Commentary Magazine


The Euromess

Just a year ago, as representatives of the twelve governments making up the European Community (EC) met in the Dutch city of Maastricht to sign the latest in a series of pan-European agreements, polite opinion was unanimous that a united Europe would challenge the United States economically, that it would take charge of reordering the formerly Communist world, and that its “advanced” approach to economic, social, and environmental matters had a lot to teach us. Indeed, polite opinion strongly backed the prospective Clinton administration’s desire to imitate Europe’s approach to industrial policy, medical and child care, and much more. Today, however, it is evident that Europe will not unite according to the vision of the Maastricht treaty, that its economic policies are a drag on us, that Western Europe is being contaminated by the Communist compost pile, and that its approach to socioeconomic matters has mostly cautionary tales to tell. In 1992 Eurotopia was supposed to emerge. Instead, 1992 became the year of the Euromess.

The Danish people’s narrow rejection of the Maastricht treaty; the French people’s equally narrow acceptance; Britain’s, Italy’s, Portugal’s, and Spain’s abandonment of attempts to maintain the value of their currencies against the Deutschmark; anti-foreigner riots as well as various Eurosummits rife with talk of “saving Europe”—all these are only symptoms. The Euro-mess itself consists of nothing less than the bankruptcy of the postwar political order. Within each European country people are searching for ways of saying “no” to politicians of all parties, whom they perceive as really belonging to a single party, that of the ruling bureaucracy—a bureaucracy that takes about half a worker’s income and no longer seems able to justify doing it.

Contrary to a common perception, the explanation for the opposition to the Maastricht treaty is not nationalism. Rather, it is that people who are growing surlier about national governments which they can control only theoretically are understandably wary of approving a level of government which they cannot control at all.

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I

The modern European state is so familiar to us that we rarely realize how historically anomalous it is. Yet the high level of taxation in today’s Europe—a bit over 50 percent in Scandinavia, a bit less on the continent—is comparable only to what the most rapacious empires of antiquity exacted from slaves. Among all the governments of human history, only the recently deceased Communist regimes have exceeded the modern European states in taking over the family’s responsibilities for raising the young and caring for the old, in assuming society’s role as arbiter of taste and religion’s role as arbiter of truth. But of course the Communists ruled by force. What is remarkable about the highly intrusive regimes of Western Europe is less that they suffer disaffection than that they survive without resorting to physical repression.

This is all the more remarkable given that the bedrock of European civilization is inhospitable to governmental regimentation of ordinary life. Western civilization is built on the distinction—going back to Aristotle and then Augustine—between families and civil society on the one hand and the political realm on the other. On this basis there grew during the Middle Ages a set of restraints on the power of the king to demand one’s property, one’s military service, entry into one’s home, etc. Moreover, no king would have dreamed of setting standards for exercising a profession, let alone for raising children. Sovereignty belonged to God alone.

In the 16th and 17th centuries, however, the theorists of sovereignty, Jean Bodin and Thomas Hobbes, made into a principle the growing preference of noblemen for subjection to a king as the only way to put an end to continued feudal and religious war. But while Europeans first agreed to sacrifice ancient freedoms primarily to secure internal peace, the state’s claim to sovereignty quickly shifted to the necessities of international war.

Indeed, it is no exaggeration to say that the 19th-century European state was built from the ground up for war. It was in order to administer conscription that Napoleon and then the rest of Europe numbered houses. He first and then others also established schools of engineering and mines and fostered certain industries for the same reasons that they adopted national anthems and that, later, they required universal education: to prepare citizens morally, intellectually, and materially to fight for the state. Welsh and Scots; Savoyards and Bretons and Provençals; Lombards and Tuscans; Swabians and Saxons and Bavarians were homogenized into Britishers, French, Italians, and Germans, each worshiping a collective national identity. The essence of 19th-century European politics was that deep divisions between monarchists and republicans, clericals and laicists, liberals and socialists, were all overcome by common nationalistic passions.

Yet just as all this began for the sake of war, so it all came to an end as a result of war. The very senselessness of World War I—the mutual slaughter of peoples who differed from one another much less than they thought—dealt a grievous blow to nationalism, and World War II further weakened its legitimacy. Today, it is almost impossible to imagine the frame of mind of the millions who not so long ago were cheerfully ready to die for the state.

