Socialism and Politics

Figure 1.--Here disabled Greek citizens in Athens during December 2011 are protesting massive cuts in their benefits. They are not demonstrating against a parsimonious conservative goverment, but a bankrupot Socialist government. After several decades of Socialist rule, the country is now bankrupt. No one is willing to make additional loans to the Greek Governmrnt at reasonable rates. And the country's private sector has been so damaged that it simply can not generate economic growth needed to create jobs or tax recenue. What Greeks and other European are now having to face is no longer how to finance generous entitlement programs, but who is goung to support the truly needy or even elderly retirees when the government goes bankrupt? And this is not just a European problem. The United States debt load is comparable to that of Italy and other troubled European countries. Many Greeks are now seeking jobs in other countries because of the economic collapse.

European Socialist politicans have proved to be very successful in democratic political competition against conservatives during the 20th century. This was less true in the United States, but the same dynamic is now emrging in the United States. Economic history clearly show that capitalist economies are the most efficent and productive creating wealth that fuels high living standards. Capitalist economies are also constantly changing requiring workets to adjust and these adjustment can be unsettling and painful. The business cycle can lead to economic downturns which adversely affect peoples lives. Not suficently discussed is how government involvement has in many cases madec these downturns worse. Workers in a democratic society can elect politicans and demand restrictiond on capitalism such as restricting the ability of employers to dismiss workers or shift to new technologies or business opportunities. While this can protect workers over the short term, over the long term it crerates inflexibilities in the economy that create inefficencies and job growth. Expanded regulatory regimes make it muchb more difficult and costly to open new businesses. Most of the European countries today have high rates of unemployment and slow rates of economic growth. Another reason that Socialist politicans do well in elections is that they offer all kinds of free government benefits. Everyone like free stuff. And Socialist politicans have offered so many benefits that they have had to borrow extroduinary anoints of money to finance the government benefits. Conservatives who question government siocial spending are accused of being heartless and no caring for widows and orphans. They may seem simplistic, but President Obama and the Democrats actuall ran political advertisements depicting just this. And this will be the mainstay of the Democratic 2012 political campaign. Now the bills for all this defecit are coming due in Europe. Several countries are bankrupt are nearly bankrupt (Greece, Ireland, Portugal, and Spain). Major countries (Britain, France, and Italy) are experiencing huge economic problems because of the massive unsustainable social spending. Now the collapse of bond markets throughout Europe is forcing major cuts in public spending. It will be interesting to see just how Socialist politicans throughout Europe will explain their failed policies now that they are unable to continue massive borrowing to finance entitement spending. One option is higher taxes, tax the rich is a popular socialist refrain. The problem with this is that taxes on individuals and corporations are already quite high and that increasing tax rates is likely to adversely affect economic growth and job creation and thus no material increase tax revenues. Notably the American states with the highest tax rates are in almost every case the states with the largest debts.

Created: 7:16 AM 12/16/2011
Last updated: 7:16 AM 12/16/2011