Capitalism Returns... with a Vengeance

Remember all the stories about how free markets had failed and how capitalism was doomed? They peppered the opinion pages and the left wing blogosphere for months in the aftermath of the2008 financial crisis.

These stories were everywhere, to the point where you might have believed that Paul Krugman had been cloned and cloned and cloned again.

If you do, I'm sure you also remember all the stories about how only government could save us from capitalist greed. So we elected Barack Obama, a man who would help us to socialize the losses in the banking system, take over the automobile industry, move toward nationalizing the health care system, regulate the markets, and implement government spending programs that would pay out generous salaries and benefits to the unionized workers who had sent him to the White House.

The drumbeat for government control was so strong and so strident that, at first, only a few had the courage to stand against it. Didn't we all want to become like the great social democracies of Europe, with their socialized medicine, daily siestas, and six weeks of paid vacation?

In the past few weeks, this European democratic socialist worker's paradise has been revealed to be a fraud, a sleight of hand, a pipe dream, an exercise in rank denial and living beyond your means.

And when you deny reality, by pretending that you can live beyond your means forever and a day, then reality is going to come back to bite you.

Everyone knows that the great European social democratic experiment has failed. The governments of Southern Europe-- the Club Med governments-- are broke. Their efforts to engineer social justice, to provide salaries and benefits beyond what the economy could sustain, have turned out to be a racket taxing the productive segments of the economy and handing out favors to those who were not being motivated by profit.

Now, the world seems to have woken up to reality and responsible leaders have started to try to undo the ill effects of these experiments in social democracy.

In America, the Tea Party movement has struck a blow for fiscal sanity. New Jersey Governor Chris Christie has become a hero for many by cutting spending and refusing to increase taxes. Better yet, Christie stood up to the public employee unions whose contracts were bankrupting the state.

Now, to the surprise of many, Andrew Cuomo, Democratic candidate for governor of New York, is running his campaign on the same principles that have defined Gov. Christie's administration.

Even better, in Europe, the home of social democracy and experiments in engineering social justice, the same thing is happening. One can only hope that it is not too late.

As Andrew Roberts writes in The Daily Beast, governments all over Europe are responding to their financial crises by enacting policies that remind him of Margaret Thatcher. Link here. Speaking for educated European opinion, Roberts declares: "Instead of embracing socialism, we are all Thatcherites now."

What are these European governments, led from the left and the right, doing? Why, they are cutting spending, raising the retirement age, and reducing salaries of unionized civil servants.

To Roberts this is: "the last gasp of a dying leftist ideology." As he sees it, the Great Recession that was going to break the back of capitalism has actually revealed the ultimate failure of left wing quasi-socialist schemes.

But if Papandreou and Zapatero and Berlusconi and Sarkozy and Socrates and Cowen have figured it out, how long will it take Barack Obama to catch on? How long will it take him to realize that his free spending, government controlling, income redistributing policies are putting us on a pathway to European-style doom?