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Government Spending and Social Unrest   June 20th, 2011
Greece and Spain demonstrate what happens with too much dependency on government       


More observations...

The unrest in Greece and Spain is illustrating exactly what happens when too many people become dependent on excessive and unsustainable government spending.

Please bear with me as I share two excerpts from two recent articles, one about Greece and one about Spain. In both Greece and Spain, irresponsible fiscal policies by the governments have led to an economic and/or debt crisis. As the governments try to fix their problems, their citizens are in the streets protesting.

In Greece:

Greece's Prime Minister George Papandreou announced Wednesday that a government reshuffle will take place Thursday, after which he will seek a vote of confidence in parliament...

The government's popularity has plunged recently, and anti-government protests turned violent Wednesday, as demonstrators threw gasoline bombs at the Ministry of Finance and police fired tear gas at protesters, police said.

Tens of thousands of protesters had vowed to form a human shield around the parliament to prevent lawmakers from debating new austerity measures Wednesday afternoon...

"When will we be able to get out of this vicious circle? My wife lost her job. I had a 12% pay cut as a result of the first bailout. The new measures want to cut another 20% of jobs in the public sector," he [Christos Miliadakis] said. "So if no one has money and we are just more in debt, who is going to drive the economy? We will live like slaves paying all our lives."

Architecture student Maria Iliadi, 23, said that, for people like her, "the future in this country has been erased. There will be no big public projects, and no one will be building for a long time. Sometimes, finishing my degree seems totally pointless."

In Spain:

Tens of thousands of protesters converged on central Madrid Sunday as the so-called May 15 movement pushing for political and social change in Spain again took to the streets...

The protests focused again on Spain's 21% unemployment rate and on the government's economic austerity measures. But on Sunday, they also rallied against European Union efforts to stabilize the euro, with many protesters worried that could lead to more austerity measures across the EU...

"This capitalistic system doesn't work. It's an unfair system and a lot of people are in a very bad situation, without money," said Eva Fernandez, a social worker who was marching with the "northern" column down Madrid's main boulevard, la Castellana, on Sunday...

The crowds have been dominated by young people, but also included retirees and families with young children. Demonstrators had a long and varied list of demands, but an underlying current was a call for change in Spain's political and economic system, to make it -- according to the protesters -- more democratic.

What's happening in Greece and Spain is both worrisome and instructive.

Attitude of Entitlement & Dependence

First, take a look at the comments from Greece.

  • "The new measures want to cut another 20% of jobs in the public sector. So if no one has money and we are just more in debt, who is going to drive the economy?"

  • "The future in this country has been erased. There will be no big public projects, and no one will be building for a long time. Sometimes, finishing my degree seems totally pointless."

What these two quotes have in common is a worrisome sense of entitlement, and an erroneous belief that government is the "future" of Greece.

In the first quote, the individual implies that if the salary of the public sector is reduced, no-one will have any money and there will be no-one to "drive the economy." This belies a belief that government workers drive the economy. They don't. They are a burden to society. Yes, some amount of government is necessary, but government is always a cost to the economy, not a driver of it. Is it any wonder that Greece is in trouble when its citizens look at their government as the driver of their economy? To a large degree it has been the driver of their economy--and both common sense and current events indicates that that's unsustainable.

This attitude of government-dependence is captured in the second quote as well. The student bemoans her concern that finishing her degree is "pointless" because she no longer believes there will be a government job waiting for her. Again, this belief that the government can employ so many people is absurd and worrisome. Only a strong private sector can generate the income and wealth that generates the tax revenue on which a government depends. It's telling that this student doesn't even consider the possibility of a private sector job in her evaluation of the value of the degree she is pursuing.

Resisting the Laws of Economics

In Spain, protesters are displaying an ignorance of economics, and an apparent desire to protest against the laws of economics--laws which are as certain and inevitable as the laws of physics.

The Spanish protesters are protesting against efforts to stabilize the Euro because such efforts may result in more austerity. Governments in Europe aren't adopting austerity plans because they want to antagonize their citizens. They're doing so because they've run out of other people's money and it's time to adopt more responsible fiscal policies so that their countries can grow in the future. Yet citizens are in the streets protesting for more unsustainable and irresponsible government spending.

The protesters are also protesting 21% unemployment. Are they expecting the government to give them a job? If that's the case, they should refer to Greece to see how that turns out. Jobs come from the private sector and the private sector will hire more employees when it makes sense to do so. Not before. Protesting will only make austerity more difficult, the economic situation more dire, and delay the recovery that will eventually lead to the private sector hiring more people.

Those that are essentially protesting the laws of economics might as well be protesting gravity. They can protest all they want, but they'll still plummet to the ground if they protest off a cliff.

Attacks on Capitalism

Of course probably the most worrisome quote in these two articles is that of one of the protesters that said, "This capitalistic system doesn't work. It's an unfair system and a lot of people are in a very bad situation, without money."

Not surprisingly, those words were uttered by a "social worker"--someone who is most likely already receiving a paycheck from the most socialistic entity of society: the government. And, ironically, the problems we're experiencing throughout the world aren't because of free-market capitalism but because of the socialist-leaning spending tendencies of the governments that leech the productive power of the private sector.

This is the biggest threat the world faces as the current economic situation unfolds: An assumption that the problems we're facing are due to a failure of capitalism when, in fact, they're a failure of governments attempting to implement "socialism-light" or "EuroSocialism" on the backs of the private sector.

In both Greece and Spain, protesters are asking for changes in both the political and economic systems. The economic changes they want are apparently more unsustainable government spending (socialism), and the political changes they allegedly want are "more democracy."

Of course, a lack of democracy isn't the problem, nor is a lack of government spending.

Any economic changes that result in more spending will aggravate the problem. And it's unlikely the result of any political changes will be more democracy--it's more likely the result will be less democracy.

The Endgame

Greece and Spain are the inevitable results of too much government spending. As conservatives have said for decades, government spending provokes an unhealthy dependence on government. All we have to do is look at Greece and Spain for confirmation.

Once a society becomes too dependent on excessive government spending, any attempt to restrict the government's spending to what it can actually afford will be looked upon as extreme. The governments of Greece and Spain simply want to correct years of fiscal irresponsibility by living within their means. There's nothing extreme about that. It's common sense, responsible governance. And yet tens of thousands of citizens are in the streets protesting, throwing gas bombs, and resisting efforts to stabilize the currency their economies depend on.

Within a few years the United States will cut its spending. This may happen as a result of responsible fiscal policies coming out of Washington DC or, more likely, the spending cuts will be imposed on us just as they are being imposed on Greece and Spain.

When the spending cuts come to the U.S., Greece and Spain give us a bit of a preview of the kind of unrest that we may very well see here. The protests in Wisconsin were only the beginning.

What will the outcome be?

In a perfect world, the outcome will be forced adherence to fiscal conservatism and a solid, sustainable recovery based on conservative fiscal policies.

But with protesters making statements such as "this capitalistic system doesn't work", a U.S. president that thinks "when you spread the wealth around, it's good for everybody," and with presidential advisers that believe they should "never allow a crisis to go to waste, they are opportunities to do big things" we need to be very vigilant... and ready for a far less positive turn of events.

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