Anti-Semitism in the EU
Meanwhile, in a European Union of 450 million people, Jews now total 1.3 million --- about one-quarter of 1.0%. Most Jews in France were found in a recent survey to be sufficiently concerned about their families' personal security that they would like to emigrate. In Germany, the tiny Jewish community is fearful enough that men are urged not to wear yarmulkes in public, something the Orthodox version of Judaism requires. And the head EU Commissioner in charge of disbursing the EU yearly subsidies to the PA --- found in Palestinian surveys to be regarded as high-handed, arbitrary, and corruptly venal by the vast majority of Palestinians --- has stymied all efforts by a small group in the EU parliament to open up his books to parliamentarian scrutiny.
On the new anti-Semitism in Europe, see the article by the influential editor of Die Zeit, a leading German weekly, Josef Joffe . . . a Harvard-trained Ph.D: The Demons of Europe
For an analysis that draws more on survey data than Joffe, see the buggy prof's articles on the subject, especially this link.