Thursday, August 18, 2011

Put people ahead of profits, Pope says

Over the past several months, I have been learning more about economic theory, and have been especially influenced by Milton Friedman and Thomas Sowell. They are economists who are very concerned about helping the poor and improving the lot of ordinary people. So it may surprise you to know that they advocate free market capitalism and the end to artificial barriers in trade.

I have not heard the pope speak directly, but his words are being widely reported. The pope allegedly condemned the profit-at-all-costs mentality and in fact cited it as a cause for the economic woes experienced in Spain. However, I must disagree with this stance. No system to our knowledge has done more to help the low person on the totem pole than capitalism. All other systems have failed the poor. On the other extreme, we have communism, where millions of poor people perished, with so much waste and mismanagement.

On the other hand, we see the effects of capitalism in Hong Kong, a desperately poor rock at the tip of China, once overwhelmed by poverty. The British took over and allowed free-market capitalism to reign free. The government did not offer support of benefits, just enforced basic laws. The result: the average person gained in wealth, and some individuals became extraordinarily wealthy.

The problem in Spain is not capitalism, but the leftist policies that have been adopted. In 1996, José María Aznar became Prime Minister of Spain. He enacted many conservative economic policies. The unemployment rate plummeted to 7.6% (compared to today's 20%).

Aznar moved to privatize many previously government-owned entities to increase efficiency.

Aznar also faced the powerful civil servant unions and froze their wages. This of course sparked their ire and protests ensued. But it was a good economic policy. Less government is the key.

The prime minister also attempted to help people by ending the tax-payed subsidies on the coal industry in the country. This would allow cheaper fuel to enter into the market and thus people would need to spend less on it. This would increase the real value of their money. Unfortunately the coal mining companies dramatically protested this and blocked off all the highways. This effectively ended the debate, but the people were all worse off for it, except maybe the coal miners.

Later, the government tried to end farming subsidies, which would benefit everyone except farmers in the short term. Also, they tried to adjust the welfare system so that it would be harder for recipient to turn down jobs. These reforms were met with violent protest and thus never got off the ground.

The government also attempted to pass legislation that would allow more choice in schools and would be based on merit, etc. People again reacted against this proposal, as they believed it might lead to some arbitrary "inequality".

There are so many socialist problems happening in Spain at the moment. Unions are far too powerful and there is too much government intervention. The problem is not with free-market capitalism. A free market system would allow people to get the best prices for products and services, not pay artificially high rates. Exports would increase and unemployment would go down. People would be better educated because they would have free choice in schools, and thus increase the wage they could earn.

It seems the only reason Spain is in the economic mess that it is is because of its socialistic economic policies.

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