Posts tagged with: Greece

A new commentary from Acton Research Director Samuel Gregg. Sign up here to get the latest opinion pieces delivered to your email inbox on Wednesday with the free weekly Acton News & Commentary.

Deficit Denial, American-Style

By Samuel Gregg

Until recently it was thought the primary message of the 2010 Congressional election was that Americans were fed up with successive governments’ willingness to run up deficit-after-deficit and their associated refusal to seriously restrain public spending.

If, however, the results of a much-discussed Wall St Journal-NBC News poll released on March 2 indicate what Americans really think about fiscal issues, then much of the country is clearly in denial – i.e., refusing to acknowledge truth – about what America needs to do if it doesn’t want to go the way of many Western European nations.

While the poll reveals considerable concern about government debt, it also underscores how unwilling many Americans are to reduce those welfare programs that, in the long-term, are central to the deficit-problem.

Here are the raw facts. America’s federal social security program has become the largest government pension scheme in the world in terms of sheer dollars. It is also by far the federal budget’s single greatest expenditure item.

According to the Office of Management and Budget, “human services” ― Social Security; Medicare; Health-expenditures; Education, Training, Employment, and Social Services; Veterans benefits; and the euphemistically-named “Income Security” (i.e., unemployment-benefits) ― were consuming 4 percent of America’s GDP in 1949. By 1976, this figure had increased to 11.7 percent. In 2009, it was consuming 15.3 percent of GDP.

During the same period, human services began consuming a steadily-increasing size of federal government expenditures. In 1967, human services spending was 32.6 percent of the federal budget. By 2009, this figure had increased to 61.3 percent. It is predicted to rise to 67 percent by 2016. In 2010, 75 percent of human services spending was on Social Security, Medicare, and Income Security ― in short, the core welfare state.

These disturbing numbers make it clear any serious federal deficit reduction must involve spending-cuts to federal welfare programs. That doesn’t mean other areas of government-spending should be immune from cuts. But the deficit simply can’t be properly addressed without a serious willingness to reduce welfare-expenditures.

And yet despite all the passionate rhetoric from Americans about the need to diminish government-spending, the Wall St Journal-NBC News poll suggests that fewer than 25 percent of Americans favor cutbacks to Social Security or Medicare as deficit-reduction measures. As the Wall St Journal’s own commentators noted: “Even tea party supporters, by a nearly 2-to-1 margin, declared significant cuts to Social Security ‘unacceptable.’

Unacceptable? Think about that word. Do large numbers of Americans really believe there is something morally evil about significant reductions to welfare-spending under any circumstances? Since when – apart from Greece and other models of fiscal rectitude – have welfare payments assumed the status of an absolute right subject to no qualification? Have we really gone so far down the path of economic-Europeanization?

Granted, the same poll suggests much larger numbers of Americans are willing to raise the retirement age to 69 and means-test social security. But is that the best Americans are willing to do?

Spain’s unreconstructed-1960s-lefty Socialist government has just lifted Spain’s retirement-age to 67. Unsurprisingly, that won’t fully kick-in until 2027, long after Spain’s political class and their tame voting constituencies have met their Maker and no longer need to live off their children’s futures. But can Americans who proclaim their attachment to free enterprise and personal responsibility really do no better than left-wing Western Europeans?

Back in 2007, the journalist Robert J. Samuelson summarized the situation perfectly. “Most Americans,” he wrote, “don’t want to admit that they are current or prospective welfare recipients. They prefer to think that they automatically deserve whatever they’ve been promised simply because the promises were made. Americans do not want to pose the basic questions, and their political leaders mirror that reluctance. This makes the welfare state immovable and the budget situation intractable.”

Presidential campaigns are invariably accompanied by a great deal of posturing. It would be helpful, however, if some serious candidates for the nation’s highest office in 2012 – Republican or Democrat – would use their moment in the spotlight to educate Americans about what’s at stake.

One former American vice-president once reportedly insisted, “Deficits don’t matter.” Unfortunately, there is mounting proof he was wrong. After examining data on 44 countries over approximately 200 years, two economists recently found evidence suggesting that developed nations with gross public debt levels exceeding 90 percent of GDP (i.e., America) find that their medium-growth rates fall by one percent, while average growth declines by an even greater proportion.

That’s worrying because while deficit-cutting matters, wealth-creation matters even more if we are to dig ourselves out of our fiscal hole. America now seriously risks seeing its burgeoning welfare costs suffocating the productive sector of the economy that makes social welfare possible in the first place.

Incidentally, it won’t be the rich who suffer. It will be the poor. In their laudable concern for the weakest among us, Americans ought to remember that and start matching political rhetoric with consistent fiscal action.

Dr. Samuel Gregg is Research Director at the Acton Institute. He has authored several books including On Ordered Liberty, his prize-winning The Commercial Society, and Wilhelm Röpke’s Political Economy.

