The Riots Are About the Failure of Socialism

Written by Dennis Behreandt on Monday, 15 August 2011. Posted in Opinion, Publisher's Corner

Stand-off between police and rioters during Englands or the UK's 2011 economic riots. When riots broke out in London the overall narrative was that dissolute “youths” were engaging in an orgy of thievery and violence for no particular reason. Supposedly, it was chaos for the sake of chaos.

As in many things, although this is an exaggeration, there is likely a component of truth here. Some thugs just enjoy thuggery. But there’s more to the story. Large scale riots and violence over several nights don’t just happen because thousands of people want to get new TVs without paying for them. Something else motivates the mob.

In this case, as in Greece earlier this year, the mob has been motivated by impending doom of failed socialist policies. Everywhere in Europe socialism has been the norm for decades. The nations of European Union provide universally lavish entitlements. In the UK there is the NHS, providing state-funded health care. There is income support for people who work less than 16 hours per week. There is a housing allowance to help offset the cost of rent. There are many other entitlements benefits, all described at the UK government’s Directgov site.

Programs like these are guaranteed to implode at some point. As benefits become more available and more lucrative, they lure larger and larger numbers of people out of the private sector, reducing government revenue while increasing government costs. Simultaneously, the vagaries of demographics serve as a further catalyst. A graying population, affecting Europe, the United States, and Japan, further removes people from the work force through retirements and it adds retirees to the benefits rolls. Eventually, there are no longer enough productive workers in the private sector to pay for all of this.

While that seems like a problem, for most government bureaucrats it’s not. They have long held on to the Keynesian economic dogma that deficit spending is actually useful and helpful to an economy. To the Keynesian, government spending stimulates the economy. Therefore, borrowing to pay for entitlements presents not a problem but an opportunity. It puts money into people’s pockets. They spend the money. Ergo, the economy is stimulated.

Except for the fact that eventually the debt thus incurred becomes a crisis as is now happening around the world. Italy, Greece, Spain, Ireland, Iceland, the United States, France — everywhere the “progressive” Keynesian dogma has held sway for the last 50 or 60 years economies are in trouble and it all goes back to debt.

Under such circumstances there are only a few possible solutions. In nations that have retained their sovereignty and where a central bank is operating, the preferred solution is to expand the money supply. This has been the path followed by the United States. It works for a time until creditors begin to notice and get angry. This explains China’s reaction to U.S. monetary policy. On July 14, Voice of America reported: “China is calling on the United States to protect the interests of its investors.... At a foreign ministry briefing ... spokesman Hong Lei said China hopes the U.S. government will adopt ‘responsible policies and measures to guarantee the interests of investors.’”

Like the U.S., the UK has preserved its monetary independence and the Bank of England controls the money supply. While both UK and the United States is free to play chicken with its debt by virtue of the Federal Reserve, European nations that have given up their sovereignty in exchange for membership in a currency union are out of luck. They can no longer freely debase their currencies. Only the European Central Bank (ECB) can do that and competing political interests make that unlikely. In fact, on August 11 the ECB indicated that it thought monetary expansion could be curtailed somewhat.

In its monthly bulletin, the bank noted: “based on its regular economic and monetary analyses, the Governing Council decided to keep the key ECB interest rates unchanged, following the 25 basis point increase on 7 July 2011. The information that has become available since then confirms the assessment that an adjustment of the accommodative monetary policy stance was warranted in the light of upside risks to price stability.”

For European governments awash in debt but without an ability to debase their currency there remains only one solution — bring the books into balance by either cutting spending or raising taxes. Because raising taxes can actually be harmful to revenue growth, as economist Arthur Laffer has pointed out, cutting spending is the only reasonable option. And that means cutting entitlements. And while this is less of an imperative for nations that can debase their currencies, monetary expansion reaches a point of diminishing returns and has its own unfortunate side effects as well. Eventually, even nations with independent monetary authorities must eventually look elsewhere for a solution to a sovereign debt crisis.

In the fall of 2010, the government of British Prime Minister David Cameron announced sweeping budget cuts. “Today is the day when Britain steps back from the brink, when we confront the bills from a decade of debt,” said George Osborne, Chancellor of the Exchequer, upon announcing the cuts. Reporting on the cuts outlined by Osborne, the German publication Der Spiegel noted: “Ministerial budgets are to be cut by an average of 19 percent, the 39-year-old Tory politician announced. And 490,000 public sector jobs will disappear over the next four years. State expenditures will be slashed by 83 billion pounds (€94 billion, $131 billion), and taxes increased by 29 billion pounds (€32 billion, $45 billion.)”

