The disintegration of the welfare state

July 14, 2010 06:22

For Italy, and for other democracies, the worst is surely yet to come. The World Socialists’ website proclaims an age of rage ahead – and chillingly quotes British historian Simon Schama: “You can smell the sulphur in the air.”

Neil Reynolds at The Globe and Mail

Democracies produced Nazi Germany and Fascist Italy, fulfilling the expectation of Socrates and Machiavelli that democracies end in tyranny. Now democracies are fulfilling the complementary expectation of Nobel laureate economist Milton Friedman that democracies end in bankruptcy. Put a democracy in charge of the Sahara, Mr. Friedman once said, and sand itself will become scarce. Democracies are indeed profligate trustees – or have been for the past 30 or 40 years. Mr. Friedman’s primary fret, though, was the tendency of democracy to centralize political and economic power in the same hands. Most critiques of democracy reflect this elemental distrust. “Democracy is two wolves and a lamb,” Benjamin Franklin reputedly said, “voting on what to have for lunch.”

Democratic self-deprecation isn’t quite as funny as it once was. Mobs have already taken to the venerable, iconic streets of European states, notably among them Greece, birthplace of Athenian democracy. It’s apparently easier to give wealth away than it is to take it back. Democracy assembled the welfare state peaceably enough. Can democracy dismantle it as peaceably? No, it can’t. The mobs are not finished.

In a disturbing analysis titled Democracy, Debt and Disorder, prophetically published early in 2008, two Italian economists assert that Italian governments have accumulated so much debt that it’s essentially impossible to avert the disintegration of the country’s social contract. Giuseppe Eusepi and Luisa Giuriato, of Sapienza University in Rome, do not specify violent insurrection as a consequence. They do specify an end to Italy’s welfare state – and to the “disorder” that will arise when government divides the spoils.

Profs. Eusepi and Giuriato studied Italy’s history of public debt across 150 years – since the country became a unified state in 1861. They found that successive governments commonly resorted to significant debt but that they never came close to the country’s current dependency on debt, year after year, to fund current expenditures.


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