When Fair isn't Enough

This morning I read an article in the WSJ extolling the GOP to take on the mantle of the "We're-Not-Europe Party". The byline stated that the bill for a life of fairness comes due at the expense of growth. The editorial continues describing how Europe has entered into a Faustian bargain in which they negotiated a life of social protection and income fairness, no matter what the cost. The devil, in the world of the WSJ is the bond market which has just arrived and demanded it's money.

Now first of all I find it amusing for the WSJ to characterise the bond market as the devil. I also find it ironic that in trying to reshape the Republican Party to get away from the image of being the party of "No" they moved on to becoming the party of "Not". Somehow still a negative....

I think however that the editorial misses some points. A social-market economy tries to balance wealth distribution and overall economic growth. It is a contract which requires that all signatories fulfill their end of the bargain. It is not a question of left or right, conservative or liberal, but rather of ethics and human nature.

The Germans had a very strong welfare state which required taxes of over 50% regardless of the party in power. The result was the relative absence of poverty, functioning public transportation networks, medical care and in general a comfortable social milieu.

Then came reunification and the massive costs associated with incorporating a country half the size of Germany at a ridiculously high exchange rate. Twenty years later and under a Social Democratic government it was recognised that the cost side of the balance sheet was drowning and so cuts were instituted to bring the things back to an equilibrium.

Funny, the changes in the USA from welfare to workfare were also instituted under a Democratic government. I am always told by my conservative friends that they "can't" introduce social legislation as they will always be viewed as crass, greedy and not concerned with those less well-off, so they need the liberals to do it! But I digress.

Germany recognised that living beyond your means will sooner or later catch up with you. They are dealing with the excesses and were on their way to managing their deficits when the financial crisis hit exposing Greece's problems.

Well actually, Greece was in trouble long before the financial crisis hit. This is where the social contract kicks in, and it is not only between a state and its' populace, but also between the state and the umbrella organisation of which it is a part.

Greece cheated on its' finances to enter the Euro in 2002. It didn't really conform to the Maastricht criteria of a budget deficit of less than 3% of their GDP or a debt ratio of less than 60% of GDP. This is where the real problem lies and where other nations and financial authorities should take note.

Now the Greeks are being told to introduce their equivalent of Hartz IV. The popular response is much more Gallic than Germanic. Demonstrations in the streets rather than a morose acceptance. The demonstrators don't mention that they can take early retirement at age60 and that a large percentage of these early retirees then take jobs on the black market which aren't taxed-not to mention that not paying taxes in Greece is the rule rather than the exception, and that the tax collectors are generally viewed to be corrupt.

All the regulations and stipulations in the world are useless if they are not adhered to. This is true in government, and to the world's chagrin, finance.

Which brings me back to the question of Fairness. Is there an ethical component to being Fair? My friends at the WSJ surmise in response to Gordon Brown's statement "I tried to make the country fairer" that there is a more important goal- growth.

Sort of smells of predatory capitalism.