WASHINGTON, July 6, 2015 – The overwhelming rejection of EU austerity measures Sunday by Greek voters might not have been an anomaly. It seems that much of the world is now leaning toward national policies that lead to more government intervention, control and income re-distribution. These liberal policies seem to be gaining support as people embrace the concept of socialism.
In Greece, the government has pursued a very liberal policy that essentially discourages people from contributing to the economy and encourages them to become dependent on the government. Allowing workers to retire in their early 50s is a key example.
Because the citizens approved this trajectory and because they wanted their government to intervene, control and transfer income, Greece wound up spending massive amounts of money it did not have. The burden of debt, high government spending and low tax revenue due to slow growth and corruption put the country in a deep economic hole.
Solving Greece’s problems after yesterday’s “no” vote will prove very difficult. The Greeks need to stop spending money they don’t have and can’t borrow in order to stop adding to their already monumental national debt. Unfortunately, spending less will slow economic growth, which is what Greece really needs.
The rejection by the Greek voters of a plan to maintain and even increase austerity indicates that the citizens want government involvement and want a more socialistic economy.
This attitude seems to be increasingly prevalent today around the globe. Many countries have pursued policies that give the government more control, more ability to intervene in markets and more programs that transfer income from one social class to another.
In the U.S., particularly during the past six years, discussions about the economy are no longer about growth. Instead, they focus on how the free market has produced large economic disparities that are increasingly viewed as unfair.
Income inequality has indeed increased significantly, especially since 2009. Wages are stagnant here as the wealth of the top 10 percent of income earners continues to grow. Yet the economy hasn’t seen a solid year of robust growth in almost a decade, and there is little opportunity for most Americans during the alleged current economic recovery.
Is this a result of the free market or is it a result of too much government?
The mood in the U.S. seems to be shifting toward the left, which, as always, advocates that the problem was caused by the market, therefore proving government intervention and control are needed.
For example, most Americans currently favor raising the minimum wage, which essentially allows the government to control wages.
At the same time, most Americans do not seem concerned about the public debt. Congress will have to raise the debt ceiling shortly, probable right after their August recess. While this process is often a dogfight between the two main warring ideologies in this country, it seems that more Americans would rather spend money that we don’t have than concentrate on reducing the annual deficit, which ultimately causes the public debt.
Many local and state governments are experiencing severe fiscal problems. These problems result primarily from granting their employees extremely generous salary and benefit packages paid for by the taxpayers who seem to have little to say in the matter. Some studies show that public employees in similar positions earn about 30 percent more than those in the private sector. Couple this level of compensation with overly generous pension plans, factor in stagnant tax revenue, and governments find they are going broke. Yet the public seems to support the cause of the workers.
It also appears that many Americans believe “A little socialism is not that bad.” They like the notion of the government providing security. It’s OK to tax the rich to pay for it and it is also OK for us to give up some freedom in order to gain more security goes this train of thought.
But, as Benjamin Franklin said, “Any society that would give up a little liberty to gain a little security will deserve neither and lose both.”
Much of the world follows the actions taken by the U.S. When the current administration launched programs that led to massive increases in government spending and huge annual deficits, the world followed. When the U.S. ran up a public debt that exceeded annual income, other countries followed suit, although some were already ahead of the curve.
The problem with the example that the U.S. has set is that it places a higher priority on solving perceived social injustices than it does on stimulating economic growth. All economists agree that economic growth would solve most of our economic problems, yet the focus remains on those perceived social injustices.
History indicates that the pendulum of thought regarding social versus individual responsibility swings from side to side, usually ending up somewhere close to the middle. Today we may have swung too far left as we dig deep holes in personal, local, state and national budgets and expenditures. The last six years should serve as a prime example of what happens when we reduce individual freedom and increase the size of government.
It’s time to concentrate less on security and more on individual freedom and individual responsibility. In the area of economic thought, it’s time to starting leaning more to the right. As Greece is currently demonstrating, those seemingly satisfying tilts toward the left end up creating many more problems than they solve.