The disastrous end of the welfare state 6

The following extracts are from an essay on the failure of the welfare state in Europe by James Roberts and J.D. Foster:

Europe’s socialist (or “social democratic”) welfare state is collapsing under the load of unsustainable debt. There is no chance European politicians will ever make good on the many costly and unfunded entitlements they have promised their citizens.

The fundamental problem in the European Union is a monetary policy failure. In conjunction with the debilitating effects of the social welfare state, this has led to a broad economic collapse among the lesser states — notably the PIIGS (Portugal, Ireland, Italy [though not really a a “lesser state” – JB] , Greece, and Spain), but also some of the EU’s newer members — and it threatens to envelop the greater states.

For years, this collapse among the lesser states was disguised by debt accumulation — countries would borrow (at de facto concessionary interest rates) to overcome their inability to generate adequate income by producing and selling. The lack of actual and prospective growth combined with growing debt burdens has led to a long-term solvency crisis, which has been bubbling up of late into a series of liquidity crises.

The monetary and fiscal situation in the EU is increasingly unmanageable, as the debt burdens grow and growth prospects diminish further. …

The vision of a “euro zone” was ill-conceived from the start. It is now increasingly acknowledged that Brussels’ lack of control over social spending, especially in the PIIGS, doomed it from the beginning. Agreements (e.g., the Maastricht Treaty) to stay within EU member government spending targets were routinely flouted, even by the largest EU countries. …

The strong got stronger, while others, like Italy and Greece, stood still or even retreated on policies that would have sustained their international competitiveness. …

Southern Europeans kept borrowing in low-interest-rate euros (which simultaneously inflated housing bubbles in their countries) until, in Margaret Thatcher’s words, their socialist governments “ran out of other peoples’ money!” As a result, some of Europe’s large private banks now hold toxic quantities of sovereign debt issued by the PIIGS and are threatened with extinction through serial defaults …

For decades now, one of the most tragic costs of the European welfare state has been Europe’s structural unemployment, especially among the young, combined with welfare payments that turned unemployment into an acceptable — even desirable — status, while stripping those affected of their dignity and sense of responsibility. The recent riots in the U.K. are an ominous reflection of this failure.

One of the key questions now is: How much longer will workers and taxpayers in Germany and other relatively more fiscally prudent countries in northern Europe be willing to work into their late 60s to subsidize (via eurozone bailouts and managed defaults) their neighbors in southern Europe so that the latter can retire early in their 50s on generous state-funded pensions and go to the beach? 

How many times does it have to be proved that socialism does not work?

Free-market economists – the giants among them, von Mises, Hayek, Milton Friedman – demonstrate in theory that socialist economics cannot work. Their reasoning is not hard to follow, and entirely convincing. We human beings can use our faculty of reason – unique to our species –  to save ourselves from having to try out risky ideas in reality. But millions among us want to keep trying out the failed redistributive policies of socialist economics, experimenting with real lives, courting disaster over and over again.

Roberts and Foster grimly point out:

For the U.S., Europe is the ultimate object lesson — a warning of what happens when government is allowed to run wild, with the resulting loss of liberty, and fiscal debt.

An object lesson. A warning. But Obama, his circle of advisers and appointees, and the millions who persist in voting for socialism – aka “stimulus”, “entitlements”, “taxing the rich”  – remain obstinately deaf and blind to it.