Here is a statement we need to remind ourselves of – governments have no money.
Every, Euro, Pound or Dollar government spends; every public sector road, building or asset comes from taxpayers somewhere. Every bond issued, every debt created is a charge against future taxpayers.
As all nations – whether their political heritage is Napoleonic, Westminster or the founding fathers of the United States – find themselves in a government squeeze, a return to thinking about the fundamentals is always healthy.
Here is another statement we could think about – regulations do not create jobs or economic growth.
As with the corruption of the role of government, this ever-increasing activity of government is rarely discussed.
Would we create the system we have now if we were allowed to start from the beginning again? The masses of rules and regulations, of stifling legislation, of a moribund and incomprehensible legal/judicial system, of overlapping central and regional administrations, of European fingers in every pie creating more confusion and duplication. Unlikely.
Questions flow when we think about fundamentals. What sort of government do we really want? Can we really do anything about it? Do we just give up?
For those who look to a better future where individuals lead the creativity that is the basic building block of national wealth, where the emphasis is on creating the wealth before redistributing it, where unnecessary barriers to freedom are eliminated, where government helps the process and does not strangle it, there are two avenues worth considering.
First, Europe. Last week the EU agreed on the steps necessary to create a banking union. In the light of the financial crisis this was probably inevitable. It is likely the surrender of control over national budgets will follow. Can some sort of debt mutualisation – Eurobonds – be far away? The European Parliament is incrementally increasing its role and power. Europe now has a foreign policy High Representative. Is this trend likely to be reversed?
If there is an inevitability about the ever-increasing intrusion of the EU into national decision-making should the members of the EU seek to facilitate it by unwinding corresponding national administrative and regulatory functions? The last thing Italy and other nations need is another layer of the dead hand of bureaucracy.
Second, Italy. What may be appropriate in Italy may also be appropriate elsewhere. I prefer the term ‘reform’ to ‘austerity’. Appropriate reform will produce similar, if not better results than austerity. Reform unshackles individuals and small business to create, grow and employ. Reform requires leadership; leadership that explains to the people what is necessary and why; leadership that takes the people along with the program and doesn’t lead to violent demonstrations and, potentially, civil unrest.
It is critical for Italy’s future that Mario Monti succeeds. A return to the politics of the Berlusconi era would be disastrous for this country.
It seems to me that Monti has two problems: firstly, he has to push his reforms through a parliament that is instinctively hostile, secondly, he is too much the technocrat which means he is not communicating sufficiently with his people.
Are there alternatives?
In case you missed it: The IMF and the EU – Part 1
Here is Part 3 with some positive suggestions for reform.
By Stephen Lusher
Stephen Lusher served five terms in the Australian Federal Parliament. He worked around the fringes of politics before setting up Lush on Bondi, a trendy bar on Sydney’s Bondi Beach.
Frequent trips to Italy led to an inevitable love affair with Tuscany. He and his wife Cathy sold up in Sydney and purchased Il Mulinaccio in 2008.
Within two months of moving to the Chianti Hills he was diagnosed with throat cancer. The experience led to him re-focusing his life and priorities. After a few uncomfortable years he thinks he has it beaten.
Stephen’s interests include wine, food, history, culture and travel.
He struggles with the Italian language and indulges himself in some occasional writing.