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II

But the discrediting of nationalism did not also delegitimize the state, since an alternative justification for the state’s power had been gaining currency even before World War I: the state, as the agent of modern science, would ensure material progress, while state schools would spread expertise, culture, and morality.

The origins of this view were threefold: utopian socialism, with its dream of establishing happiness through governmental schemes; the Hegelian tradition of public administration, whose intellectual apex was the sociologist Max Weber, and which saw impartial bureaucrats as the embodiment of Reason itself; and the Christian rejection of the 18th-century liberal notion that individuals should be left to themselves to sink or swim. Hence, by the end of the 19th century, a curious coalition of socialists, right-wing Bismarckians, and clericalists was already converging on the idea of what came to be called the welfare state.

The unprecedented domestic regimentation that accompanied World War I also taught the disastrous lesson that government rationalization of the economy could boost production dramatically. Walter Rathenau’s trebling of German war production, more than anything in Keynesian or Marxist texts, became the practical inspiration for collectivist economics later variously labeled fascist, Communist, or social-democratic. The result was that, while fratricidal war was discrediting the state as a vehicle for glory, a growing fascination with socioeconomic engineering was providing the state with a warrant for expanding its powers farther than even the most rabid nationalist would have dreamed. Just when people became less and less willing to give their lives for the state, they became more and more willing to give it more and more power over those very same lives.

By now, however, this alternative justification for state power has, like nationalism before it, just about run its course. For if nationalism turned out to mean senseless slaughter, the welfare state turned out to mean economic stagnation, social corruption, and above all bureaucracy.

The story of Europe’s economic performance over the past generation is essentially that as soon as the goose began to lay golden eggs, the state smothered her. In the 1950′s governments took about 25 percent of Europeans’ incomes through various kinds of taxes. This was already close to twice the level of taxation in the interwar years, and some three times the pre-World War I level. But few noticed, because postwar rebuilding was roughly doubling standards of living.

By the early 1990′s, everyone noticed, since growth in personal income had virtually stopped, while the growth of the public sector and of its “bite”—by now roughly 50 percent of gross domestic product (GDP)—continued apace. Every European was familiar with the ratcheting mechanism: one more budget crisis and another austerity package of increased charges for state services once touted as “free,” plus tax increases. Government was reducing hope to a counterintuitive proposition: the less you get to keep, the better off you will be.

Today, high taxes are only a part of Europe’s economic troubles. Starting and running a business involves more red tape and officious officials than most Americans can imagine. “Social” laws that make it difficult to shed employees also make businesses think twice before hiring them. Generous unemployment benefits reduce the pressure to take available jobs. Substantial percentages of the workforce are employed in inefficient nationalized industries, from railroads to coal mining to broadcasting, as well as in subsidized private industries, from agriculture to computers to aircraft.

The bottom line is that a mid-level bureaucrat in Europe now takes home the equivalent of $30,000 per year. But given that prices in Europe are almost twice as high as in the U.S., this average European’s lot is not too far above the official U.S. poverty line. A two-earner professional couple in Copenhagen or Milan can afford to own a modest apartment or a car, but not both. Understandably, then, Europeans no longer regard the state as a creator of wealth.

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So, too, with major social problems, which until recently Europeans turned to the state to solve. The first and still the biggest European uplift project—Italy’s 40-year attempt to bring its southern regions up to socioeconomic parity with the north—has corrupted both recipients and donors, and is now fueling a serious movement in the north to secede from the south. Then there is Germany’s attempt to uplift the former Soviet zone of occupation by artificially raising wages and unemployment and other social benefits to West German levels while forestalling the collapse of East German companies. Whether these methods, comparable to methadone maintenance for heroin addicts, will ever wean the East Germans from socialist habits, they surely are increasing the weight of government in the West. Worse, many of the very white inhabitants of this area (like their counterparts in smaller pockets of dependency elsewhere in Europe) have taken on some of the characteristics that we tend to associate with America’s black underclass.

