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At the heart of economic crises: givers versus takers

The fact that Germany is almost single-highhandedly providing the money to bail out their bankrupt country didn't stop angry Greeks from burning an effigy of German Chancellor Angela Merkel in last month's election. But when the ballots were tallied, Greece had chosen parties that support staying in the euro zone.

For a few hours after that, financial markets cheered. Then reality set in: Investors realized that continuing to pour cash into dysfunctional Greece would only diminish the euro zone's chances of saving other beleaguered members, and Spain's borrowing rates soared to record highs.

The European situation is so bad that near-zero-yield U.S. Treasury bills are seen as a haven – even though they're issued by a country whose debt clock registers $15.8-trillion and is adding more than $1-trillion per year. The chances of slowing that debt clock are small: Social-program entitlements make up half of expenditures, so balancing the U.S. budget would mean cutting all other expenditures by a staggering 70 per cent.

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In both Europe and the United States, the financial crises come down to a struggle between "takers" and "givers."

It's not a new struggle, of course. Austrian economist Friedrich Hayek summed up the problem in his 1944 book, The Road to Serfdom: "If you guarantee to some a fixed part of a variable cake, the share left to the rest is bound to fluctuate proportionally more than the size of the whole."

An April column of mine on this issue drew a lot of feedback. One reader forwarded an unattributed piece that put entitlements into perspective: "The folks who are getting the free stuff are mad at the folks who are paying for the free stuff because they can no longer pay for both the free stuff and their own stuff."

You don't have to look to foreign countries to see this in action. The "takers" turning against the "givers" exists in Canada, too, and nowhere is it more virulent than in Quebec, where student protests against tuition increases continue in support of their special brand of free stuff.

NDP Leader Thomas Mulcair demonstrates his own version of being "mad at the folks who are paying for the free stuff" by vilifying Alberta's resources which pay the lion's share of Quebec's $7-billion annual equalization payments.

Meanwhile, Quebec's university tuition fees are half of those paid by Alberta students.

Perhaps it's not surprising that Quebec's protesting students and Mr. Mulcair share the same outlook. It has become clear Quebec's paltry tuition increases are just a sidebar for the students' actual goal of replacing free-market capitalism with government-controlled socialism. And the NDP is, by its own definition, a socialist political movement.

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Germany's post-Second World War history provides an instructive comparison of socialism versus capitalism.

When the Berlin Wall came down in 1989, West Germany had risen from the ashes of the war to become the world's second-largest economy, while East Germany was an impoverished wasteland. The difference was command-and-control subjugation in the East versus capitalism's freedom of enterprise and innovation in the West.

The same phenomenon is evident today in China, where relatively small steps toward free-market capitalism are lifting hundreds of millions out of abject poverty.

Given that it was just last century when socialism brought unspeakable poverty and despair to more than half of the world's population, how can it be that so many young people in Quebec apparently want to turn back the clock?

Here the timeless truth applies: Those who don't learn the lessons of the past are doomed to repeat them.

But how many students have been taught those lessons? Schools and universities not only fail to teach those sad historical lessons, but many teachers and professors espouse anti-free enterprise rhetoric.

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In his book, nearly 70 years ago, Mr. Hayek noted: "The younger generation of today has grown up in a world which, in school and press, the spirit of commercial enterprise has been represented as disreputable and the making of profit as immoral …" It seems little has changed, and little has been learned, in the decades since.

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About the Author
Gwyn Morgan

Gwyn Morgan rose from his modest roots on an Alberta farm to become one of Canada’s foremost business leaders and ardent champion of the importance of Canadian-headquartered international enterprises. Gwyn has served on the board of directors of five global corporations. More

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