Obama’s reelection — are we on the path to Spain?

For me, the Obama acceptance speech began ominously:

…the belief that while each of us will pursue our own individual dreams, we are an American family and we rise or fall together as one nation.

It seems that Obama’s dream is a nation of people working hard as individuals, and collectively contributing their fair share towards the provision of a societal safety net, administered by an efficient government.

It’s a beautiful ideal. Who wouldn’t want to live in such a society? There’s just one problem; it simply doesn’t work. Why?

  1. Government attracts those seeking power, operates inefficiently and always becomes corrupt.

  2. The existence of a social safety net lowers the motivation of survival, and usually leads to abuse.

Free to Choose

I wish everyone would take the time to watch Milton Friedman’s series called, Free to Choose. It’s the culmination of the life’s work of one history’s most brilliant economic thinkers.

A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.

Friedman argues convincingly — through both logic and historical evidence — that socialism, while noble in concept, simply doesn’t work.

Taxing removes the incentive to invest. Through incompetence, inefficiency and corruption, only a fraction of tax receipts end up at their intended destination. The presence of a safety net creates unproductive dependency, a sense of entitlement and abuse.

The path of socialism ultimately leads to a society in which an unreasonable portion of its resources are consumed by a growing, inefficient and corrupt government. Its citizens have, by and large, become uncompetitive with those of freer nations, are suffering and have developed a deep sense of entitlement. The productive sector of the society has left, to invest its resources and capital in freer places.

The tragic irony is that this path is governed by a vicious cycle, because it’s so easy for the suffering to place their hopes in the hands of politicians who blame anything and everything except the root organization of the society itself, and promise relief from the government, funded through debt, taxes and redistribution of wealth.

Am I living in the future of the United States?

I live in Spain, a socialist country, and in a sense I feel I’m living the future of the United States.

As you’re probably aware, Spain is in dire straits. In response to an ailing nation, the Spanish government has tried social program after social program — subsidies (money) to those with children, subsidies to young people who want to rent a property, subsidies to those who take jobs far from home, subsidized loans, massive stimulus funds given to local governments, scholarships based on economic status rather than merit, free medical services for everybody including illegal immigrants, laws that protect renters, laws that protect employees.

You name it, and it’s been tried here.

What are the results? Widespread corruption. Widespread fraud and abuse. Massive inefficiencies. An economy hopelessly burdened by its debt. And a society deeply rooted in the culture of entitlement.

In my time here, I have been absolutely astounded at what I’ve seen and have personally experienced as a result of this approach to organizing society.

As a businessman, I’ve experienced the abuse of the Spanish employment protection laws. As the owner of rental property, I’ve experienced the abuse of the Spanish renter protection laws. I was once told,

You’re going to watch me enjoy this apartment’s swimming pool and not paying any rent, while you spend years trying to get me evicted.

In recent news, a nearby local town received 11 million Euros from the central government, as part of a massive stimulus plan. Of those 11 million, 10 million disappeared, and one million went to a mysterious company who was the only bidder on an infrastructure improvement project. Hardly a week goes by without the breaking of another story like this.

Only on the brink of financial collapse under the weight of its debts has the government began to implement austerity measures. And what is the response of the people, who have developed such a deep sense of entitlement? Revolt — against the government who are cutting back entitlements, against businesses and against anyone who’s in a better situation.

Just yesterday I overheard a group of people talking about burning a bank, because it foreclosed on someone who could’t pay their mortgage. It doesn’t matter that it was the bank that provided the possibility for the person to buy a home, and that that person agreed that if they do not repay the bank, they will lose their home. It doesn’t matter that, rather than saving and living frugally during the past generation, the person likely (statistically) lived a life of consumptive excess beyond their means.

And the world view reflected in this example is absolutely typical of a large portion of the Spanish society today.

What about those who could help? Well, more and more, I’m learning of capable Spanish individuals and businesses who are emigrating to other countries, freer countries, to apply their skills and resources.