Despite a promise of “complete and fair coverage of health care for everyone for free,” the Greek state-controlled system is broken and corrupt, the Athens daily ekathimerini.com reports. Predictably, Greeks have taken it upon themselves to build a private health care sector:

Despite hikes in Greece’s health spending between 2000 to 2008 being among the highest of all OECD countries, this has not been matched by growing life expectancy rates, the report added. Turning to the hospital system, corruption has grown due to poorly run operations and an improper organisation structure with about one in five Greeks admitting to having paid a bribe in order to receive medical treatment at a state hospital. These problems have contributed to growth in the private healthcare industry which provides crucial services but also enjoys the benefit of not having any competition, the report added.

In the UK, the National Health Service has been using hospital beds as housing for senior care, to the detriment of people who actually need hospital beds. From the Telegraph:

If current trends continue, almost 100,000 of 170,000 NHS beds will end up being filled by elderly people who are well enough to be in residential care. This will cost the health service millions of pounds and throw its day-to-day operations into chaos, says the report by Bupa, the health insurance and care provider. It blames the looming crisis on a “17-year legacy of under-funding in the care home sector”. The next few years will see the problem getting progressively worse, the report’s authors predict, despite a Coalition pledge that local authorities will have an extra £2 billion to spend on adult social care over the next four years.

For more on this issue, see Acton’s Health Care resource page.

With the country insolvent, and streets filled with violent protests, the Church of Greece is now pointing fingers at the country’s political leadership and international “creditors” (who have just ponied up another 2.5 billion euros for the bailout). Yet Greece, the Holy Synod says, is “under occupation” by lenders, who have moved in because the politicians “undermined the real interests of the country and its people.”

Here’s a report from the Athens Now site, which attributed the statement to the Holy Synod of the Church of Greece. (more…)

Blog author: jcouretas
Wednesday, December 15, 2010
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Video: Hundreds of protesters clashed with riot police across central Athens on Wednesday, smashing cars and hurling gasoline bombs during a nationwide labour protest against the government’s latest austerity measures. The former Development Minister Costis Hatzidakis was attacked by protesters outside a luxury hotel. He was escorted, bleeding from the scene as his attackers yelled “thieves” at him. Source: Russia Today

In the Greek daily Kathimerini, Alexis Papachelas writes:

There are no easy answers and, to make matters worse, we still have no idea about how the global crisis will affect Europe in early 2011.

The Greek government chose a course of treatment for the economy that is much like shock therapy, meaning that it tried to squeeze as many changes as possible into a short period of time.

If this strategy is successful, the government will have a strong card to play when it has to deal with its European peers and market forces in the case that debt restructuring is offered as a solution. If, however, the strategy fails, the shock therapy may turn into that extra bit of force that breaks the valve on the pressure cooker that is Greek society.

Read Acton Research Director Samuel Gregg’s new essay on Public Discourse titled, “Socialism and Solidarity.”

On Public Discourse, Acton Research Director Samuel Gregg observes in a new piece that “while moral beliefs have an important impact upon economic life, the manner in which they are given institutional expression also matters. This is illustrated by the different ways in which people’s responsibilities to those in need—what might be called the good of solidarity—are given political and economic form.”

Excerpt:

… the rather modest welfare and labor-market reforms presently being implemented in Spain, Greece and France have sparked considerable moral indignation (and not just from welfare recipients) despite widespread acknowledgment that such reforms are inevitable. Obviously there are many whose negative reaction is partly driven by consciousness that such reforms mean that the days of not-very-demanding jobs for life may be numbered. Nevertheless it’s also true that many Western Europeans genuinely believe the good of solidarity is threatened by efforts to move beyond the present and economically unsustainable status quo, precisely because of the state-oriented institutional expression given by Europeans to the surely uncontroversial proposition that we are our brother’s keeper.

While Americans are often regarded as more individualistic than Western Europeans, this perception is partly driven by the different economic and institutional expressions that Americans have often given to the idea of concern for neighbor. This was among one of the distinguishing features of America that struck the French social philosopher Alexis de Tocqueville when he visited the United States between 1831 and 1832. The emergence of social and economic problems, Tocqueville noted, did not elicit demands from Americans for the government to “just do something.” Indeed, Tocqueville marveled at the relative absence of government from American life and the corresponding vitality of civil society, especially when compared to the state’s all-pervasive presence in his native France.

Tocqueville quickly realized, however, that this “absence” of the state was not symptomatic of a callous disregard by Americans towards their fellow citizens in need. Though Americans tended, Tocqueville noted, to dress up their assistance to others in the language of enlightened self-interest, he observed that Americans usually expressed the value of helping those in need through the habits and institutions of free and voluntary association. In short, Tocqueville wrote, Americans banded together to try and resolve social and economic problems through voluntary associations. Some of these associations (like churches) had a more-or-less permanent presence in American society. Others lasted only as long as a particular economic or social problem persisted. As a consequence, the same pressures for centralized top-down government-led solutions and all their economic implications that prevailed in France were not present in the young American republic.

Read all of “Socialism and Solidarity” on the Public Discourse website.

