Virtually every Western Democratic Government is insolvent.
Virtually every Western democratic government is insolvent. And governments utilized the same practices as General Motors to reach this point.
In GM's case, poor management was exposed by Honda, Toyota and other foreign competitors. In government's case, the same poor management provided by Santa Claus politicians provided the damage. They continuously promised and implemented "bread and circuses" that could not be paid for.
Unions played a large role in the failure of GM. Public unions are playing the same role at all levels of government, especially below the Federal level. Around the world they have driven wages, salaries and benefits ahead of the private sector. In the US we hear the stories of police or firemen in some municipalities retiring on more than they made during their highest earning years. It is estimated that state pension programs in the US country are underfunded by $2.5 Trillion. Municipal pension programs are in worse shape.
As a personal example, I taught college for 5 years in the University of NC system. As a result, I "earned" full retirement benefits. There was no pension, because we had 401Ks. I "earned" fully paid medical premiums for as long as I live (or the state's finances hold up). I understand that the same requirement was in place for teachers at all levels. (I believe it was changed last year to require an "inhumane" 10 years to qualify.)
All countries have instituted welfare systems for their citizens that promise more than they can deliver. In the US, we have the Ponzi schemes known as Social Security, Medicare and Medicaid at the Federal Government level. The deficits in these programs alone exceed the entire wealth of the country. (See Spiraling to Bankruptcy for more details.)
The US unfunded liabilities are intractable and will bankrupt the nation unless these programs are drastically modified. Other Western governments have made the same Faustian bargain with their citizens/public unions. The New York Times discusses problems in Europe:
According to research by Jagadeesh Gokhale, an economist at the Cato Institute in Washington, bringing Greece's pension obligations onto its balance sheet would show that the government's debt is in reality equal to 875 percent of its gross domestic product, which is the broadest measure of a nation's economic output. That would be the highest debt level among the 16 nations that use the euro, and far above Greece's official debt level of 113 percent.
Other countries have obscured their total obligations as well. In France, where the official debt level is 76 percent of economic output, total debt rises to 549 percent once all of its current pension promises are taken into account. And in Germany, the current debt level of 69 percent would soar to 418 percent.
Politicians everywhere appear to have a spending gene unlike ordinary citizens. Of course they are spending our money rather than their own, so perhaps it is not a biological condition. Regardless, there is enough evidence across enough countries to proclaim a universal truism: Politicians will bankrupt whatever they touch.
I cannot think of anything that could be deemed a governmental success. That does not mean that certain programs are not popular (most are). It means that they are inefficient and too costly in comparison to other ways that they could have been implemented. I know of no exception anywhere!
It is easy to come up with failure upon failure. Why do we continue to allow these boobs to ruin everything they touch? After too many years of this nonsense, the fiscal survival of many countries is threatened.
Monty Pelerin www.economicnoise.com