- #36
russ_watters
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The way I see the functioning of the economic spectrum is this:
An industrialized nation with a relatively low intervention government resulting in a relatively free economic system has a certain inherrent GDP growth rate. Let's say it's an average of 5% for a certain country (it depends on the country and, among other things, their mineral wealth). Along with that is a steady increase in income inequality - let's say 5% a year. Socialist policies are designed to decrease income inequality by slicing off part of that 5% growth rate, giving cash to people who produce nothing, therefore getting nothing in return - no production into the economy (that's welfare or a subsidy). Move a little to the left and you end up with 4% GDP growth and 4% income inequality growth. 3% and 3%, etc., etc.
The further to the left you go on the spectrum, the lower the inherrent GDP growth rate and the lower the associated income inequality. At some point on that graph, you pass the break-even point and enter the socialist death spiral where the productive people in society are incapable of producing enough to support the unproductive people, leading to runaway debt and eventual total collapse.
The test case for this is, of course, the Soviet Union. Now the USSR had one thing going for it: extreme mineral wealth. Due to its extreme mineral wealth, it could handle a welfare state much better than countries that can't literally dig money out of the ground. But eventually, the spiral took it down (with a little help from Ronnie to speed things up).
No western countries, afaik, have crossed the line yet, but one that is close is Sweden. The expansion of socialism there has put a severe strain on the economy.
What Obama proposes will place us squarely on the wrong side of the equilibrium point.
An industrialized nation with a relatively low intervention government resulting in a relatively free economic system has a certain inherrent GDP growth rate. Let's say it's an average of 5% for a certain country (it depends on the country and, among other things, their mineral wealth). Along with that is a steady increase in income inequality - let's say 5% a year. Socialist policies are designed to decrease income inequality by slicing off part of that 5% growth rate, giving cash to people who produce nothing, therefore getting nothing in return - no production into the economy (that's welfare or a subsidy). Move a little to the left and you end up with 4% GDP growth and 4% income inequality growth. 3% and 3%, etc., etc.
The further to the left you go on the spectrum, the lower the inherrent GDP growth rate and the lower the associated income inequality. At some point on that graph, you pass the break-even point and enter the socialist death spiral where the productive people in society are incapable of producing enough to support the unproductive people, leading to runaway debt and eventual total collapse.
The test case for this is, of course, the Soviet Union. Now the USSR had one thing going for it: extreme mineral wealth. Due to its extreme mineral wealth, it could handle a welfare state much better than countries that can't literally dig money out of the ground. But eventually, the spiral took it down (with a little help from Ronnie to speed things up).
No western countries, afaik, have crossed the line yet, but one that is close is Sweden. The expansion of socialism there has put a severe strain on the economy.
What Obama proposes will place us squarely on the wrong side of the equilibrium point.
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