Wednesday, December 1, 2010

Pondering Portugal's Problems Positive For Palin's Prescriptions

Here is the challenge and clarion call from Mortimer B. Zuckerman-who else but Palin has the will and fortitude to respond to it?

What we clearly need is leadership with the will and the moral authority to govern on the basis of the long-term interest of the country
Fiscal responsibility and discipline are going to be critical issues in the formulation of public policy. The debates in this election season, sidetracked on emotional but marginal issues, have been depressing. We cannot continue to mortgage our future by reducing investments in our future, whether it be for education, infrastructure, or basic research. We still possess the most appealing popular culture and public values, as well as the most innovative and competent business culture. American exceptionalism endures. But we must confront our dysfunctional and profligate government. America was founded on the principle of creating a better life for our children and grandchildren. We can do it. We aren't doing it!

As Sarah Palin contemplates a possible 2012 presidential run she has been forward regarding America’s current economic failings and has prescribed clear remedies
These include; "In her 2009 book, 'Going Rogue,' Palin offered a remix of 1980s-style Reaganomics — low taxes, less government spending, strong dollar.” And further: Palin has recently cautioned against the Fed's policy of quantitative easing that injects printed money into the economy with the hope of spurring economic growth, but at the risk of sparking inflation. She has won some grudging praise from conservative economists”.

As a support to the overriding
philosophical/economic concepts behind Palin’s economic plans and analysis, it might be instructive if an example of how an alternative economic policy to hers might turn out. There are those on the left still supportive of the big government concept, even after seeing the miserable examples of the end result of such economic paternalism.But they never seem to learn-here's Robert Reich, a former U.S. secretary of labor, professor of public policy at the University of California at Berkeley.

"The real solution lies in changing that structure: making the taxes more progressive,..."
Yes-lets raise taxes on the entrepreneur class, that is a sure recipe for success, no doubt all Berkeley professors would agree in their tenured security. However, cautionary examples abound.

As Palin further contemplates the economic way forward it might be of value to look at the example of Portugal which is teetering on the brink of bankruptcy and bailout.

A significant Associated Press article canvassed Portugal’s current economic woes and presented the following salient aspects:

The last ten years saw an average of 1% economic growth.
Billions of Euros in government bonds will have to be refinanced next year.
The state budget deficit reached 9.3% of GDP last year with an estimated public debt of 112% of GDP.

The article then goes on to canvas some of the reasons why Portugal is in this near “failed state" situation-and they are instructive;

Portugal didn’t shed its post-revolution labour laws which made it hard to fire workers as trade unions stood in the way of attempts to modernize.
Laying off workers is a bureaucratic entanglement and entails hefty compensation payments and workers can refuse proposed changes to their working hours.
There is a bloated civil service whose members can’t be fired except for extreme misconduct.
Education and productivity levels are amongst Europe’s lowest.
Reluctance to take on risks has kept productivity low-it stand s around two-thirds of neighbouring Spain.
State-owned companies are amongst the most inefficient with massive debts.
The government forces public transport companies to keep prices artificially low and pays them compensation for their losses.

Portugal is an example of an alternative to an economic policy of market led growth. This can be summed
up as a regulated against restricted practices/dishonesty free market economy, which rewards innovation and hard work, and punishes inefficiency by letting failed companies fail.

It allows for labor market efficiencies -mobility of labor-by letting, over time, labor be employed in the most efficient, productive capacities whilst ensuring high standards of employee protection through fair labor laws which protect but don’t restrict.
It provides for limited, but watchful government, fair free trade, and progressive moves to a balanced budget.
It sees education as the best investment of all.

We are fortunate to be living at “the end of history” where we do not have to indulge in conjecture as to which economic system works best i.e. communism/socialism/capitalism, the answer is indisputably clear.The remaining argument is one of big spending, deficit creating “big government’ versus limited, balanced budget government.

The example of Portugal will, hopefully, assist in putting paid to the big government idea. It, Portugal, does serve a wider purpose however, it provides potential President Palin with a clear example of what may happen to America if her economic “common sense” plans are not put in place after 2012.

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