Dear Friends,
It seems to me that the modern welfare state is showing some of it’s weaknesses in the debit crisis that is engulfing the industrialized World. Winston Churchill is credited with having said, “The problem with socialism is that eventually you run out of other people’s money.” This is proving to be the time when we run out of other people’s money. Which brings up the biting question, What then, if welfare state capitalism fails, or more appropriately, bankrupts us?
What is the fall back plan. It seems there is none. The socialist parties in Europe and the democrat party in the US are hell bent on spending. The ability of the credit markets to fund the profligate spending in Europe is being curtailed. It seems that as a country’s debt gets at or above 100% of GDP the markets start demanding a premium and so the country that exists on borrowed money grasps that it also is living on borrowed time.
Governments in welfare states have stretched Keynesian economics into a physically impossible toroid. They spend in good times and bad, “to keep the economy running.” Keynes did not ever advocate government deficit spending every year under every economic condition. His advice was very specific, that under conditions of a demand generated economic slump, government could deficit spend as a way of kick starting an economy. As a short term stop gap measure.
The truth is, a dollar of government spending is not equal to a dollar of private sector spending. When government needs products or services it has a very defined method. If no half witted nephew provides the product or service it goes to firms that specialize in servicing government. This specialized field does not lend itself to propping up firms that have traditionally served the private sector. Another reason government spending is not as effective is private sector spending is government spending is necessarily reactive not proactive.
Government spends to fix a problem government has created. Often as a make work project. Money spent this way does not improve a person or firms ability to produce a product or service. It is spent on something that will need constant funding. Even the most productive of government spending is hobbled by government bureaucracy. Spending on infrastructure is made by bureaucrats that build in obsolescence. When told that a bridge could be built that would last a thousand years with almost no maintenance at a cost comparable to modern bridges a State engineer exclaimed, “What will people do in twenty years without the bridges needing to be rebuilt?”
The socialist and communists in Europe and the democrats in America claim that money given as a dole is then spent in the economy. That stores are thus propped up and cigarette manufacturers are kept going. That the dole provides a means for those that have none. The dole is the least a prosperous society can do for the less fortunate among us and who could be so mean spirited that they would deny a child food? All strong emotional arguments that make perfect sense as long as you don’t think about them long. They work best if you just let your emotions wash over you and make your decisions for you… no thinking required.
The strongest, logically, is that money given as a dole goes almost directly into the pockets of storeowners. This seems logical… But, as Bastiat said about the broken window, this line of reasoning presupposes that the money would not have been spent otherwise. Of course we know money never just sits around unless someone hides it under their mattress. Money is spent taxed or invested.
If there is a locality that is bereft of job opportunities it is in the interests of the people living there to move to where there are jobs. To use State welfare as a means to hold people in an impoverished area is no benefit to them. Government does no one a service by keeping people unemployed to the point of training them to become unfit to engage in work.
So, I ask the big hearted communists, democrats and socialists, what will become of your dependents when government can no longer borrow the money to feed the starving children? Will the communist, socialist and democrats step up with their own money and give alms? No, it will be the traditional supporter of the poor, the Church. The much aligned Church. Of which the democrats, socialists and communists claim must be separated from government. Even as they seek to bankrupt the Church through lawsuits. Well, the communists, socialists and democrats are always talking about the population problem. Maybe this is their final solution for poverty…