Over the past few decades, I’ve gotten the sense that America is moving away from its roots as a free society and towards a model of collectivism and ever larger government. Granted, I’m viewing this from afar, but perhaps that also makes it easier to see. Sometimes I feel it’s easier to recognize where America is headed, when you already live in a place that’s just down the road.

Obama’s campaign message wasn’t that we Americans need to bear the painful consequences of a generation of excess, and move in a direction — both individuals and government — of taking more personal responsibility and creating the conditions for freer markets, incentivizing people to take risks and seek opportunities.

Instead, the message was that we’re one big family, we’ll all take care of each other through government mediation, and we’ll pay for it with debt, increased taxation and redistribution of wealth.

As Friedman pointed out, that’s a noble idea, but has never worked. America is worse off today than it was four years ago. I predict it’ll be worse off still four years from now, and over time will continue to look more and more like Spain. I hope I’m wrong.

Is this inevitable? Perhaps it is.

I often wonder why the tendency of nations towards collectivism seem almost inevitable, and I guess it’s because freedom, while a superficially attractive concept, ultimately demands personal responsibility and unavoidable accountability. It’s attractive and easy to delegate the hard parts of freedom to a government willing to make promises, and easy for us to believe that having made that delegation, we still retain the good parts of freedom.

In that respect, the free-market capitalism model which Friedman so eloquently argues is the best known system in the overall interest of a society, is one that appears to be unfortunately unsustainable in the long-run.

Footnote:

I don’t see how any average person, like myself, can claim to know how a society should best be organized. Certainly that’s not what I’m trying do in this article. What I am trying to do is simply articulate the world view I seem to have developed over time, through study, observation and experience.

6 thoughts on “Obama’s reelection — are we on the path to Spain?”

  1. Your writings describe a sad but very possible reality for the USA. I visited Spain this summer and was astonished to see the huge amount of endowments that the previous socialist government had established. Mr Rajoy and his cabinet have a very difficult situation to resolve. I pray that the USA will not follow this path, however; in my over 40 years in this country, I would have never imaging that a socialist would have been elected twice! I guess the enticement of receiving freebies is just too great to resist!

  2. Hi Matt, just read this article and wanted to give you my share: Although coming from a social democratic country and being raised in that manner I think many things you say are right. But I guess the key-comment in your article is also the weakness of the American model: You imply more or less that rich people will only do “good” things with their money. But the reality is, that without governmental control, the rich are becoming as corrupt as many administrations are.

    In fact, it’s the rich who are already misusing the governments by corrupting them big times at the moments. Facing countless corruption cases here in Austria becoming public I must say that it’s only banks and big industries paying the money to get what they want. Why don’t they invest it in other things? Because they pay too much tax for it? I doubt that.

    Still, as you, I don’t have a clear vision of how our society has to be organized so everyone is free to work successfully and live a prosper live. But total economical freedom might also not be the answer.

    Cheers! Bernd

  3. Hi Bernd!

    What specifically do banks and big businesses want from government? They want things like trade protection and favorable regulations, which give them advantages in doing their business.

    Milton Friedman was against government being involved in such activities in the first place — i.e. he was against government providing anything to business that upset or distorted the natural mechanisms of the free markets.

    It would seem like the answer to addressing government corruption by businesses could only be found in having smaller, not larger, government (less activity to corrupt).

    1. I’m totally with you regarding the downgrading. But I guess there will always be some sort of regulations and governments. Therefor there will always be corruption financed by industry and banks. The question is: Has our “free market” the moral backbone to regulate itself in a way it’s healthy to our society?

  4. It might seem counter-intuitive, but the Friedman model is based on the assumption that everyone will act in their own self-interest, in cooperation with others doing the same. It doesn’t require a moral backbone.

    I’d really recommend viewing the Free to Choose videos. Friedman does a far far better job arguing these points that I ever could. They completely changed the way I view things. Same thing happened with my Spanish wife, and several friends here in Spain who watched them. It would be interesting to hear how you feel after watching them.

Agree? Disagree? What do you think?