Recent elections in France and Greece have centered around the term “austerity,” generally a reference to economic policies which involve cuts in government spending, especially on public sector salaries and social welfare programs. While reductions in government spending are a good thing, the current austerity measures in Europe, and the suggestions for similar programs in the United States, will never be able to achieve the goals of reducing the size and scope of government.
Government restrictions that reduce the ability of the average person to start a business, get a better job, and save for the future must be eliminated before cutting welfare benefits will serve any purpose other than to anger the masses.
Ron Paul recognizes this fact: In his budget proposals, he has always emphasizes that cutting military spending, corporate subsides, and reducing the regulatory burden must occur first, before we begin to cut back on “welfare” type spending. To do otherwise would leave the poor with no option but to take to the streets. The key to economic recovery is not only reducing government spending, but reducing government power. The average person must be free to earn a living without the massive burden of taxation and regulation that currently favor the largest firms, which can more easily absorb state-mandated increases in overhead than can start-ups and small business.
The current economic slowdown is the result of not only massive debt, but also the long-term effects of an ever-expanding “public sector” that takes revenue from productive business and uses it to pay meddling bureaucrats and violent “law enforcers.” To the extent that “austerity” means eliminating some of these threats to the well-being of every market participant, it is a good thing. Misguided attempts to cut spending on the most vulnerable in society without freeing the economy so that they have alternate ways of making a living is asking for more riots and unrest such as we have seen in Greece recently.
The reason behind cuts is also important. If cuts are made simply to allow the government to spend the money on paying back international banks rather than an actual reduction in the size of the budget and more money in the hands of taxpayers, they will only hurt the economy. Much of the Greek bailout falls into this category, what is presented as a bailout of the Greek people is in fact a bailout of international banks. These banks bought high-risk Greek government debt, and now want the rest of the European Union to insure their risky investment does not go bad.
This is the essence of crony capitalism: socialized losses and private profits. It is inevitable in a system in which bankers (at the European Central Bank and the Federal Reserve) control the market for money. Only sound money and a long-term commitment to reducing the role of government in the lives of every person will turn around the current economic crisis. Short-sighted “austerity” is simply more of the same corporatism that got us into this mess.