Thursday, December 01, 2011

Weaning the British of the Welfare State.

Much of the televised commentary I saw on British TV yesterday, during the incredibly stupid strike mounted by the public sector unions, seemed to presume that the "welfare state" was a divine right and no matter how wasteful or absurd it became or even appeared it was in all respects untouchable. That, of course, just ain't so.

As an Englishman with sixty odd years of constant argument against the welfare state, socialism and all the other lunacies so ever-present in daily life in England, I started the day determined to steer clear of that particular topic on this blog. (I did however make another posting on EU pensions to Orphans of Liberty, but that will appear later, no doubt.

Acting Man blog, linked here, however, has headed straight for the welfare state aspect in a posting today, so I have decided to repost those particular comments here:

Meanwhile the UK faces a mass strike over its planned pension reform. So far the government's attempts to slash Britain's deficit have failed. The market still treats UK gilts as a 'safe haven', with their yields hovering close to 2%. The big question is for how long, given the deteriorating debt situation and the 'stagflation' backdrop.

As the threatened UK strike once again indicates, it is politically extremely difficult to cut the generous benefits promised by welfare states during the boom. And yet, there will be no other choice. Allen Mattich has written an interesting editorial for the WSJ in this context, „British Struggle to Live Within Their Means“.

„The whole of the U.K. economy of the past two decades or more has been built on the notion that the British are richer than they really are.
This was the underlying message in Chancellor of the Exchequer George Osborne’s autumn statement Tuesday. The debate now boils down to how the U.K. is made to adjust to this poorer state of affairs.
How did this notion of being richer than they thought come about? Largely, it was thanks to leverage. Since the mid-1990s, the global boom in leverage, but particularly among the Anglo-Saxon economies, allowed the British to spend more than they might have otherwise.
Leverage also allowed the Labour government to think it had more long-term spending firepower than it did. Booming house prices, strong consumption and a debt-fuelled expansion in the financial services industry boosted transitory government revenues.“

Tough times are ahead, not only for Britain, but the entire plethora of welfare states in Europe.



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