Zoning out in the Euro Zone

Yesterday there was an article in the Advocate’s “op-ed” page – by Robert J. Samuelson entitled: “Europe stares into an abyss.” Well, true enough. The whole place is coming apart, and Mr. Samuelson brings up Greece, which is broke, and Spain, which is broke, and Portugal WiB, and Ireland, and so on down the line. All the nations of Europe are broke. Greece is just the brokest. Samuelson’s opening line is “It has come to this. A year after rescuing Greece from default, Europe is starting into the abyss. The bailout has proved insufficient.” And I cracked up. Insufficient? Why, Greece is a drunk in a bar, seeking $20 more bucks for a round for his buddies, and Old Man Europe lent it to him in the hopes that the drunk would be sober after another shot of ouzo. Sure. What on earth was Europe thinking?

The problem is, as Samuelson says, “massive government debts” brought about by “costly welfare states.” Yes, indeed. And “costly welfare states” is economics for “too much ouzo.” And apparently, if Mr. Samuelson is correct in quoting “the Washington Post’s Anthony Faiola – of a ‘resurgence of an anarchist movement’ there and elsewhere.” Yes, well, I suppose that could be called a Tea Party, I don’t know. Or maybe it’s just more drunks in a bar waiting for someone to hand them a $20. And so the welfare is handed out to the Greeks, and the Greek government borrows money to cover the expense, and there’s absolutely no way out of the mess, supposedly.

Oh, but there is, says Samuelson – the “ability – or willingness – of weak debtor nations to endure growing hardship” – well, if not this year, when? “Just how long this grinding process can continue is unclear” says Samuelson. I’ll tell you, until you stop the costly welfare state and live within the tax base you can muster. Aw, says the opining man, “unemployment is 14.1 percent in Greece” and more elsewhere, “What are the limits of austerity?” he wonders. Yes, well, I suppose the limits are, if you can borrow enough, to keep paying the 14.1 percent unemployed to stay home and do nothing while keeping your costly welfare state humming along to help the people and the socialist party in power to give alms to the poor it can go until there’s no more money to lend. The way to cut the unemployment rate is to cut the costly welfare state, and the costly regulations, and the bizarre bureaucracies of the Euro zone which regulate the shade of white toothpaste must be. Cut the taxes, cut the government, dismantle the whole thing. Or keep borrowing until whatever is being ground up will come out the other side.

Samuelson points out that the socialist party in Spain got a thumping in the recent elections there. Yes, and the other socialist party that’s in office now will continue doing exactly what the previous socialist party is doing. The differences in the socialism is of course the difference between Gomez and Rodriguez, which is a lot of difference indeed. Some man at the American Enterprise Institute, an economist he says, named Desmond Lachman, is quoted as saying “the markets failed” and I think – not much of a thinker on enterprise and economy. Markets don’t fail. Markets are the things which keep drunks in order. Markets are like bouncers. They don’t fail, they bust heads. The markets have shown that they will no longer lend to Greece, without either enormous interest rates, or some very good collateral like an island or two. The markets are impersonal things in which people look at the drunken spender and decide to lend no more for ouzo.

He says (I’m not sure which he) that “American and European banks went overboard in relaxing credit standards.” They certainly did – they lent money to Greece. At the direct behest or connivance of the central banks. The “private” banks are so regulated and told what to do, and are led hither and yon by the central banks, that credit standards were relaxed – precisely to “bailout” Greece for another year. The thing to do is not bail out Greece and let it cut its costly welfare state and socialist paradise and tell those people to go to work and keep their own money. And then you wouldn’t have to worry about governments going broke, but just whether they pave the roads.

The problem is governments taking care of people with taxes – for that means that the people taken care of must give their money to the government so they can get it back. It’s one thing to build a bridge, taxes are needed for that. It’s quite another to give wonderful “benefits” to the people so they’ll vote you back into office – and borrow the money to do so, which always leads to “austerity.” The only one going austere should be the government – and cut the taxes, so people can keep their own money – every tax cut leads to more economic activity – people will spend their money, trust me. And a bureaucrat might have to get a job.

But whether you raise the taxes on the rich, or the sales taxes, or the VATs or the income taxes, or wherever, somehow it’s coming out of the economy – and in the case of Greece – visits Athens and the Acropolis – then goes home to Thessalonika – minus a 30% to pay for the tax authorities and the distribution authorities. In our case, it’s DC and the state capitals. In either case, you tax people to give them back their money. Weird, it doesn’t work after a while. Especially because the promised “benefits” always wind up exceeding the taxes that can be collected, which leads to borrowing to sustain the party, and eventually everyone is passed out drunk and exhausted.

And yet, poor Samuelson seems to want to find a way to wait it out, and keep up the spending, and hope it doesn’t come to “What are the limits of austerirty” after all. And by quoting the unemployment figures he seems to be assuming that what the people need is more money to stay unemployed, or the government to hire them to sit around and shuffle paper – and he seems wholly unaware that what Greece and Spain and the rest need is a whole lot less government and a whole lot more free enterprise so that the “markets” don’t fail, and the government doesn’t go broke, but one or two things don’t work out and the rest are all humming along fine in the creative destruction of free markets.

“Given Europe’s huge debts, even the holding action may fail.” he says – And then concludes with Lachman’s “They may dodge this bullet, but not the next.” Well, if that’s your concluding sentiment, it does strike me that the very previous sentence, along with the preceding few hundred words are mush if all they say is that we need to find some “bailout” to continue the drunken party while lamenting the inebriation.

Instead of just staring, shouldn’t opinion makers point out the obvious and propose a solution? Cut the taxes and cut the spending, fire the bureaucracies and let the people keep their own money.


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