Wednesday, May 26, 2010

More on the death of the welfare state

John Reynolds has a good article on the failure of western governments and their huge social programs. These massive programs are crowding out the private sector and leading to massive debt and are ultimately unsustainable.

It is sometimes argued, in defence of high taxes, that governments merely provide services people need – without the waste (profits, for example) inherent in capitalism. In one sense, the argument sounds plausible. Without medicare, a health care insurance monopoly, people would presumably buy insurance from competing companies, some of which would spend money on repetitive TV commercials and all of which would aspire either to profit or, at least, not register a loss.

But the argument fails for two reasons, both of them explicitly documented in the imminent restructuring of Europe’s debt-imperilled welfare states. The Taxes-R-Us argument fails because people individually make very different decisions than governments make on their behalf. And it fails because marketplace competition imposes a financial discipline that governments do not impose on themselves....
In a report last week, The New York Times reviewed the consequences of extravagant government spending throughout Western Europe. “The assumptions and gains of a lifetime are suddenly in doubt,” writer Steven Erlanger said. “The deficit crisis that threatens the euro has also undermined the sustainability of the European standard of social welfare, built by left-leaning governments since the end of World War II.”

Europeans have long boasted, Mr. Erlanger said, that their social model – “with its generous vacations and early retirements, its national health care system and extensive welfare benefits” – proved the superiority of the Welfare State over the “comparative harshness” of U.S. capitalism.

In retrospect, it’s apparent that the beneficiaries of big government in Europe (and, to a somewhat lesser degree, in North America) are the people who consumed government largesse in the halcyon days of the past; the losers are the people who will be required to pay for them. In some cases, these will be the same people – a just retribution. In other cases, though, they will be different people, and the retribution will be unjust.

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