Tuesday, September 29, 2009

Is Socialism dying?

From Steven Erlanger at the New York Times:
A specter is haunting Europe — the specter of Socialism’s slow collapse.

Even in the midst of one of the greatest challenges to capitalism in 75 years, involving a breakdown of the financial system due to “irrational exuberance,” greed and the weakness of regulatory systems, European Socialist parties and their left-wing cousins have not found a compelling response, let alone taken advantage of the right’s failures.
But is Socialism really dying?
Europe’s center-right parties have embraced many ideas of the left: generous welfare benefits, nationalized health care, sharp restrictions on carbon emissions, the ceding of some sovereignty to the European Union. But they have won votes by promising to deliver more efficiently than the left, while working to lower taxes, improve financial regulation, and grapple with aging populations.

Europe’s conservatives, says Michel Winock, a historian at the Paris Institut d’Études Politiques, “have adapted themselves to modernity.” When Nicolas Sarkozy of France and Germany’s Angela Merkel condemn the excesses of the “Anglo-Saxon model” of capitalism while praising the protective power of the state, they are using Socialist ideas that have become mainstream, he said.
The truth is, the so-called "right" has just adapted their policies to the Socialist ideal. They still have not resolved the inherent problem with Socialism, which was best described by Margaret Thatcher several decades ago:
"Socialist governments traditionally do make a financial mess. They always run out of other people's money."
Socialism never bothers to reconcile the conflict between the welfare state and capitalism, which is necessary to pay for the welfare state. Without the economic growth which capitalism provides, the only way to pay for the welfare state is by printing money, which is the government's equivalent of an individual trying to pay all their expenses by credit card, while not having a job. Without capitalism, there is no tax revenue, and you end up in an old style communist system, where there is no production incentive.

So far, the Socialists have managed to balance their welfare state with their capitalism to avoid the fate of communism. But their growth rates have become anemic as their burdensome tax rates keep capitalism on life support. You cannot take the production of half (or more) of your economy and expect it to grow.

In addition, the more welfare provided, the less incentive there is for people to be productive. Why work when you can get almost as much money on welfare?

Someone has to pay for the welfare state. But what the world's recent economic collapse has taught the Europeans is that their golden goose cannot support their lifestyle of leisure in this modern age of world trade. Between economic pressure, and government taxation, capitalism's golden goose needs some TLC too. If the goose dies, Socialism dies with it, because somebody has to pay the bills.

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