June 11, 2007 10:41AM

Does Globalization Undermine Redistribution?

An article in the UK-based Guardian notes that wealthier regions within nations and wealthier nations within Europe are increasingly unhappy with the amount of money being used to subsidize less productive areas. The article suggests the growing unease is a function of globalization, though it is more plausible to argue that the high tax rates associated with redistributionist policies are becoming more untenable because of globalization:

...disputes over public money and how to spread it fairly are rife across large tracts of Europe, eroding national solidarity, feeding separatism, encouraging populism, and generating friction between Europe's wealthy centres of excellence and their less fortunate national hinterlands. The rich bits of Europe are revolting. And it is some of the most successful and attractive cities on the continent that are in the revolutionary vanguard. From the fashion and finance mecca of Milan to the hi-tech centre of Munich, from the world's diamond capital, Antwerp, to the vibrant coastal hub of Barcelona, Europe's most dynamic cities and regions are increasingly rebelling against "subsidising" the poorer parts of their countries, demanding to keep their home-grown wealth, and causing headaches for central governments. ... In Italy, the centre-left government of Romano Prodi has just received a drubbing in local elections, particularly in the north, not least because the north perceives Rome as the agent pilfering its hard-earned cash only to hand it over to the "spongeing" south where the Mafia and Camorra soak up the subsidies. ...In Belgium, Flemish nationalists complain that the public sector payrolls in Wallonia are twice the size of those in Flanders. "It's majority socialist in the south, the last Soviet republic in Europe," says Filip Dewinter, the Vlaams Belang leader. "They're stealing our money with the collaboration of the government in Brussels. We're a hard-working people, very prosperous, low unemployment, and we're giving them €12bn (£8bn) every year to finance their social security. We can stand alone." In Germany, the wealthy southern states of Bavaria and Baden-Württemberg balked at the Berlin government's health service reforms last year because they had to pay more into the national kitty than poorer parts of Germany. In Britain, in the debate over Scottish devolution or independence, the wealthy south-east appears increasingly aggrieved over the Barnett formula that ordains higher per capita public spending in Scotland than in England.