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The Government of Greece recently engaged in a spree of state spending
that led to that country's current fiscal crisis. Spain, Portugal and
Ireland are not far behind Greece in terms of government
spending, to the point of undermining the long-term values of their
respective currencies. The economic lesson from Argentina, Japan and Greece is that government spending offers no guarantee of renewed
long-term economic growth in the unsubsidized private sector. That is
the sector that historically has created opportunities for long-term
employment, during times when interest rates may have reflected actual
events in the economy.
Western economies will
remain stagnant and even contract until the United States Federal Reserve shuts
off the printing presses and allows the American economy to self-correct, as
happened following the stock market meltdown of 1920. Continued printing of
currency merely delays an inevitable market correction and increases the
severity of that correction. The state of the economy in Zimbabwe illustrates
how unrestrained printing of currency ultimately undermines a national economy
to the point where civilization itself begins to break down. Several survivalist
websites have appeared in the USA, advising people to take greater personal
initiative to prepare to live through greater economic challenge in a stagnant
or contracting economy.
As much as governments
may want to discourage underground economic activity, such activities as people
growing a portion of their food in pots or on small parcels of land, not to
mention bartering, may soon become a strategy of survival. Up to 90% of India's
population may be employed in that nation's unofficial economy. No government
program could create official employment opportunities for massive numbers of
people in a private sector economy. In India, people did it for themselves.
Perhaps the lesson from India's unofficial economy may serve as a guide for
populations in other parts of the world where excess government spending either
ruined national economies or seriously incapacitated the ability of their
private sectors to function.
A think tank announcing
that a government stimulus package created jobs could just as easily have been
made in Argentina, Japan, Greece and Zimbabwe after their governments
initiated state spending programs. In the short term and in the short term only,
economic data certainly suggested that state spending was creating employment
opportunities, business opportunities and a range of spectacular economic
results in what appeared to be dynamic and flourishing economies. But the
illusion of prosperity dissolved into economic breakdown, leaving the economic
model from India as one of the few options for certain segments of populations
to survive. At some time in the future, a substantial segment of the population
of many western nations may also need to follow India's economic model to ensure
their economic survival.
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There is a political purpose to a government commissioning a study to determine
if a public works program actually created jobs. People who have some basic
free-market economic knowledge know the history of public works programs. They
have a specific purpose, that being to create jobs over the short term.
Ontario will likely hold a provincial election in 2011, and the minority federal
government could literally be thrown out of office at almost any time, depending
on the opposition parties. The timing of the public announcement that the public
works program has created jobs may extend the term of office of the federal
government. The duration of the short-term public works positions will remain to
be seen. Perhaps the eminent think tank will make another announcement just
prior to Ontario's expected provincial election.
