From independence, freedom and truth

Economy

The Welfare State: a fraud

Fernando del Pino Calvo Sotelo

June 13, 2013

In May 2010, our then President Zapatero announced in sheer panic (but, like The Joker, without losing his everlasting smile) that pensions would be frozen for one year without being adjusted for the CPI, thereby losing purchasing power. Foreign leaders, it seems, warned him of the importance of basic algebra if an immediate default was to be avoided. The minority leader in Congress at that time, today President of the government, was only too happy to seize the opportunity and spread his populist wings harshly criticizing such a “cutback in social rights”. He also reproached the ever smiling Zapatero that he had not cut first other expenditures, including a “total revision of all subsidies (…), elimination of unjustifiable ones (…) and a complete restructuring of public expenditure aimed at tackling the overlapping and duplications between (national, regional and local) administrations”.

Three years later, and a year and a half into his first term after winning the elections by a landslide, the current government is yet to identify a single duplication, has seldom touched subsidies even with kid gloves and has flatly refused to reduce the size of the State (that is, its fiefdom) to a sustainable level. This immobility notwithstanding, it has followed the customary path of asking an Expert Committee to examine the viability of the public pension system, the goal being not to freeze them for a year but to probably reduce them forever. The survey, aimed to be taken seriously, states the unsustainability of the current system and proposes some formulae to link the pensions to both life expectancy and financial reality over a complete economic cycle. However, the Committee, restricted by its mandate, stops short of going to the root of the problem.

And the root of the problem is that the pay-as-you-go system brought about by our Welfare State is a fraud. Now the taxpayers are starting to understand that, after spending a whole lifetime paying up to 40% of their payroll to Social Security, anything but security is what they’ve got, as they don’t have a clue either of the pension they are entitled to receive or for how long they might get it.

They have discovered that they have no control, no contract, no legal right to defend in a Court of Law. The harsh reality is that they do not have a single damn paper allowing them to claim anything from anybody. All they’ve got is a bunch of empty promises made by politicians which, we will probably agree, are of little value. Only too late have they begun to understand that they surrendered the power over their retirement to a foreign someone. In exchange for a promise of security (remember, Social “Security”), they yielded their saving capacity, their liberty and the control over their own lives, falling into the same trap that the socialist-communist temptation conceived in the 20th century: “hand me your freedom and I’ll provide you with security”. As was the case then, they have ended up losing both.

The Welfare State never had the goal of protecting the weakest, those temporarily or permanently unable to take care of themselves. No, no. Its hidden goal always was about perpetuating the power-holder in power. Under the excuse of an altruistic aim (which would be supported by any warm hearted individual), it directed its tentacles to the population as a whole, because the weakest, by definition, are only a minority of voters.

This wolf dressed in sheep’s clothing has left a few victims along the way, of which I will just mention two. Its first victim has been the citizenry as a whole, which has been pushed to become State-dependent. The famous historian Alexis de Tocqueville traveled to the United States at the beginning of the 18th century, when this country only counted a few decades of life. A keen observer of the effects of the American revolution and a great admirer of the truly free society he encountered there, he immediately realized the nature of the Beast. He wrote that the American Republic (the Founding Fathers always avoided the word democracy) would endure “until the day Congress discovers that it can bribe the public with the public’s money”. The fruit of that bribery is the Welfare State. Politicians bribe us offering, every four years, to reduce taxes or increase public services in exchange for our vote: “free” education, “free” healthcare, “free” infrastructures. We accept the bribe and become addicted to public money, which never appears to come from our own pockets, but from the neighbor’s. The people end up being intellectually anesthetized and morally corrupted by both the adulation and the addiction. We criticize the politicians’ lies, true, but at the same time we reject anyone who refuses to flatter us as voters. Would we vote for someone telling us that any healthy adult is responsible for his own life through his own personal efforts and not through his neighbor’s? Someone making it clear that if we want a good or a service, regardless of the nature of the provider, we should pay for it on the spot because there is nothing for free? Someone stating with a firm voice that the same as Nature did not distribute talents evenly, there could only be equality before the Law but not equality of opportunity or equality of outcome? Would we really vote for someone like that?

A second victim will be the next generations, because the Welfare State has turned out to be a true generational theft. For some years it lived off increasing taxes to unthinkable levels. When these taxes, though nearly confiscatory, proved insufficient, it managed by getting into debt, huge amounts of debt, which might already be impossible to repay. We have enjoyed spending our children’s and grandchildren’s money.

A very subtle collateral damage of the Welfare State has been the family. Substituting it as the individual’s safety net, it has weakened the roe of stable family relationships. Also, by completely eradicating the perceived need of saving for the future (don’t worry, the State will provide any necessary means), it has incentivized short termism and irresponsible behavior, and children, who used to be the elderly’s support, have become a burden to be got rid of – even preemptively and remorselessly eliminated before being  born. Thus, the Welfare State has accidentally contributed to its own demise by killing its very hope of survival, that is, a normal demographic pyramid. Like any Ponzi scheme, the system depended on the constant entry of new clients, now a dry channel.

We are living the downfall of this fraud. The die is cast. As happens with most of its Western counterparts, our government remains blind to the fact that the Beast’s days are numbered, and persists in its mistake of keeping it artificially alive for a little longer through tax increases that are putting the country close to the boiling point. What we need, though, is a totally new system, but this is a challenge our government is definitely not up to. Neither is its political alternative (if such a thing exists these days).

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