海角大神

鈥淲hen you visit India鈥�and I suppose it is true when you visit China or Brazil too鈥�you don鈥檛 even notice at first鈥�it鈥檚 not so much a thought鈥�but more like a feeling鈥︹��

We were explaining to colleagues why it鈥檚 the end of the world as we have known it.

Back to that in a minute鈥�

The Dow rose 102 points yesterday. If this keeps up we鈥檙e going to have to amend our view.

In our way of looking at things鈥�we are still in a prolonged bounce following the big drop of 鈥�08-鈥�09. Stocks have yet to realize that the economy is in a depression. Yes, we know it doesn鈥檛 seem much like a depression. Even we have stopped using the term鈥�

Now we鈥檙e calling it 鈥淭he Great Correction鈥濃��in which we鈥檙e expecting a number of things to get sorted out 鈥� including the stock market boom from 鈥�82-鈥�07鈥�the post-鈥�71 dollar-backed monetary system鈥�and the huge credit expansion that goes all the way back to 1946.

But that鈥檚 not all. It could be that this period will correct the whole, extraordinary surge in Anglo-Saxon power that began in the 17th century. English speakers have been on a roll since Sir Francis Drake defeated the combined armada of Spain and France in 1588. Soon after England began putting together her empire鈥�and then, the industrial revolution turned Britain and America into economic powerhouses.

In addition to reducing asset prices and de-leveraging the economy, The Great Correction could be reducing the relative power and influence of the English speaking peoples. We don鈥檛 know鈥�but that鈥檚 the way it looks now鈥�

Returning to our conversation鈥�

鈥淥f course, things are a mess in Mumbai鈥�I mean, the traffic is terrible鈥�the heat is appalling鈥�there are people who look like they haven鈥檛 eaten in a month鈥�

鈥淏ut you can鈥檛 help but notice that India is moving forward. It鈥檚 chaotic; it鈥檚 uncomfortable; it鈥檚 unpredictable鈥�but it is going ahead. People are young. Buildings are new. There are new cars on the road鈥�and new shops opening up.

We saw a couple of Tata Motors鈥� new Nano cars 鈥� cute little cars that sell for only $2,500. But there were dozens of car varieties we never see on American or European roads.

鈥淵ou can鈥檛 help yourself鈥�you begin looking into the future鈥�and imagining what it will be like when they finish a bridge or complete a road鈥�or demolish a slum鈥�or find new ways to do things鈥�new ways to get along with one another鈥�and new ways to run the country鈥�

鈥淭hen, when you come back to France or America, you鈥檙e suddenly back in the past. It鈥檚 a relief, because everything seems familiar and orderly. Like a museum. But it鈥檚 a let-down too鈥�because you鈥檙e back to dealing with old problems鈥�old people鈥�and old institutions. While the emerging economies look ahead鈥�the developed ones look back.鈥�

What is this health care bill? Is it a new way of making the future better? Or is it an old solution to an old problem? The feds first considered a takeover of the health care industry during the Roosevelt administration. They鈥檝e been working, planning, plotting their way towards the same objective ever since 鈥� for 80 years.

And what they鈥檝e finally gotten is yesterday鈥檚 bad solution to yesterday鈥檚 problem.

The nation state was invented by the French at the beginning of the 19th century. By the middle of the 19th century, Otto von Bismarck added the refinements that we know today as the modern welfare state.

And now鈥�as every welfare state in the world faces decline and bankruptcy鈥�America has completed its collection of welfare state essentials 鈥� with a national health care system.

Why are the old welfare states going broke? Because the payoffs to the past have become too great. There are too many old people who expect pensions and health care. There are too many old industries that, like patients in a mental hospital, need to be cared for. There are too many bailouts鈥�too many subsidies鈥�too many protections鈥�too many safety nets.

Every society is a pact between the future and the past. A new society looks to the future. An old one looks back at the past. As a successful economy matures it owes more and more for things that have already happened. China builds new high-speed railways, for example, while in the US we鈥檙e still paying Amtrak鈥檚 losses of the last 40 years.

Over time, more and more special interests, anglers, parasites, leeches and lobbyists get a grip on a financial system. They find ways to take advantage of it鈥�to exploit the system for their own ends. Trade unions, business groups, the rich, the poor, the middle classes 鈥� everybody wants a benefit.

The health care act is not a bold new initiative that will lead the country forward into a new era. It is 2,400 pages of payoffs to old interests 鈥� payoffs to senators and congressmen for supporting the bill, payoffs to the pharmaceutical industry, payoffs to organized labor and insurance companies鈥�payoffs to groups that were set up many years ago.

The benefits go to the past; the costs go to the future. Even if the economy were running at normal speeds, the deficits of the world鈥檚 leading welfare states would still be increasing. Only 10% of current deficits are related to 鈥渟timulus鈥� efforts. The rest is payoffs鈥� To organized interests representing the past.

In the US, Federal debt is expected to reach 140% of GDP by 2014. In the G7 countries as a whole, debt-to-GDP will go over 100% just two years from now.

The welfare state model is no longer the model for the future. It鈥檚 a model for the past鈥�that will soon be defunct.

.

------------------------------

海角大神 has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.