Slow Motion Collapse of the Welfare State from the US to the EU

Walter Russell Mead has written an important essay on the collapse of the welfare state, which he refers to as "the blue model." It is worth reading in its entirety at the link after the excerpts below:

The blue model is breaking down so fast and so far that not even its supporters can ignore the disintegration and disaster it now presages. Liberal Democrats in states like Rhode Island and cities like Chicago are cutting pensions and benefits and laying off workers out of financial necessity rather than ideological zeal. The blue model can no longer pay its bills, and not even its friends can keep it alive.

...Demographic change is accelerating the crisis of the blue social model, as retirement and other social benefits come under increasing pressure. Social Security and Medicare are covering a steadily growing percentage of the population. Younger workers no longer believe these systems will be in place for their old age. They are at least partly right. Without major change, the current Medicare system cannot last. Beyond that, a general crisis of the pension system threatens to reduce the income of older people even as government is less able to take up the slack. Defined benefit retirement programs have largely disappeared in the private sector; state and municipal pensions threaten to bankrupt some cities and states, and they are forcing officials in others to choose between drastic service cuts and breaking pension commitments to retirees. _Walter Russell Mead American Interest

The welfare state contained the seeds of its own death, just as the Russian Soviet system did. As humans give up more and more of their autonomy to an ever-bloating bureaucratic system, more and more of the internal systems which made them human begin to decay and become vestigial. Eventually most citizens are unable to grow out of the dependency stage of childhood. Birth rates collapse along with family stability. The very future of the society fades away with the declining competence and courage of its citizens.

he real crisis today in the United States is the accelerating collapse of blue government, not blue private industry, which is a phenomenon largely behind us. We are witnessing a multi-dimensional meltdown that affects our lives and politics in many ways. Three elements of the blue government meltdown in particular are worth mentioning.

The first is the government’s role in providing the benefits associated with the blue system. When we talk about “runaway entitlement programs”, we are talking about commitments by the government to provide retirement and other social benefits that originated as part of the blue system social contract. Workers could retire as early as 62 with a combination of Social Security and private pensions. These costs are now exploding according to the immutable logic of demographic and actuarial facts, and it is clear that the government can’t pay them into the future.

The second crisis is that the government is now the last “true blue” employer in the country. Federal, state and local governments are often staffed by lifetime civil servants whose jobs are protected by law and by some of the last truly powerful unions in the country. All the Reagan Administration and like-minded state governments ever managed to do was to slow the growth of government, not reduce it; government at all levels today accounts for a larger share of U.S. gross national product than it did in 1981 (and that was when government did a lot more in regulating the economy). It has become incredibly expensive for governments to do anything at all, and they are poorly equipped to respond nimbly to the fast-changing conditions of America today. _American Interest WRM

Read (or at least carefully skim) the entire essay.

Having allowed governments to control the economy via monstrous budgets and central banks, the private sectors of western nations have become almost completely dependent upon government caprice. As the core populations which allowed these societies to advance slowly shrink away, so does any chance of ultimate recovery from the welfare state's collapse, when it comes.

Europe has gone through a similar process, and is somewhat advanced along the downward pathway:

Europe's demographics also aren't on the side of growth. Populations across the developed world are graying, but Europe's low productivity growth means that its future labor shortfall will be especially acute. It doesn't help that Europeans draw social security benefits earlier and more easily than their developed-world peers. Pension commitments will strain national budgets even if Angela Merkel gets her way on handcuffing euro-zone public debt.

Which brings Messrs. Gill and Raiser to the other serious drain on European growth. Big government, by their calculation, shaves about two percentage points off growth once public spending passes 40% of GDP. Some welfare states are better-run than others—think Sweden and Germany—but the World Bank report highlights a few important connections between the welfare state and growth.

Today, European governments spend more on social protection than the rest of the world combined, thereby entrenching powerful disincentives to work and enterprise. Social protections have also come at huge direct cost to taxpayers. _WSJ

And so we see European nations on the verge of economic collapse, one by one, like dominoes. The same thing is occurring in the US, but on the city and state level -- for exactly the same reasons.

The welfare state is dying, and defiantly threatening to take down the rest of the world with it. Is it any wonder that many of the less intelligent global economic analysts look to China and India as the last great hopes for the future of global civilisation?

Fragmentation is likely, widespread hardship is possible, and war is not out of the question. Hope for the best. Prepare for the worst.