"Decline and Fall of the West"

Europeans thrilled to the re-election of Barack Obama. Slouching toward financial ruin old Europe has received a vote of confidence from America.

If the center of world economy continues its seemingly inexorable move toward the East, America and Europe will be manning the same life boat.

In two of her London Telegraph columns, Janet Daley explained what happened. Links here and here.

She began by analyzing why Europeans were such great supporters of Barack Obama:

The United States is now officially one of us: an Old World country complete with class hatred, ethnic Balkanisation, bourgeois guilt and a paternalist ruling elite. And it is locked into the same death spiral of high public spending and self-defeating wealth redistribution as we are. Welcome to the future, and the beginning of what may turn out to be the terminal decline of the West.

She continued:

The United States has now acquired an electorally powerful liberal bourgeoisie who are convinced, as their European counterparts have been for several generations, in spite of all evidence to the contrary, that public spending is inherently virtuous, that poverty can be cured by penalising wealth creation, and that government intervention can engineer social “fairness”. But just when some of Europe’s political class has begun to appreciate the dangers of this philosophy – that taken to its logical conclusion, it leads to economic stagnation and social division – America seems to have decided that it is the quintessence of enlightened sophistication.

The truth lies in the numbers.

In Daley’s words:

… present levels of public spending and government intervention in the US, Britain and Europe are unsustainable. The proportion of GDP which is now being spent by the governments of what used to be called the “free world” vastly exceeds what it is possible to raise through taxation without destroying any possibility of creating wealth, and therefore requires either an intolerable degree of national debt or the endless printing of progressively more meaningless money – or both.

What went wrong? While fighting and winning the Cold War against totalitarian socialism, Western nations, beginning in Europe, decided that they could spend the fortune created by capitalism to create their own utopia.

They were competing with Communism in terms that were congenial to Communism but not to capitalism. They were trying to create the better utopia. 

They wanted to wring the risk out of the system and create a world where government would ban inequality and injustice.

Daley explained:

Having won the Cold War and succeeded in settling the great ideological argument of the 20th century in favour of free-market economics, the nations of the West managed to bankrupt themselves by insisting that they could fund a lukewarm form of socialism with the proceeds of capitalism.

The new capitalism wanted to redistribute income. It was no longer about safety nets but about providing a decent standard of living for everyone.

Citizens were treated as though they were trust fund babies. By Daley’s analysis, America had lost its self-reliance. Previously, children of the rich were forced to go out to earn their own way. Living off of Daddy’s riches was considered to be dishonorable. Now it’s hip and cool.

She wrote:

 Capitalism would only be tolerated if government distributed its wealth evenly across society. The original concept of social security and welfare provision – that no one should be allowed to sink into destitution or real want – had to be revisited. The new ideal was that there should not be inequalities of wealth. The roaring success of the free market created such unprecedented levels of mass prosperity that absolute poverty became virtually extinct in western democracies, so it had to be replaced as a social evil by “relative poverty”. It was not enough that no one should be genuinely poor (hungry and without basic necessities): what was demanded now was that no one should be much worse (or better) off than anyone else. The job of government was to create a society in which there were no significant disparities in earnings or standards of living. So it was not just the unemployed who were given assistance: the low paid had their wages supplemented by working tax credits and in-work benefits so that their earnings could be brought up to the arbitrary level which the state had decided constituted not-poverty.

Of course, the new way is the Obama way. Having voted for it, America will be paying for it. 

Capitalism is, by its nature, dynamic: it creates transitory disparities of wealth constantly as it reinvents itself. Fortunes are made and lost and, as old industries are replaced by new, the earnings that they create rise and fall. Punishing those who exceed some momentary average income and artificially subsidising those who fall below it – as well as providing for a universal standard of living which bears no relation to merit or even to need – has now reached the unavoidable, unaffordable end of the line.

Daley is not wholly pessimistic. Perhaps in four years the American electorate will come to its senses. By that time, however, we will be living in a new America.