“Why is the grass always greener on the other side?” If only grass could reply, the answer could be “Because you are not grazing here.” As the proletariat class across the world celebrates Mayday, they wonder about what to do with the new class of people enjoying the fruits of their labor. This class is right among them and is not exactly the much hated bourgeois class that Marx or Engels mentioned. This is the fainéant class, those who vote for a living and expect something for nothing through the welfare state.
Welfare state, just like every other system, an empire, religion or socio economic order, started with a good intention (of lending out a helping hand to those in need) and is now ending in ruins after over-exploitation and abuse. People across the welfare state world (Europe, USA) are marching and living on the streets as austerity is pinching them, where it hurts the most, one’s wallet.
In Europe, under German Chancellor Angela Merkel’s supervision, the prices of goods and commodities continue to be stable, but paychecks are shriveling by as much as 50%. Paychecks of proletariat as well as the fainéant classes are being cut under strict austerity measures, in an effort to reduce budget deficits in all countries across the continent. The backlash to these cuts is being seen in protests on the streets and in frequent change of leadership across the legislatures in Europe. Romania’s newly elected government losing a vote of confidence in just two months is just an example of the seriousness of the situation.
In USA, under the Federal Reserve Chairman Ben Bernanke’s supervision, the paychecks are stable, but the prices of goods and commodities are rising rapidly. Inflation is being stoked by massive printing of money in the name of quantitative easing. The backlash in the form of street protests is rather subdued as inflation is being projected as a sign of growth by the wily media that has perfected the art of brainwashing the masses. The latest brainwash is “After communists (USSR) and terrorists, the new enemies of USA are the Chinese and Indians, stealing the jobs of the average Joe and Jane, consuming a lot of food and fuel, thereby pushing up unemployment and inflation here.
Globalization of wages is happening despite all efforts to stop it. When a small tank, full of water is connected to a large tank with very little water, the level of water equalizes in both. Common sense and physics, suggest that the drop of level in the large tank would be significant while the rise in level in the larger tank would be insignificant. In the labor world, the small tank represents the advanced economies (mainly of Europe and USA) while the large tank is the emerging economies in the rest of the world. Water represents jobs and the level of water in the tank represents the wages. Manufacturing sector might return to the advanced economies soon but in a new avatar of mechanization representing a jobless recovery.
Fools repeat mistakes, wise people learn from their mistakes while a genius learns from others’ mistakes but cretins repeat others’ mistakes. USA and Europe seem to have exchanged the books of mistakes and are now busy following and implementing them. About a century ago Europe had the military might and so the politicians there found some external cause for the problems of their voters and rallied troops to go to war and printed money to fund those wars which we now call World wars (I &II).
USA was not even in the top 15 nations, in a list based on military might, a century ago and so they had to look within and resort to austerity and economic depressions. The deep but quick depression of early 1920s that almost everyone forgot was followed by the Great depression of the 1930s that Ben Bernanke does not allow anyone to forget as he got his Ph.D. from studying it.
The international monetary fund (IMF) prescribed tough austerity measures during the East Asian financial crisis in the late 1990s. It was tough medicine after a painful surgery, for the people and the politicians, but it helped the economies grow stronger. However, IMF is now unable to carry out that decisive surgery (of austerity) on the ailing countries in Europe as they are their own kith and kin. The head of IMF, Christine Lagarde (former finance minister of France) and most of the members are either from US or Europe and so they are recommending a palliative called printing money (also known as Quantitative Easing, QE in US and Long Term Refinancing Operation, LTRO in Europe).
The rest of the world is unable to decide between austerity and inflation. The path of inflation would need a reserve currency (like the US dollar) backed by the military might of the world’s mightiest war machine in order to avoid a serious backlash. Walking on the path of austerity would need nerves of steel and personal sacrifice. Both of these are out of reach for the average politician in any country on the planet and so they muddle along indecisively.
The solution to this economic problem might be found in the works of the great naturalist, Charles Darwin. A predator chasing and eating prey might seem gory on animal planet (channel), but it is the way of nature. What happens when all the predators are killed or caged? The ecosystem perishes. What happens when proletariat entrepreneurs are removed from the economy? The economy collapses.
Removing the predators leads to overgrazing by herbivores and denudation of the land and finally the end of the ecosystem. In economic terms, the free market is comparable to nature. Policies such as communism, socialism or welfare state are akin to eliminating the predators. With no incentive to work and no disincentive against sloth, people tend to become overgrazing herbivores in the ecosystem or parasites on the economy as the jingoism of nationalism or a proletariat heaven that motivates people to work fades after a generation.
Too big to fail is another flawed policy at the other end of the spectrum. This is akin to the resolution “save the dinosaur at any cost”, even when food is scarce, after a massive meteorite hits the planet and raises a plume of dust high into the sky blocking sunlight for years. We are now alive and present here as our ancestor, a tiny nimble mammal survived the food scarcity that killed the dinosaur. Survival of the fittest helped humans triumph over all other species on this planet. Can we afford to lose that spirit, in the name of a welfare state?
Free market never lost a war albeit politicians throw everything they can to stop its advance. They are able to slow it down but never succeed to stop it. Greece, Italy, Spain, Netherlands, Romania and France could be next in the list of European countries capitulating. This time it is the force or the free market and not German or Anglo-American. All is not gloom and doom for the world markets. Very soon, the fainéant classes and the ‘too big to fail’ behemoths would perish and the nimble entrepreneurs would be out in the open with business as usual.
India need not worry about a downgrade by some rating agency somewhere as most of these agencies are rootless and brainless wonders with hidden agendas. It has jumped on to the bandwagon with countries like USA, France except that India is in a different wagon on the same train downhill. They were downgraded from the best (AAA) to the better (AA) class while India went from worst to junk class.
Airlines and telecom, the success stories in India, in the past decade have come to the notice of Uncle Gogoi (Grumpy/Good Old Government of India) and suitable action is being taken. A few of us might reckon, Uncle Gogoi’s old list of the rich. Anyone who owns a house, a car, a telephone, an airline boarding pass, a credit card, or a membership of any club (could soon include LIC insurance too) is deemed to be rich. I guess uncle Gogoi never forgot that list and believes that the rich can be taxed to overcome the budget deficit.
Sell in May and go away is the buzzword now in the markets. Dinakarananda would modify it as ‘Sell in May and go away with gold’ Let us remember our nimble ancestor that survived the dinosaur and the geological cataclysm to cheer up and stay hopeful in the face of inflation and taxation.
Farewell to the welfare state and long live (the optimism of) the proletariat entrepreneur. Dinakarananda wishes you a happy Mayday comrade.