Wednesday, February 10, 2010

The Welfare State Hitting the Wall

How will it end? The welfare state, that is. Will it end with a bang or a whimper?

We are getting a glimpse at the welfare state in crisis because there are a bunch of countries in the world right now where the government is in serious economic trouble.

There's Greece. The interest rate on Greek sovereign debt has sky-rocketed and so the Greek government is in a cash crisis. The helpful Greek civil servants have gone on strike, presumably to protest any potential cuts in government spending. Since Greece is in the Euro system, its troubles affect all countries in the Euro area. Ministers are shuttling to and fro deciding what to do.

There's Argentina. President Cristina Kirchner has just sacked the president of Argentina's central bank.

In his place she named Mercedes Marcó del Pont, a Yale-trained economist who has expressed the view that central bank autonomy ought to be limited.

So that will enable Kirchner to pay foreign creditors with central bank reserves. Can you spell i-n-f-l-a-t-i-o-n?

But Venezuela takes the cake. Last month Venezuela devalued the Bolivar by about 50 percent, finally caving in to reality. But, of course, President Chavez is trying, even now, to deny reality by threatening retailers that raise prices.

The government, which threatened to shut down or seize retailers that were seen gouging prices, closed about 1,900 retailers and nationalized a supermarket chain controlled by France's Casino Guichard-Perrachon S.A. (CO.FR).

Like that will really get food to the poor.

This is not a pretty picture. It shows that the welfare state will not go quietly. It shows that left-wing politicians will loot the state of all its wealth in an effort to stay in power. It shows that there is no way around an economic maelstrom at the end of the welfare state era.

And then the whole thing starts again.

Listen folks. This is not that hard. Hard money. Limited government. Clear and transparent regulation of the private sector. No crony capitalism. Pretty soon the poor get to prosper and the country climbs into the developed world.

But no. People want to take the short cut. They think like peasants. They think that businessmen are no different than the landowners that oppressed them for centuries. They want to line their pockets with other peoples' money. They think that evil businessmen are stealing them blind.

As Goldfinger told James Bond: You are a fool Mr. Bond, and a fool must pay for his folly.

1 comment:

  1. Well put. You can't keep spending what isn't there. We're told by our government to be frugal, to sacrifice to help our economy, while they continue to line their pockets and spend us into bankruptcy. (And that nice new park in St. Croix that the democrats voted to buy for $50 million).