Tuesday, June 8, 2010

Column: Governments Are Destroying Democratic Capitalism

These are the personal views of Peter Morici, a professor at the University
of Maryland's Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Democratic capitalism is in eclipse.

From Berlin to Tokyo, governments struggle to instigate enough growth to pay
their bills and gainfully employ workers. Meanwhile China enjoys breakneck

Democratic capitalism is not flawed. Rather, government policy makers are
destroying a system through deception, delusion and abuse that took mankind
from dark feudal superstitions to cracking the secrets of life.

From Athens to Sacramento, Calif., politicians have deceived voters by
telling them pension systems can be constructed allowing retirement at ages 55
or 60. Whether funded by savings and investments or taxes, no solvent pension
system is possible that permits educated professionals, unionized workers and
government employees, who get most of the income and benefits, to work only 30 or 35 years and retire for another 20 or 25 years.

In the U.S., President Barack Obama has convinced American families earning
less than $250,000 a year they can have guaranteed health care that costs 50%
more than what Germans and Canadians pay, and double what the British shell
out, without paying a dime in additional health insurance premiums and taxes.

To make that work, he will have to start selling shares in the Brooklyn
Bridge; thankfully New York Mayor Michael Bloomberg owns it.

Sadly, after Greece defaults the dominoes won't stop in Berlin but rather in

Politicians have deluded themselves into believing an education system that
encourages young people to "find themselves," instead of "finding something
productive" will give society enough scientists and engineers to solve the
tough problems needed to perpetuate growth. They have deluded themselves into
thinking that professors spending six hours a week or less teaching and the
rest thinking great thoughts or verbally pistol-whipping the society that
supports them is somehow wealth-creating.

Finally, free markets can't be wholly free but from Tokyo to Berlin national
leaders have peculiar notions about who should compete, who should be regulated
and how.

Most national leaders, having been educated in squeaky-clean environs like
Harvard University, the University of Oxford and the University of Tokyo,
believe anything created by hand, other than through a computer keystroke or
cooking an exquisite meal, is somehow unworthy of Western postindustrial

Hence, they have granted virtually free access to Western markets for
manufacturers from China. For its part, China maintains high tariffs and other
arcane import barriers on Western products, subsidizes exports through an
undervalued currency, and offers other inducements to keep Chinese products
artificially cheap on world markets. China grows at 10% a year, and the West
sheds millions of "unworthy" manufacturing jobs and stagnates.

Meanwhile, in New York, London and elsewhere 30-year-old MBAs pull down
bonuses of $1 million, $10 million and $20 million a year for trading
securities that really don't exist and creating havoc that has cost U.S. and
European governments upward of $4 trillion to clean up.

Simply, on Harvard Square and at King's College, where tenured professors
define our values, remember where Obama learned about law and economics. The
intelligentsia has decided IT entrepreneurs, financiers and Hollywood stars
should be paid more than God.

The rest of us, suffering this abuse, should be satisfied with low pay,
unemployment benefits and subsidized health care, all paid for by borrowing
from the Chinese.

From Obama to German Chancellor Angela Merkel the system is suffering from
delusions of grandeur, self-deception and good old-fashioned abuse by leaders
who address the world as Ivy League intellectuals think it should be, rather
than how the facts of physics, demography and economics define it.

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