Included among the cuts, according to the BBC, are some to the UK’s beloved entitlements programs. They included budget reductions for new “social housing,” according to the BBC, “cut by 60% over four years, and rents for new tenants ... brought closer to private sector rates....” And, said the BBC, the measures included “£7bn extra welfare cuts, including changes to incapacity, housing benefit and tax credits.”

While these cuts come over a period of time rather than being applicable immediately in total, the announcement of them has had a predictable result. Those accustomed to living on the dole and benefiting from government wealth transfers would react. In the case of the recent riots in London, the reaction was violent. The city burned.

Nina Power, opining in the pages of the Guardian newspaper, pinned the blame on a combination of police mistreatment of minorities and the poor and the government cuts. Of the latter, she wrote:

Since the coalition came to power just over a year ago, the country has seen multiple student protests, occupations of dozens of universities, several strikes, a half-a-million-strong trade union march and now unrest on the streets of the capital (preceded by clashes with Bristol police in Stokes Croft earlier in the year). Each of these events was sparked by a different cause, yet all take place against a backdrop of brutal cuts and enforced austerity measures. The government knows very well that it is taking a gamble, and that its policies run the risk of sparking mass unrest on a scale we haven't seen since the early 1980s.

Ken Livingstone, the former mayor of London, also said the spending cuts were to blame. “I am concerned that there is growing social dislocation in London and a threat that the police will be forced into escalating conflict with some London communities. We do not want to go back to the 1980s,” Livingston said.

“The economic stagnation and cuts being imposed by the Tory government inevitably create social division. As when Margaret Thatcher imposed such policies during her recessions this creates the threat of people losing control, acting in completely unacceptable ways that threaten everyone, and culminating in events of the type we saw in Tottenham,” he continued.

Leftists are right in assigning blame for the proximate cause of the riots to the cuts. But, ultimately, it has to do with the failure of the socialist welfare state. Those who have benefitted from the transfer of wealth for decades don’t want to give up those “benefits” now. Facing that prospect, they react, violently.

Minus the violence, the same thing happened in Wisconsin in the Spring of 2011. An “austerity” package favored by the administration of Governor Scott Walker and the Republican majority in the legislature drew tens of thousands of protestors to the state capitol and resulted in Democratic Senators fleeing the state in an effort to stop the legislation. The most contentious part of the measure pertained to curtailments of collective bargaining “rights” that public employee unions in Wisconsin have long used to bludgeon taxpayers into ever higher spending on public sector compensation, contributing to a budget problem that grew over recent years under the Democratic administration of former governor Jim Doyle. The ultimately successful Republican attempt to reign in this problem resulted in both historic protests and in efforts to intimidate Republican politicians. Death threats abounded.

In Greece, too, the prospect of the end of the welfare state catalyzed violent protests by Communists in the streets. Yes, actual Communists.

In June, Communist militants stormed the Acropolis to hang banners saying, “power to the workers.” According to the Guardian newspaper of London, another of the “gigantic” banners said: “The peoples have the power and never surrender. Organize — Counter attack.”

At the same time, an affiliate of the Greek Communist Party said: "We call upon working people, youth, women to join our popular uprising.” The statement continued: “We will strengthen our struggle with people from all over the world against capitalist brutality in order for the brutal measures that bankrupt the people not to be applied.”

Ultimately, the riots, the violence, and the threats amount to intimidation used as a tactic by extortionists. Used to bleeding the productive portion of society dry, the parasitic class is reacting violently to the end of their decades-long gravy train.

“What an utter admission of failure, that after 50 years of the most lavish welfare state in the solar system, you cannot govern your country without soaking the citizenry in cold water and bombarding them with missiles from a safe distance. Except, of course, that it is because of the welfare system that this is so,” wrote columnist Peter Hitchens in a recent editorial in the Guardian.

Hitchens is one of the few voices that have it right. The riots and the violence are what happens when a civilization populated by spoiled children faces a future without a nanny state holding their hands and spoon feeding them out of the public pot. The future of civilization demands that the long adolescence of the West come to an end and that personal freedom and personal responsibility are embraced and the welfare state abandoned.

The alternative is chaos, poverty, starvation and tyranny.

About the Author

Dennis Behreandt

Dennis Behreandt

Dennis Behreandt is Publisher and Editor-in-Chief of American Daily Herald.

Copyright © American Daily Herald.

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