The Unsustainable Welfare State

With crawling speed, awareness is spreading across Europe that something has gone wrong – terribly wrong – with their economy. The latest to raise his eyes above the mainstream horizon is Jonathan Portes, director of the British think tank National Institute of Economic and Social Research. In a recent interview with Euractiv.com, Portes explained that Europe’s leaders have completely misunderstood the nature of the current crisis:

http://c.brightcove.com/services/viewer/federated_f9?isVid=1&isUI=1

The problem for Portes is that he lists among the challenges for Europe that it needs to find a way to fund its welfare state. But the welfare state is precisely the problem for Europe. The welfare state is what eventually tipped a regular recession over the edge into a permanent, structural crisis. Surely, the welfare state was aided in its amplification of the crisis by misguided, ill-designed austerity policies. But the European economy was suffering from a structural imbalance, forced upon it by the welfare state, long before the financial crisis began.

We should not glean too much from Portes’s short statement, but it is probably not an exaggeration to conclude that he is looking for a sustainable funding model for the European welfare state. The problem is that no such model exists. In order for the welfare state to be fiscally sustainable, neither its funding model nor its entitlements can have any effect on the tax base from which the welfare state gets its revenue. This “exogenous” view of the welfare state has been thoroughly refuted, both by reality and by a long tradition of research.

There is only one solution to the European crisis, and that is to phase out the welfare state – to privatize education and health care and to return income security to the individual taxpayer. No more, no less, will save Europe.

2 comments

  1. deschutes maple

    Oh gosh, let me get this straight: another libertarian windbag decided to put up a website to espouse his nonsensical rants against socialism and welfare. Libertarians suck! Why don’t you crawl back into your lazy boy recliner with your dog-earred copy of Atlas Shrugged and stop polluting the web with your rubbish. Every man for himself libertarianism is a shit economic theory: it will only lead to what you have today in USA: a tiny cabal of capitalists owning everything with a vast lower class of have-nots. China, Venezuela, Chile, Germany–all have socialist or welfare state economies with pro-people programs, making life better for millions. In Germany students go to university for a tiny fraction of the cost of USA’s debt peonage university system: there’s your Ayn Rand capitalism for you: American students told to “pay your own way” instead of sucking off the state. So they graduate with 30,000 or even 75,000 debt. Fucking shameful, really. And the defunding of American universities all started with that asshole Ronald Reagan in California. In 1965 Californians could go to UC Berkeley for FREE; Reagan put a stop to that, fine libertarian he. You idiot libertarians will never get it. Like republicans, your meme is “got mine, fuck you”. Pathetic.

  2. S R Larson

    Dear deschutes maple,

    Too bad your intellectual capabilities were not strong enough for you to produce a thoughtful, facts-based and rational comment. Nevertheless, your condescending tone and ad-hominem aggression is typical for socialists and other statists. It is not my business to worry how you even get up in the morning, so let me get straight to your brave effort at commenting. And knowing that your intellectual ability has been stretched to the limit just writing that comment, I will make this very short and simple for you.

    “Libertarians suck! Why don’t you crawl back into your lazy boy recliner with your dog-earred copy of Atlas Shrugged and stop polluting the web with your rubbish.”

    And this, of course, is not verbal pollution at all, right? These words from your very fine self is obviously an enlightening contribution to the intellectual betterment of humanity…

    “Every man for himself libertarianism is a shit economic theory: it will only lead to what you have today in USA: a tiny cabal of capitalists owning everything with a vast lower class of have-nots.”

    Give some facts and numbers instead of senseless ranting.

    “China, Venezuela, Chile, Germany–all have socialist or welfare state economies with pro-people programs, making life better for millions.”

    Ask the students in Hong Kong who just protested for weeks in the streets if they would prefer to live in China or in the United States. Ask the families in Venezuela who live under 50-60 percent inflation and where property rights are virtually non-existent, if they would prefer to stay where they are or move to the United States. As for Germany, check out the blog articles here about that country, and I think you’ll find that things aren’t nearly as great as you think they are.

    How Chile got on your list of socialist welfare states beats me… I suppose it’s just another example of how a socialist is so busy spewing hatred against those who disagree with him that he never has time to check facts.

    “In Germany students go to university for a tiny fraction of the cost of USA’s debt peonage university system…”

    You are yet another in the long line of socialists who think that just because you don’t pay tuitions, college is somehow free. I don’t know how you get to that delusional conclusion, but obviously you believe that college professors do not get paid for their work; that cleaning ladies empty paper baskets and mop the floors for free; that utility companies provide electricity to colleges without charging a dime for it. I hate to poke a hole in your rosy dream, but that is not how things work in real life. If it is not paid through tuitions, it is paid through taxes or through voluntary donations.

    Which brings us to an aspect of the American education system you apparently have no idea about. Those capitalists you despise to thoroughly donate huge amounts of money to American colleges and universities each year. A college in Atlanta needed a new library, so Coca Cola wrote them a check for $100 million. A college in upstate New York needed a new building for their fine arts education program, so a wealthy capitalist wrote a check for $5 million. A university in Utah needed a new sports facility, so a former student who had worked very hard and made a lot of money decided to donate the money to build it. Etc etc. Millions of Americans, wealthy or not, donate to their former colleges on a regular basis. Why? Because as they go through life they see what their college did for them, and they want others to be able to have the same experience.

    You are also totally ignorant of the fact that students from poor families have tons of scholarships to apply for. Students who do well in high school can earn merit scholarships. Many of those merit scholarships give them a free ride through college.

    Add to that the billions upon billions of tax dollars that our states and the federal government pour into our colleges each year, and you realize why we have the world’s best universities. America is still the number one destination for foreign students wanting a first-rate graduate education. Your beloved Germany does not have one single global first-tier academic institution. Why do you think that is?

    Do feel free to continue this conversation, but if you are going to do that, I must ask you to stretch your intellect just a notch farther, past condescension, insults, ad-hominem garbage and cliche-style verbal trash. I realize this may be difficult for you, but trust me, using facts, reason and good arguments does not hurt. It is worth the try. I refuse to believe that your first comment is the best you can do. If that were the case, you would undoubtedly be in possession of rather limited analytical means.