It is not surprising that Germans, accustomed to lining up for state privileges, should strike out against those they perceive as alien competitors for the largest handouts they have ever seen (especially since the German asylum law, written for another time, invites foreigners to line up). Nor is it surprising that they should do so under the most offensive intellectual justification in their tradition, Nazism. But note that these Germans are physically and morally indistinguishable from the British hooligans or the French or Belgians who live in their countries’ expanding welfare culture. There is no danger that any EC country will march off under Nazi banners. They are not going to follow any banner at all for any purpose whatsoever. The danger (as in America) is that the crime, the vandalism, and the very dispiriting presence of the modern welfare underclass will slowly destroy the quality of life in European cities.

The immigration of millions of people from the third world adds to this process. These immigrants, mainly from North Africa, do not come to Europe to become Belgians or Italians. Nor are European societies in the least capable of or (with the partial exception of France) interested in assimilating them. Europe’s planned, bureaucratized, welfarized economies already have trouble generating enough jobs for the (decreasing) number of young people that they produce.

But giving the new immigrants a chance at economic integration would be child’s play in comparison with the problem of cultural integration. Most of the new immigrants are and intend to remain Muslims, and Europe’s contemporary secular culture, which is even losing its own young people, hardly seems a good long-term bet against Islam (especially the brand of it that has less to do with the Qu’ran than with hatred of Western civilization).

Europe spends a lot on culture. On a per-capita basis France’s Ministry of Culture spends 50 times what the U.S. pays for the National Endowment for the Arts. But Europe’s cultural establishment, like our own, devotes its energies to fighting everything that once made European civilization attractive to ordinary people, including immigrants. In sum, Europe is neither shutting out immigration nor turning it into a good thing for the long run. The fact that mainstream parties have left to extremists the formulation of a response to third-world immigration is another sign of the bankruptcy of Europe’s establishment.

Europeans are also being invaded by refugees fleeing murder and despair in the formerly Communist world. These people could be assimilated. But again, European governments can bring themselves neither to welcome them with open arms (as the U.S. enriched itself by welcoming Cuban refugees), nor to slam the door in their faces, nor to do what is necessary to alleviate the conditions in the East that are driving them West. The EC governments have refused to let East Europeans sell what they can in the West, and they have shied away from protecting the Croats, Bosnians, and Albanians from the ethnic-cleansing policies of the Serbian strongman Slobodan Milosevic. So, by default, Western Europe is importing desperation.

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On top of all this, the European state has lost its former reputation for administrative efficiency. The non-poor increasingly avoid national health-care systems, while the poor and lower middle classes are stuck with worsening service and ever higher charges. European parents, who once considered state schools to be the very standard of high culture, now notice that their children are learning less than they themselves were taught, and that they are bringing home the opposites of culture and morality. Pension systems vary, but everywhere the impression has spread that tomorrow’s retirees will receive only so much as tomorrow’s workers may be willing to give them. More importantly, today’s retirees are receiving less than they thought they would, and fear further austerity.

Europeans have also lost their old faith in the state’s impartiality. While it had never crossed the minds of Italians that government might be impartial, many other Europeans seem to have been genuinely shocked in recent years at revelations that officials high and low were dispensing preferential treatment in connection with jobs, contracts, credit—in other words, that bureaucrats have friends and that the state is not a family but a giant patronage machine.

The harsh truth is that impartiality was possible in grandfather’s time because the tasks of government were smaller and better defined, whereas spending half a nation’s income—whether it is done by socialists or by conservatives—involves making the fortunes of some at the expense of others. That is why Europeans do not believe they can throw the rascals out without putting in a set who are just as bad.

This represents a radical change from the days when each of the parties stood for, and was known to stand for, a particular vision of the good life. Thus, for example, in the early postwar period, the German Socialist leader Kurt Schumacher was not exaggerating when he accused his Christian-Democratic rival Konrad Adenauer of fostering a society characterized by capitalism and religion; nor did Adenauer exaggerate when he painted his opponents on the Left as wishing to substitute the state for the family. In France and Italy, there were straightforward battles between, on the one side, Communist leaders who took their inspiration (as well as their vacations, medical care, and money) from Moscow, and, on the other side, parties officially backed by the Catholic Church, with the Socialists trying to straddle the divide.

