From today’s Open Europe news summary:
Juncker unveils his €315bn investment package for EuropeSpeaking to the European Parliament this morning, European Commission President Jean-Claude Juncker unveiled his plan for a €315bn investment fund – backed by €8bn from the EU budget (underpinning €16bn in guarantees) and €5bn from the European Investment Bank (EIB). The rest of the funding will come from the private sector with the public funds acting as first loss protection for riskier investments. Juncker also called on member states to commit further funds, promising that, for each public €1 given, €15 of investment would be created. Juncker added, “If Member States chip in capital to the [investment] fund, we will not take these contributions into account in our assessments” of countries’ deficit and debt under EU fiscal rules.
This summary of EU Commissioner Juncker’s so-called “investment plan” would be worthy of discussion in an Austrian economics class. One could have the class point out all the fallacious, embedded assumptions, such as whether third parties have any insight into the real economic needs of Europe. As Ludwig von Mises pointed out a hundred years ago in his Economic Calculation in the Socialist Commonwealth, no economic calculation is possible in the absence of property rights. Since EU bureaucrats do not own the property that they will put at risk, they have no way of rationally establishing ordinal preferences. In other words, the EU will not know if it is investing to satisfy the highest needs of the market. But this is just one problem and probably not even the most onerous. There is the problem of creating money out of thin air, which ignores the importance of time preference in determining the real wishes of property owners to save more or save less and, thus, provide real savings to the loanable funds market. The problems go on and on, yet one expects that Commissioner Juncker will proceed undeterred by the few lone voices of dissent in Brussels. Patrick Barron