Socialism: If you don't think heavy regulation, elephantine bureaucracies, union rule and runaway spending amount to poison for an economy, take a gander at what decades of such socialist policies have done to Greece. Last week, the tiny Balkan state seemed like a blazing house threatening to set the rest of its European Union neighborhood on fire. It started when Greece earned the first of two sovereign downgrades from ratings agency Fitch over its $436 billion budget deficit. Then Standard & Poor's cut Greece to BBB+ from A- and sternly warned that if the government didn't get serious about controlling its spending, the downgrade wouldn't be its last. Through the week, investors dumped Greek bonds, and word rose that Greece would need a bailout from the European Union. European leaders such as German Chancellor Angela Merkel loudly said no to that Wednesday, but it didn't help. By Thursday, Greece's problem became Europe's problem, with the euro tumbling to a three-month low against the dollar while U.S. Treasury prices — a traditional safe haven for sovereign investors — soared. On Friday, S&P announced "a more pronounced and faster economic deterioration than we previously anticipated" for Greece, with a "protracted hard landing" next. The whole crisis has a perfectly logical basis: Greece's budget deficit is more than four times higher than the European Union's 3% ceiling and stands at 12.7% of GDP. Its gross debt, at 112% of GDP, indicates it has more debt than productive output. And its socialist government has no credible plan to quit spending. Years of embedded socialism — in spending, labor and regulatory practices — are responsible. They've enabled the government to consume the very economy that's supposed to sustain it. Even supposedly right-of-center parties spent state cash the same way. The last party in power was nominally conservative, but failed to stop expansion of government. It kept hiring, kowtowed to union demands for fear of strikes and did little to change the culture's gimme-gimme mentality. Bureaucrats were hired like there was no tomorrow. These state employees are union members who can never be fired no matter how nasty, lazy or corrupt. Layers of such people go into ministries as payoffs for political favors. The newly elected socialist prime minister, George Papandreou, claims he's cleaning up. He has denounced corruption and asked to freeze public hiring and pay. He has proposed to cut social security 10%, perhaps privatize state firms and gut military expenditures — easy to do with the U.S. doing the heavy lifting in Afghanistan. Papandreou still can't bring himself to lay the blame where it belongs — on big government. Instead, he makes bankers the scapegoat, calling for a 90% tax on bank bonuses and vowing to end tax exemptions for everyone else to raise more revenues for the state. His own party blames foreigners. "This group dismisses Greece's financial predicament as a short-lived west European conspiracy to discredit the socialist government," according to a socialist policymaker quoted in the Financial Times. Papandreou also has vowed to protect the little guys in the bureaucracy, making them immune to discipline even if they protest meager cuts. Already the communist labor union PAME has roused 5,000 teachers and hospital workers to strike, warning Papandreou to cut nothing and blaming the "greedy" private sector. "Papandreou, remember who elected you," the strikers shouted. Newspapers followed with their own work stoppage, and two of the bigger Greek unions warned the government to go gore someone else's ox. With a shrinking private sector, that's getting harder. One in four Greeks is employed by the state, and 422,000 Greeks — 10% of the work force — are unemployed. Salaries and prices are as high as Germany's, but productivity is not. Job mobility is the most rigid in Europe. In 2009, Greece ranked second worst in Europe on the Heritage Foundation's Index of Economic Freedom. This culmination of years of runaway socialism has left the public resentful, bitter and unwilling to pay taxes. "Why should I pay?" a Greek citizen told the New York Times. "I don't care about my government, I don't care about my country." Greece may be Europe's problem for now, but the lesson should not be lost on the rest of us.
--- Ronald Reagan
Sunday, 20 December 2009
Sounds like the US! People here had better awaken!
"Freedom is a fragile thing and is never more than one generation away from extinction. It is not ours by inheritance; it must be fought for and defended constantly by each generation, for it comes only once to a people. Those who have known freedom and then lost it, have never known it again."Augean Socialism
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