Yet by the late 1960′s, at least where domestic policy was concerned, only the rhetoric of these old struggles remained. For as Europe’s Christian Democrats learned that the bigger the government one administered, the more patronage available for one’s friends, they began to compete with the Socialists and the Social Democrats in promising, taxing, and spending. European politics today is dispiritingly value-free.

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In contrast to domestic affairs, real differences did persist in European politics until only yesterday over policy toward the Communist world. Indeed, from the late 1970′s until the fall of the Berlin Wall, these differences even widened, as many in the European Left seemed bent on returning to the openly pro-Soviet, anti-American attitudes of the late 1940′s. (The West German Social Democrats even negotiated a turgid communiqué with the East German Communists to the effect that they had more in common with each other than with the rotten American warmongers and their local running dogs.)

Hence during the 1980′s, elections were dominated more often than not by the question: do you want to stand with the Americans or do you want to accommodate the Soviets? Standing with the Americans helped not only the conservative parties—German and Italian Christian Democrats, British Tories, and French Gaullists—but also Italian, French, and Spanish Socialists. Being soft on Communism penalized British Labor and German Social Democrats. But that is all gone.

Gone with it is the last vestige of the European state’s original basis for legitimacy—war-making. Much as Europeans detested war, a substantial percentage of them supported the Atlantic alliance that was keeping the Communist monster at bay. Polls throughout the cold war showed consistently that the bulk of voters, even for leftist parties, opposed unilateral disarmament and wanted American troops to stay in Europe. Today the polls show that while the proportion of Europeans who want American armies on their continent has actually risen, so (except in France) has the proportion of those willing to make radical cuts in their own armed forces. What this means is that Europeans no longer look to their own governments to protect them. And the reason is that these governments are run by a generation of leaders who do not inspire trust.

The elder statesman, France’s François Mitterrand, represents a party that has been receiving only about one-fifth of the popular vote. Germany’s Helmut Kohl bet everything on trying to introduce capitalism in the East through socialist methods, and has nothing to offer but more taxes as far as the eye can see. Britain’s Prime Minister, John Major, is a colorless man who drifts with the wind. In Italy, where there is no real distinction between government and opposition, the entire political class is widely regarded as a bunch of thieves.

Contemporary Europeans are not revolutionaries. They express their disaffection with the state in protest votes for regional and local parties as well as in referenda. But mostly they are turning their backs on government. One gets the impression that few if any Europeans would put themselves in harm’s way to stop extremist mobs from rushing parliament buildings, and that perhaps even news of a foreign invasion would not prevent anyone from sitting down to dinner.

In short, European welfare states are as weak as they are big.

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III

The movement for European unity that began in the 1920′s with the writings of Jean Monnet was supposed to be something of a cure for a political culture mortally wounded by World War I. Monnet’s immediate aim in proposing functional economic integration was to restore some of the interdependence and human contact that had existed prior to the Great War. But since passportless travel and easy trade had not prevented that war, they could not ensure future peace. That is why Monnet hoped that in the long run a new, vital European identity would transcend the now-discredited nationalisms. In Monnet’s view, it was economic technocracy that would serve primarily to foster the growth of pan-European sentiment.

Monnet’s plans did not get serious attention until after World War II had discredited nationalism even further. Yet the statesmen who championed Monnet’s approach—Konrad Adenauer, Robert Schuman, Alcide de Gasperi, and Charles de Gaulle—did not wait for a common market to tackle the task of uniting Europe psychologically. The culmination of their work was the de Gaulle-Adenauer treaty of 1963, celebrated by a solemn Mass over Charlemagne’s tomb, which American observers ridiculed as the old men’s wedding. Nevertheless, Franco-German concord has been the primary blessing of European life since World War II.

In 1992 the outlines of a pan-European consensus remain as clear and firm as they were 40 years ago: never again a war among us; free movement of people and goods; stand together to safeguard and promote our common civilization. The EC has enjoyed broad support because of the misconception that it has been working on the basis of this consensus. But now the Maastricht treaty has for the first time brought home to the average European the fact that the EC is on a path very different from that of Adenauer and de Gaulle.

