Why Europe (Social-Democracies) Will Fail

First, we must clearly define what exactly a social-democracy is. Considering that they are relatively recent inventions, attributing a concrete definition can be difficult. This is what we do know: The social-democratic state is exclusively a European invention which began to emerge in the 1870-1880s (and fully in the 1950s). It typically has high personal income tax rates and numerous social programs (such as socialized medicine (universal healthcare), “free” education, “free” public transportation, low or moderate levels of defense spending, massive infrastructure spending, nationalized corporations and industry, Keynesian economics, etc... Social-Democracy sounds great right? In fact, the social-democracy has prostituted itself, harm of posterity. The nation, tempted by its own momentary greed and lusts, seeks the whore of irresponsibility. Though the time spent with it is pleasing and intoxicating, the light of the following day reveals the resulting sores and rashes. They are indeed painful. The social-democratic state is thus doomed to fail, as manifested in the current European debt apocalypse (along with similar symptoms caused by similar causes in the United States)

When planning for the financing of new or additional spending within the state, the foremost question is from where it will be derived. Typically (and historically) funding is acquired by means of taxation primarily on corporations and the wealthy. Corporate and individual tax rates are increased in proportion to the cost of the program – the greater the expense, the greater the increase. Often, “luxury taxes” on items such as boats, jewelry, cars, exotic wines or specialty foods, personal planes, Havana cigars, etc… are instituted or increased. Also, additional fees on virtually all forms of wealth (or the management of wealth) are instituted or increased.

Once such targeted fines are tolerated by the wealthy for a prolonged era, or period, the number of rich ultimately decreases as the number of middle-classers increase. Eventually, the former rich evaporate into the middle-class. Corporations take substantial hits as well. Lay-offs en masse, reduction of products/services, relocation to less costly regions, decline in product/service quality, etc… are very possible. No matter which one (or combination of some) occur, the state’s economy and citizenry will necessarily suffer.

After annihilating the wealthy and profitable corporations, the state will ultimately find itself at a loss of funding for the social programs and will most likely have developed a large national deficit due to the increased drop in funding (due to the now non-existent wealthy)  over the years.

The beneficiaries of the social spending will rebel, blaming the former rich, formerly profitable corporations, or even the state for their reduction of services or goods previously provided. Once this point is reached, four possible scenarios could result:

1.)    Programs would ultimately run out of funding (if continuing on their current path) and thus be abandoned. From here, reforms to the social-democratic system could follow. This development is unlikely, for people will not relinquish their “free” goods or services without a fight. After all, workers of the world unite, right?

2.)    A nationalization of industry could take place coupled with universal price controls set by the central government. One hundred percent of corporate profits would be absorbed into the state to pay for social program spending. Ultimately, (because of the nationalization) private property would be taken by force by the state. The price controls would result in rationing and the general population would greatly suffer because of this artificial man-made system of constant shortages. If

food and medicine are rationed, famine and disease would flourish. (study the Soviet Union for a prime example).

3.)    The state would seek to rapidly increase the money supply by printing more fiat currency (paper money). Once the enormous sum of paper enters the economy, hyperinflation ensues. All wealth would be destroyed or greatly diminished. Banks will fail because now everyone can easily pay of their loans and have no need to borrow money anymore because of their increase in paper money. Historically, hyperinflation has resulted in economic collapses and massive depression (see Weimar Germany, Yugoslavia, Zimbabwe, Hungary, and Greece for prime example. In Hungary, a loaf of bread that cost $1 at 9:00am Monday would cost $2 by midnight (Monday), $4 by 3:00pm Tuesday, $8 by 6:00am Wednesday, $16 by 9:00pm Wednesday, $32 by noon on Thursday, $64 by 3:00pm on Friday, $128 by 6:00am on Saturday, $156 by 9:00pm on Saturday, $312 by noon on Sunday. Within a week’s time (because of the inflated money supply – hyperinflation) a loaf of bread went from selling for $1 to $156. This is in one week. Imagine, now, how bad it would have been in Weeks Two, Three, Four, etc... This is how economies are collapsed. To help people pay for food and other goods, the state prints more money which makes the hyperinflation worse, thus they have to print more money to help people pay for goods… The cycle progressively gets worse).

4.)    The most radical of all the options would be to abolish wage labor (people don’t get paid to work anymore), nationalize all industry, and adopt state socialism (everyone works for the government and gets everything they need from it (unless you're a political enemy or there’s rationing!)). Government propaganda would espouse nationalist sentiment to promote national economic restoration and growth. The country would halt all importation of foreign goods and would greatly stress the exportation of goods (sometimes creating rationing by exporting non-surplus goods. Other times, they would only export their surplus, if any). Imagine the Soviet Union with an ultranationalist culture.

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http://en.wikipedia.org/wiki/Hyperinflation

http://en.wikipedia.org/wiki/Hyperinflation#Worst_hyperinflations_in_world_history