Wednesday, May 5, 2010

Who Stole the People's Money? The "People" Did, Sort Of

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By Barry Rubin

During violent demonstrations that killed three people in Athens, rioters shouted, “Thieves! Thieves!” as they protested new taxes and government spending cuts. Greece is near bankruptcy and other European countries, before bailing out the country with their own money, demand that Greece stop the massive spending that has brought it to this point.

So who are the thieves? The protesters are voicing the old-fashioned, outdated idea that rich and powerful capitalists have taken all the country’s money for themselves. In fact, the protesters themselves stole the money and their demand is that the thievery continue, indeed, insist that they have a right to be thieves of their own country's--and other countries--wealth.

As early as 1948, George Orwell pointed out that there was only one way to raise working class living standards: “Even if we squeeze the rich out of existence, the mass of the people must either consume less or produce more.”

And that is precisely what happened starting in the 1950s. A proper combination of free enterprise and regulation—a balance which has been lost in recent years—new technology, better ways of organizing production, the development of a strong service sector, education, and other changes made it possible to produce much more.

As a result, the masses in these countries were also able to consume much more, to have higher living standards. These developments also allowed many members of the working class to move upward. Western Europe and North America flourished at the highest level of democracy and prosperity known in world history.

Orwell also pointed out, however, thus arrangement's flip side, a lie the Left told others and itself: “The lowering of wages and raising of working hours [must always] be dismissed in advance, whatever the economic situation may be. To suggest that they may be unavoidable is merely to risk being plastered with those labels that we are all terrified of. It is far safer to evade the issue and pretend that we can put everything right by redistributing the existing national income.”

And that is precisely—precisely—what is happening today. In the aftermath of World War Two, everyone in Western Europe had to tighten their belts, even accepting rationing of the most basic commodities, to deal with the strain of fighting the war and the devastation from battle. That strategy worked.

Since then, government spending and employment has soared, more and more burdens have been added to the economy, the productive sector has shrunk. Such things are called "entitlements," meaning the people who get them have earned, them deserve them, have a right to them no matter what happens. The money doesn't have to be there for them because, well, because they are a natural right that no one can take away. And if anyone tries, they are "thieves." And if these bankrupt the country? Well, someone will be found to foot the bill, right, higher taxes on the wealthy, foreign donors, the sale of bonds or of national assets. Like a heroin addict, the "fix" is the only thing that's important.

In America, lending institutions were forced to provide mortgages to people who couldn't pay them back. That was not exactly a conservative policy, though the Obama Administration and its supporters would have us believe that nonsense. The result, not surprisingly, is that the borrowers defaulted. So the borrowers were urged and permitted by the government to steal wealth from the financial institutions, which then tried to steal some of it back from everyone else.

Then the government stole even more from the public to bail out the financial institutions which were in trouble due to government policies and incompetence. A huge "stimulus" plan spent billions yet somehow  created surprisingly few jobs, especially sustainable ones, nor contributed to the nation's wealth or infrastructure.

The result of this kind of strategy is unsustainable, and Greece is only the first place where this outcome can no longer be ignored.

Nowhere have I seen made the obvious connection between what’s happening in the West today and both the chronic financial problems of many Third World countries and the collapse of Communism in the Soviet bloc.

True, the level of corruption in these two types of countries was higher and the level of democracy much lower. But the principal causes of their failure were huge unwieldy governments that strangled the society, spending money on unproductive things, and stifling initiative.

In 1871, Thomas Nast drew one of the most famous cartoons in American history, in response to a series of scandals in New York, Under the question, “Who stole the people’s money?” he drew the leaders of the Democratic party political machine standing in a circle, pointing at each other and saying, “It was him.”

Today, an equivalent cartoon would have to respond to the question of “Who stole the people’s money?” with the answer: The people did or, alternatively, the government did in the name of the people.

We aren't living in the late nineteenth century, when powerful corporations like Standard Oil and U.S. Steel held monopolies and owned governments. That is why the liberals of the day understood that the government had to be stronger, break up monopolies, help trade unions come into existence to protect workers, and regulate some economic and social matters.

That was, however, a long time ago. The balance has long since shifted too far in the opposite direction.

Today, the problem isn't voracious corporations but rather a voracious government and politicians who try to buy support by promising to pay for everything one can imagine. In Greece, the government employs more than one-third of the work force. They generally don't produce revenue, they just absorb it. True, they put their income into the economy as consumers but that also puts up prices and either doesn't add to--or even reduces--income-making exports. And all the local plus EU regulations makes it harder and harder for the private sector to generate a profit, pay taxes, and hire people. Government's innate inefficiency and waste does the rest.

The ideas that there can be no limits to government size or power, that the supply of money is endless, that the richer can be squeezed and strangling regulations increased with no effect on productivity are leading to disaster for both freedom and prosperity.

Since 1945, both liberals and conservatives in the West have agreed in the concept of a reasonable balance between government and the private sector, between the desirability of maximum individual freedom and the necessity for limited controls out of necessity. They disagreed on the details but they were in the same ball park.

In more recent times, however, the radical wing of liberalism or, in Europe, social democratic parties has seized control and thrown out those limits. Now the bill for these excesses is coming due, though the Left wants to go further and further down the wrong road.

This rush to disaster is concealed and defended using the same tool Orwell mentioned as being employed by pro-Soviet fellow travellers and Communists during his day, with, "those labels that we are all terrified of." Here's how he wrote about it in 1948 (sorry this quotation is so long but it's too good to cut:

"These people have a regular technique of smears and ridicule--a whole specialized vocabulary designed to show that anyone who will not repeat the accepted catch-words is a rather laughable kind of lunatic....If from time to time you express a mild distaste for slave-labor camps or one-candidate elections [in Communist countries], you are either insane or actuated by the worst motives. In the same way, when Henry Wallace [the candidate of the left-wing Progressive Party in 1948] is asked by a newspaper interviewer why he issues falsified versions of his speeches to the press, he replies: `So you are one of these people who are clamoring for war with Russia?' It doesn't answer the question, but it would frighten most people into silence. Or there is the milder kind of ridicule that consists in pretending that a reasoned opinion is indistinguishable from an absurd out-of-date prejudice. If you do not like Communism you are a Red-baiter, a believer in Bolshevik atrocities, the nationalization of women...."

You can update those labels for the ones used during the current age of Political Correctness.

And the answer is the same as the one Orwell gave back in 1948 as well:

[But] after all, what does it matter to be laughed at? The big public, in any case, usually doesn't see the joke, and if you state your principles clearly and stick to them, it is wonderful how people come round to you in the end."

Barry Rubin is director of the Global Research in International Affairs (GLORIA) Center and editor of the Middle East Review of International Affairs (MERIA) Journal. His latest books are The Israel-Arab Reader (seventh edition), The Long War for Freedom: The Arab Struggle for Democracy in the Middle East (Wiley), and The Truth About Syria (Palgrave-Macmillan). His new edited books include Lebanon: Liberation, Conflict and Crisis; Guide to Islamist Movements; Conflict and Insurgency in the Middle East; and The Muslim Brotherhood. To read and subscribe to MERIA, GLORIA articles, or to order books. To see or subscribe to his blog, Rubin Reports.

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