Wednesday, October 20, 2010

European Austerity Measures: But a Knee-Jerk Reaction?

There is no doubt that several European governments are attempting to back-pedal on their overly-generous -- but ultimately ruinous -- welfare states. From Greece to Ireland to France to the UK, European governments are attempting to stave off disaster by down-sizing government benefits and workforces, through a variety of means.
...across Europe, where the threat of a double-dip recession remains palpable, what is most surprising is not simply that governments from Germany to Greece are slashing public outlays but that the debate hinges more on how fast to do so rather than whether such substantial cuts are the right thing to do under the current circumstances. _Mish
What you don't hear from the American left these days is much acknowledgment that the Europeans are backpedaling as fast as they can. There is a reason that transportation and oil-refinery unions have been striking in France and government workers are rioting again in Greece. When Greece nearly defaulted on its national debt last year, governments got a glimpse of what would happen when the money ran out, and they began enacting some of the toughest austerity measures of the post-World War II era.

While France and Greece have grabbed the headlines - protesters setting things on fire makes a visual the media can't resist - the most important case study in austerity economics may be the United Kingdom. Taking out the carving knife, the newly elected Conservative Party government is dissecting government with a vigor not seen since Margaret Thatcher's heyday. _WaTimes
Leftism always fails, sooner or later. Any political economy that presses citizens into dependency on government for basic needs will fail, since such economies clash with basic human nature. Leftist economies are all about redistribution and government spending, but they have no clues how to generate wealth to begin with.

A look back at the perilous -- and ultimately failed -- economic transition in Russia may be helpful. Many courageous Russians attempted to create a thriving market economy out of the remains of the USSR command economy. But they were thwarted by the corrupt power-mongers who seized control of Russia's wealth. These corrupt thugs killed Russia's nascent renaissance in its nursery crib.

Once a nation's people surrenders to a thugocracy -- of whatever stripe -- it becomes very difficult to throw off the chains in order to create a market economy which creates sustainable wealth.

As for Europe, it is not clear that her leaders have learned the true lessons behind the ongoing collapse of nanny-state economies. The deep truths of human nature as they relate to economics are quite unpalatable to most politicians and would be dictators.

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