Thursday, April 21, 2011

The Wages of Big Government

It's the old story. A populist leader bewitches the peasants with talk of justice for the poor and an end to inequality. He promises well-deserved raises to ill-paid government workers, and spreads out subsidies to help folks with their heating and cooking fuel.

Then comes reality.

Reality is hitting Evo Morales and Bolivia right now, as the populist president tries to roll back fuel subsidies and faces demands from government employees.

Last December, his country erupted in massive street protests when Morales abolished fuel subsidies and thereby caused an abrupt spike in gasoline and diesel prices. Chastened by the violent backlash, he quickly reversed his decision and restored the subsidies. A few weeks ago, fresh anti-government protests began. Spearheaded by the most powerful Bolivian trade union (the Central Obrera Boliviana), the demonstrations were aimed at winning a 15 percent salary increase for teachers, miners, policemen, and other public-sector workers.

Not so long ago he was a populist union leader, the darling of progressives everywhere.

Morales took office with bold promises of reducing widespread poverty and deep inequality. Instead, his policies have spooked foreign investors, spurred capital flight, slowly destroyed the vitally important Bolivian energy sector, and increased social polarization.

I suppose that if you are a populist politician--sorry, any politician--you tell people what they want to hear.

But come on fellas, we know that subsidies and price controls don't work. And we know that feeding the beast of unionized government workers just feeds their appetite for more.

What is interesting in the Bolivian case is that Evo Morales seems to lack the charisma and the thuggishness of his mentor Cesar Chavez. Maybe it's just that Bolivia doesn't have as much wealth to loot as Venezuela, so the money ran out faster that it is running out up north.

But I am looking at the bigger issue: the problem of unwinding any government program. The fact is that any government program is in the business of giving away free stuff. It doesn't matter whether it is Social Security subsidizing pensions for the low-paid, or government schools giving away education for "free." Pretty soon people get to expect those free services; they organize their lives around them. And they get really angry if the government runs out of money. They don't care that the money has to come from taxes on business—the businesses that give them jobs—they don't care that, e.g., their pensions and their unemployment come from swingeing taxes on ordinary working stiffs. They just want their money and they are prepared to break the peace in order to force the government to keep paying up.

That's the lesson of Madison, Wisconsin, not just third-world Bolivia. You give stuff away for free, then you will find that people will fight to keep that free stuff when you run out of money.

That's what we are going to see here in the United States in the next few years, after the Republicans get back the White House and the Congress, and it ain't gonna be pretty.

In fact, it's time for Republican gray beards to be thinking, right now, about the strategy to deal with the government workers and lefty activists that are going to be doing the Madison thing in the years ahead.

I suppose that the best thing to do is start with a 60-40 presidential election blowout, something that makes President Obama's seven percent "we won" look like a dead heat.

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