The old men’s approach amounted, on the one hand, to the dropping of barriers to common economic and social life, and, on the other hand, to greater coordination of government policy. Instituting a common market was to be easy: simply drop trade restrictions and free enterprise would do the rest. The governments were also freely to adopt increasingly similar policies in order to pursue similar objectives, and technocratic arrangements were to support this growing agreement.

But even before Adenauer and de Gaulle left office a generation ago, the pan-European movement began diverging from this set of prescriptions. The EC’s ancestor, the Coal and Steel Community (1952), brought together the thoroughly cartelized German coal and French iron industries under the auspices of an international High Authority—in other words, a super-cartel. It resulted in more people and goods crossing borders, but it was not free trade. The Common Market’s Common Agricultural Policy of 1962, which set a common (high) tariff on agricultural products in order to ensure uneconomically high incomes for French, German, and Italian farmers at the expense of all European consumers, was the very denial of the free market. All this was intended to be temporary, transitional. Instead it provided both the financing and the model for the EC.

Thus the EC’s approach to economic integration is the very opposite of the free market. In any given sector (agriculture, cars, computers, condoms), the EC Commission begins with an external tariff. Then it sits the leading producers in each of the member countries down with labor and government regulators from those countries, and works out standards for production, prices, and trade. These are implicit market-sharing arrangements. Big businesses love the EC Commission because it virtually assures that they will stay alive. The lucky ones can be picked as champions to be built up by subsidies, and then to go out and conquer global markets. (In fact, however, the major recipients of government aid—computers and aircraft—are losing money.)

EC regulations have been justly ridiculed for banning all but six kinds of apples from commerce and for setting the length of Eurocondoms at precisely 15.2 cm., while at the same time failing to touch the monopolies owned by the member states, from tobacco to telecommunications. But the EC has been unjustly credited with breaking down borders. To be sure, truck traffic now flows from the Baltic to the Mediterranean without stopping at borders. But that is because the product and its destination were regulated beforehand.

Obviously the regulators are aiming at an enterprise other than mere European integration. That enterprise is the corporate nanny-state. It is no coincidence that as socialism has acquired a bad name in national governments, it has found a home in the EC Commission under the stewardship of Jacques Delors, an unreconstructed French socialist out of the Ecole Nationale d’Administration.

But the most important effect of the EC’s single-market regulations has been to diminish the public’s fervor for European unity. For years now, national bureaucrats have answered the public’s inquiries about new regulations by explaining that it was something required by the EC. That meant the matter was out of the government’s hands, out of the citizen’s hands: it might as well have come down from heaven, and objecting to it was not only futile but something akin to disturbing the peace of Europe. Indeed, the EC has become the perfect source for intrusive, picayune socialist legislation that national parliaments would be loath to pass for fear of public retribution.

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IV

The maastricht treaty was supposed to carry the current approach to its logical conclusion. The heart of the treaty is a set of procedures for adopting a common currency and a common independent central bank on the model of Germany’s Bundesbank. Never mind that Germany itself did not meet the inflation and deficit criteria for admission to the club; only two out of twelve signatories did. More important, divergence in actual economic policies had already undermined the thirteen-year-old system of exchange-value coordination.

Quite simply, in 1991 the German government did not ask permission from other EC governments (and disregarded the advice of its own central bank) when it traded real Deutschmarks for worthless East German marks, undertook to subsidize the East, and decided to pay for it all by borrowing rather than taxing. This drove German interest rates up to 10 percent, forced other EC governments to follow, and placed the EC’s more vulnerable currencies (British and Italian) in a squeeze between low growth and high interest rates. The result was that in September 1992, Britain and Italy (and then Spain and Portugal in November) had to devalue their currencies after paying billions of dollars to fight speculators in futile attempts to maintain the integrity of the system.

The lesson was lost on nobody that everyone would have been better off if Europe’s leaders had made more competent economic policy decisions, and coordinated actual policy better, rather than working on abstract plans for a new currency. The turmoil also raised the question: do we want to put the economic future of the whole continent into the hands of these people?

