Rome, America, and the Collapse of the Welfare State

| June 8 2011
Christopher Cook

http://upload.wikimedia.org/wikipedia/commons/thumb/3/36/Roman_Gateway%2C_Turkey.jpg/500px-Roman_Gateway%2C_Turkey.jpg

Every so often, mankind learns a major lesson in governance:

  • The Romans learned the perils of imperial overreach.
  • The feudal system got a major upgrade with the Magna Carta.
  • Mankind continues to enjoy the benefits of the revolution in governance produced by the 18th century classical liberal enlightenment.

And there were others. I am going to go out on a limb here and predict now that humankind is about to go through another such sea change: The Collapse of the Welfare State.

All the signs are there, from Greece to Portugal to Ireland to the U.S. It's all coming unraveled, and I believe that is because the welfare state cannot work. Not that it isn't working or "isn't being done right," but because it is literally not possible for it to work. Fully socialist states have already proven to be failures. And now we are seeing that welfare-state capitalism, while more stable than socialism, also becomes unsustainable eventually.

The internal contradictions are simply too great. Those contradictions are many and their natures are multifarious, but it can all be simplified to this:

As the dependent population increases, the strain on the ever-shrinking productive population increases. Eventually, the strain becomes too great and the system collapses.

In other words, too many takers and not enough makers. I'm not even saying that as a value judgment, just a fact. It doesn't work because it cannot work. Indeed, the debt load of major welfare states shows that it stopped working a long time ago. I'll repeat:

As the dependent population increases, the strain on the ever-shrinking productive population increases. Eventually, the strain becomes too great and the system collapses.

As soon as you start borrowing to feed the welfare state, you've already crossed that line. The debt is a clear indication that the productive population is not able to support the dependent population anymore. The welfare state begins not only surviving on borrowed money, but on borrowed time.

Critics will argue that the productive population needs to be taxed at higher rates, but the Laffer Curve is an inescapable economic reality. We may disagree on where the sweet spot is on the curve. It may not even be possible to know exactly where it is. But we do know what happens at either end. Tax rates of 0% produce no revenue. Tax rates of 100% also produce no revenue. As you increase rates past that sweet spot (wherever it is) and move towards 100%, revenue falls. A welfare state that is ever-growing requires ever-greater amounts of revenue. But this revenue cannot be produced by taxation at ever-greater rates because eventually revenue will fall off.

Unless the size of the welfare apparatus is small and strictly limited to a safety net for those in serious need, its growth is inevitable. This makes borrowing inevitable, and since borrowing cannot continue indefinitely, it makes collapse inevitable.

I believe humankind is about to learn this lesson. Like all sea-changes, their nature and impact becomes much clearer in the fullness of time and history, and we may be deprived of a single, punctuating event that puts it all into focus in our lifetimes. Nonetheless, I believe that our time is that time—the time when the welfare state, writ large, collapses and lessons begin to be learned. And I fear the lessons will be hard indeed.

America's role in this process—and our suffering—will very likely be great indeed. We are the world's largest commercial empire, and until recently, it seemed like there was no stopping us. Rome was once the world's largest territorial empire, and they seemed similarly unstoppable. But imperial overreach and a host of problems back home eventually brought about their collapse. The chilling reality now is that welfare-state overreach may be what future generations cite as the factor that brought about ours.

8 comments
DarkAgeMan
DarkAgeMan

 

The prerequisite to learning from the the Roman experience is a knowledge of history; but when did a history book ever reach the best sellers list? There is a general assumption that these ancient peoples knew very little and were only a little more advanced than "bear skins and caves".

 

  The Egyptians figured out how to inoculate against small pox. Many other civilisations practiced brain operations. The Greeks worked out the circumference of the earth in the third century BC using trigonometry and the shadows of tall buildings (the "West" has never believed in a flat earth, not even in the middle ages). The general belief that  only "modern" man has known that the earth is spherical and all those before "us" thought the earth was flat is is reflection of our own arrogance, and as such stupefies us in the lessons of history.

 

But the hallmarks of our own impending demise are for anyone to see. In addition the what has been discussed, almost every country in the world is coasting towards demographic suicide. China, Russia, the Middle East, North and South America, Asia, Africa.... all following Europe... which is following the very demise of ancient civilisations before them. Coincidently, China's one child policy is likely to little to change their demographic decline: Taiwan, Singapore and Hong Kong all have far worse demographics without a one child policy. The world, many would argue, needs less people anyway. That may be true, but it's also a clear marker for end of empires and civilisations.

 

Another marker is climate change - cooling, not the warming hoax (no warming in 18 years.... and counting). Severe cooling is likely to start somewhere in the next decade and last for much of this century. It's not the temperature that is a worry (a few degrees from cooling - or even warming - is no big deal). The disruption comes from the Super Storms as the earth's poles try to balance out the temperature differences with the equator. Precipitation is also drive away from the clement regions (where more rain IS needed) and towards the tropics or northern regions (where more rain is NOT needed). Storms, too much/little rain plus cold is recipe for agricultural failure.

 

Such climate will create hardship for the USA and Europe but will prove catastrophic for China and nearby regions. This century will be one of Mega Famines. Many will believe it is the days of the Apocalypse.

 

anarchobuddy
anarchobuddy

Why wasn't the lesson learned from the Roman Experience?

Dark Age Man
Dark Age Man

In The Decline and Fall of the Roman Empire – Gibbon – it was clear the general population was unaware they were living through the collapse of their great empire. Indeed, not even those with most to lose were aware of the perilous future they were condemning themselves and their children to.

 

The same can be seen today, whereby Boomers expect younger generations to pay for their own largesse while showing no shame in spending the family wealth upon themselves with long holidays and high living, often with the unabashed stated purpose of leaving nothing to their children. Democracies worldwide are having a topping-out parade, as each one reaches the cliff of their debt burden. And yet not a single one in line has been able to reduce it's spending, let alone hold that line.

 

Those who rely on such bankrupting states will also be bankrupted by them. We are marching to a certain Dark Age and yet no one is aware – not in the media, rarely in blogs, not in general conversation. Even if one were to convince a hundred people of the unfolding crises and where it leads, hardly a single person would have the mindset to do anything to prepare. Why? Because the information age is one of knowledge, not understanding; an age of multi-tasking, not focus; one of busyness, not of reflection; one of distraction, not of attention. Anyone convinced of the enormity of the dire times ahead would quickly forget once the conversation had passed, even though it endangers the lives of themselves and all those they love. Remarkable!

WesternFreePress
WesternFreePress moderator

 @Dark Age Man Largely agree, but I think there may be hope. Even in collapse, we may be able to rise from the ashes with something better. Do you not have such a hope yourself?

anarchobuddy
anarchobuddy

@WesternFreePress I think when I wrote the comment I was referring to people today. If we don't have enough knowledge and experience yet, I'm not sure any amount of knowledge and experience will be enough.

WesternFreePress
WesternFreePress moderator

@anarchobuddy@WesternFreePressOh yes, definitely agreed!  We have all the knowledge we need to make informed decisions on such matters. That some people still come to the wrong conclusions is largely, like leftism generally, the triumph of intentions and beliefs over facts and reality.

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