Wednesday, June 15, 2011

The Choice is Welfare or Wealth

Economist Allan H. Meltzer has an excellent article in today's (June 16, 2011) Wall Street Journal opinion pages entitled A Welfare State or a Start-Up Nation? (article also available on the Web) in which he clearly lays out the economic and policy choice the United States is faced with.

We can either continue on with the tax, borrow and spend polices favored by the Obama Administration and its supporters or return to policies that encourage economic growth.

Meltzer makes the point that, while the redistributionist policies favored by the Obama Administration and the left are backed by good intentions to help the poor and less fortunate in society, these policies have never worked.  It has been the free market growth policies which have lifted millions of people out of poverty in recent decades and in times before that in the places, like the United States where free markets were allowed to flourish.

The United States, Great Britain and Japan all grew and their people prospered when their governments followed free market policies.

Following World Wars I and II Great Britain opted for statist, sosocialist style policies and by the 1970s had an that was approaching that of a poor, underdeveloped Third World nation.  However, the economy of Great Britain quickly turned around when Lady Margaret Thatcher became Prime Minister and immediately began instituting free market policies.

In the United States, President Franklin Roosevelt managed to turn the 1929 economic downturn into a quarter century long depression, with near zero economic growth and 25% of the workforce unemployed, by replacing the free market with his socialist style central planning.

In the immediate post World War II era Sir John Cowperthwaite spent his career as the British Royal Governor of Britain's former island colony of Hong Kong fighting off attempts by his superiors in London to impose their failed socialist policies on the colony.  Cowperthwaite succeeded in protecting Hong Kong's free market economy from Britain's left leaning government with the result that, in the years between the end of the war and the election of Margaret Thatcher, the Gross Domestic Product (GDP) of tiny Hong Kong was greater than that of the mother country Great Britain.

Then there is the rapid transformation of formerly dirt poor nations in Asia, Latin America and even parts of Africa which in the course of a couple of decades in the last part of the 20th Century whose economies were transformed from poverty to plenty thanks to government reforms that allowed the free market to operate within their borders.

Finally, there are the nations of the former Soviet Union which threw off the shackles of communism in the 1990s and today are prospering.

As a nation, America faces a choice of following the current Administration and its dream of a socialist utopia which has always resulted in an economic nightmare or a free market policy which has always resulted in a better life for everyone.

Socialist policies promise economic equality and sharing of the wealth.  But what people end up sharing is not prosperity and wealth but hardship and poverty.

The free market, on the other hand, doesn't promise economic equality and, in practice doesn't end up distributing the wealth equally.   What it does do is create wealth in quantities which make everyone better off economically.

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