The treaty’s second most important feature is the social chapter. This consists of a lengthy list of subjects, like worker safety, rules for hiring and firing, medical care for women, sexual discrimination, the rights of labor unions, and practically everything else that might come to the mind of a social engineer. The treaty empowers the Commission to issue directives on these subjects which every government in the Community would be obliged to adopt. The British government, recently having won major battles against labor-union power and not wanting to refight them with its opponents backed by Europe, opted out of the social chapter. In so doing it raised for all Europeans another question: do we really want to give the Eurocrats a blank check over the most intimate details of our lives?

With regard to foreign policy, the Maastricht procedures for arriving at decisions are complex—obviously the fruit of long, hard bargaining. But there is scarcely a word about objectives and none at all about the problems of the day: what to do about war in the former Yugoslavia; how to avoid a war in the former USSR, and how to respond if one breaks out; whether or not to build all-European forces for expeditions off the continent; what sort of relations to have with NATO; etc., etc.

Still, if the EC is so unsatisfying, why are governments lining up all the way to Kiev to get in? Because the EC offers a tempting bargain, the very bargain that led to the accession of Ireland, Spain, Portugal, and Greece. The poor country coming in gets a lot of money up front. Ireland, for example, gets over $1,400 for every man, woman, and child. The money pays compensation for damages suffered through competition, and to support the welfare state. The country’s big businesses get to sell to the big EC market, and at prices higher than those they had at home. They also get protection from Japanese and American imports.

In exchange, the new member gradually accepts all the EC’s regulations. This tends to raise labor costs and to drive out of business and into government dependency those firms that are too small or not well enough connected to play by the new rules. In the long run this is a bad bargain for the recipients, who are deprived of the opportunity to undercut the continent’s high-cost countries, as well as for countries like France and Germany, who pay the bill. But in the short run it looks good to the outs.

As for the ins, the reaction to the Maastricht treaty has been a crescendo of disapproval. The more people from Denmark to Crete have learned about Maastricht, the less they have liked it. So it is a safe bet that the treaty has already been overtaken by events.

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V

Nevertheless, the Euromess remains. To get some perspective on it, imagine how different Europe would be if Konrad Adenauer were alive today and chairman of the EC Commission. Anyone proposing that the Commission issue fine-print Euroregulations would have received an Adenauer lecture on how inspiration builds allegiance while meddling in details destroys it. And just imagine what that austere old Rhinelander would have said to the Eurocrat who placed on his desk a proposed standardization of Eurocondoms. What ? Is this what 3,000 years of civilization have led to? Don’t you have anything better to do with your life?

Imagine, too, how different German unification would have been if it had been run by Adenauer. Drawing on his miracle of 1948, he would have allowed the rotten system in the East to disintegrate, permitting Westerners to make real investments at bargain prices. Instead of raising taxes to pay for welfare, he would have cut both taxes and regulations to smooth the way for Easterners into the economy.

And imagine, finally, his response if an aide had pointed out to him that support for military action to stop the war in Bosnia was shaky. Adenauer would probably have answered as he did in 1954, when he confronted opposition to the establishment of the West German army: Let’s set to work and build up that support.

The worst news about the Euromess is that politicians who have grown up as amoral brokers of favor are not about to become Adenauers. True, these Europoliticians have begun to perceive that promising, taxing, and spending more will not make them more secure in their jobs. Hence there is now a lot of talk about privatization, decentralization, or, in Eurospeak, subsidiarity. Even socialists are campaigning on the need to lower taxes, and Sweden itself is in the third year of a much ballyhooed process of backing away from statism. Even so, no one has begun to wean the vast patronage networks—rich companies, middle-class intellectuals, or poor welfare recipients—off the state.

New politicians are thus needed, but as in the formerly Communist countries, they will arise only to the extent that the old ones default. Two phenomena already mentioned bear watching: the growing use of referenda, and the growing importance of local and regional government. Both enable new politicians to build direct relationships with the electorate and to strike a decent balance between their usefulness to society and their cost. But in Western Europe, the decay and the default are slow and statism is not yet completely discredited. That is why the Euromess will get worse before it gets better.

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