Acton’s Research Director in the American Spectator:

Europe’s Broken Economies

By Samuel Gregg

During September this year, much of Europe descended into mild chaos. Millions of Spaniards and French went on strike (following, of course, their return from six weeks vacation) against austerity measures introduced by their governments. Across the continent, there are deepening concerns about possible sovereign-debt defaults, stubbornly-high unemployment, Ireland’s renewed banking woes, and the resurgence of right-wing populist parties (often peddling left-wing economic ideas). Indeed, the palpable sense of crisis left many wondering if some European economies have entered a period of chronic decline — one which might eventually reduce Europe to being a bit-player on the world stage.

Obviously we should avoid over-simplification. In Germany and Sweden, for instance, unemployment is declining while economic growth and exports are rising. Not coincidentally, both countries have implemented significant economic reforms over the past ten years. To the audible disappointment of the world’s left-wingers, Sweden is no longer Social Democracy’s poster-child.

Nor can Europe’s present woes be explained in mono-causal terms. Like America, property-bubbles and over-leveraged financial industries played a role in some countries’ meltdowns. But not every European nation presently enduring economic hardship experienced banking crises on the scale experienced by Ireland and Britain.

It will be decades before economists and historians completely diagnose what’s happened to Europe’s economies since 2008. Many, however, will likely conclude that many European countries’ economic culture helped them lurch into seemingly unending crisis.

“Culture” is one of those heavily over-used words. But in sociological and historical terms, “culture” is a way of describing, among other things, the approach to life, the values emphasized, attitudes toward work, the understanding of law, and ultimately the view of science, the arts and religion prevailing in a given society. Over time, these form a type of inheritance that can remain relatively stable in particular historical settings over several generations. (more…)

Until recently, many thought that Europe had escaped the worst of the 2008 financial crisis. Some even argued that the crisis has demonstrated the European social model’s superiority over “Anglo-Saxon capitalism”. In 2010, however, we have seen an entire country bailed out, riots in Athens, governments slashing budgets, and several European nations staring sovereign debt default in the face. Some are even claiming that the euro is finished. So what went wrong for Europe? How adequate have been the responses of European governments? And what are the consequences for America? The video is from the Aug. 2 Acton Lecture Series in Grand Rapids, Mich.

This August 3 Wall Street Journal article is based on a Legatum Institute survey comparing Indian and Chinese entrepreneurship and raises important issues about the roles of the state and the family in promoting entrepreneurship.

The common elements between Indian and Chinese wealth-creators are their optimistic view of the future, compared to Americans (“Why I’m Not Hiring”) and Europeans (“Everything’s Fine With Greece, Just Ignore Some Facts”) presumably, and their lack of concern about the impact of the global financial crises on their businesses.

But Indians and Chinese differ widely on why they become entrepreneurs in the first place, where they look for capital, and whether they look to the state to support and encourage them. As the article’s subtitle puts it, “Indians believe they succeed despite the state. The Chinese say they succeed because of it.”

I draw two conclusions from the study: Those who favor freedom, creativity and self-employment seek limited government, while those who seek greater wealth for its own sake are seemingly indifferent about the size and scope of government. And greater trust in the family seems to go along with less trust of the state.

It follows that friends of freedom and the family ought to favor the Indian to the Chinese version of entrepreneurship.

Blog author: jcouretas
Tuesday, July 20, 2010
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The birth of a new genre: econo-psychobilly bouzouki music. Opa, you all! For more great Merle Hazard tunes, check out his website. They don’t call him “The Man in Beige” for nothing. PBS NewsHour has more on the Nashville crooner. (HT: Calculated Risk)

Blog author: jcouretas
Tuesday, May 25, 2010
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Over at Public Discourse, a new article by Acton’s research director Samuel Gregg examines the deeper reasons behind the problems of the euro. In “Europe’s Monetary Sins,” Gregg points out that many of the euro’s present difficulties reflect a basic refusal of Europe’s political class to acknowledge some of the unpleasant economic realities associated with the EU’s social model, as well as a tendency to say one thing while really doing another. In short, Gregg argues that many of Europe’s economic predicaments flow from a crisis of truth, an unwillingness to recognize it, and the subsequent formulation of policy on the basis of untruths and half-truths. The most recent result of this process, Gregg says, is that the independence of the European Central Bank has been severely compromised:

Ever since its foundation in 1998, the ECB has been a whipping boy for European politicians from the left and right who argue that the ECB’s legally mandated priority of maintaining price stability has kept productivity and economic growth rates in the EU far below those of America. In reality, these problems have little to do with monetary policy and everything to do with low rates of entrepreneurship, unsustainable levels of welfare expenditure, an aversion to competition, high rates of public sector employment, and structural rigidities associated with some of the world’s most inflexible labor markets. Indeed, it is probable that the ECB’s avoidance of the low interest-rate policies adopted by the Federal Reserve in the 2000s may have made the 2008 recession in Europe more bearable than it might otherwise have been.

Against considerable political pressures, the ECB has hitherto doggedly defended its independence. All that, however, changed when the European Union decided to set up its 750-billion-euro bailout fund in early May 2010 to stabilize financial markets and rescue the holders of not only Greek government debt, but also, implicitly, the holders of any EU government debts that seemed shaky.