The Legacy of the Social Welfare State

By Linden Blue & Herb London

There is a perfect storm emerging across the globe with Europe in the vanguard of economic and social woe. With the possible exception of Germany, every western European state is living beyond its means, ignoring the simple precept that you cannot spend what you do not have.

This is aggravated by increasing competitiveness from other parts of the world - frequently from people who are willing to earn far less than Europeans expect. The confluence of entitlements, lack of competitiveness, demographic trends and collectivist sentiment is literally changing the face of the continent.

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The protests in Greece, England and Egypt, to cite three examples, provide vivid testimonials of an entitlement mentality at odds with the essential need for productivity. For decades the entitlement psychology has relentlessly decoupled the biblical and basic understanding that in order to eat, one must be productive.
In Europe, union pressure for wage increases and political power led to a social welfare system that defied human nature and the conditions necessary for productive activity. The net result of the entitlements that emerged from the general welfare benefits is declining competitiveness, the very condition a globalized economy requires. Many people, far too many people, believe the role of government is to care for them.
In the industrialized world this state of mind is aggravated by demographic trends and the loss of the advantage an information monopoly once provided. Thomas Friedman uses these conditions to argue 'the world is flat.' Of course it is much less flat than Friedman contends since productivity in some corners of the globe has yielded disproportionate improvements in living standards.
The roiling of politics in North Africa offers additional evidence that protests about living standards are seemingly unrelated to the factors that contribute to an improved standard of living. A recent news account told of a Tunisian resident who was trying to be productive and provide for his family, but when the government seized his assets, he, immolated himself. The injustice was there for anyone to see. The need for productivity is neither seen nor understood.

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Linden Blue is a member of the Hudson Institute Board of Trustees. Herb London is a senior fellow at the Manhattan Institute and president emeritus of the Hudson Institute.

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