After reading an article, we see some obvious comparisons of some nations in the Eurozone.
MADRID/BERLIN (Reuters) – Anyone needing a New Year reminder of the divide that has been threatening to tear apart the 17-nation euro zone need only look at Thursday’s German and Spanish jobs data.
To the north, work. To the south, unemployment.
The number of Germans out of work actually rose for the ninth month running in December, reflecting some of the strains of the euro zone debt crisis on Europe’s largest economy. And Mediterranean Spain’s official tally of those out of work fell in the month. But both figures are belied by other factors.
Germany’s jobless number, for all its recent rises, remains close to a post-reunification low. Spain’s improvement was based almost entirely on temporary holiday jobs. Around one-in-four Spaniards are out of work.
The outlook for 2013 from analysts is jobs growth in Germany and further joblessness in Spain. The labor success in Germany – unemployment rate around 6.8 percent – is partially thanks to years of wage restraint and structural reforms undertaken in the mid-2000s.
That was the good and bad comparison, now for the ugly.
GREECE, SPAIN VIE FOR FIRST PLACE
Spain’s latest jobless data means 4.8 million people are registered as out of work, but the figures are considered less reliable than data from the National Statistics Institute (INE).
INE recorded 5.8 million Spaniards out of work in the third quarter, putting the country’s unemployment rate at a record 25 percent, the highest since the Franco dictatorship ended in the 1970s.
The only comparable level in the euro zone is in Greece which, in an economic depression for six years, recorded a monthly unemployment rate of 26 percent in September, meaning that it may by now have jumped ahead of Spain.
So, what happened? All three nations joined the Eurozone before the new currency was printed. All three were supposed to have met certain economic criteria before they were allowed entrance and they were suppose to maintain this criteria.
For the sake of brevity, I’ll resist the urge to delve into cultural differences. For now, we’ll just simply inspect what happened. And, what happened isn’t difficult to pinpoint. Spain’s and Greece’ joblessness is a result of two things.
Spain and Greece had/have an unusually high reliance upon the government for employment, and then they ran out of money. Simply put, that’s what happened. Germany, OTOH, has continued with relying upon private sector jobs. True, like any Western nation, Germany does also rely to heavily on government jobs, but not nearly as bad as Spain and Greece.
So, there Spain and Greece are. They can’t really create government jobs because they’ve no money. They’ve both raised taxes to get more, but they’ve reached the point of diminishing returns on their taxes. In other words, they can’t tax enough to make up for the shortfall of their balances.
What do you do about it?
Well, socialists and Keynesians, (but, then I’m being redundant) would say to increase government spending to get the economies over the hump. We see this advocated by the likes of Krugman. But, these governments don’t have any money to do so. And, this is what got them in trouble to begin with.
If they weren’t in the Eurozone, they could simply print more money, but, that only delays and worsens the problem. To an extent, we see this occurring in the US. The US will have a debt ceiling discussion soon, we’ll agree to raise the debt ceiling and continue to print money in various forms. Without constraint on the spending, we’ll only make the problem worse in the future.
So what is one to do? —— LEARN!!! It is a basic law of nature. We see it in economics, we see it in physics, we see it in chemistry, we see it everywhere we look. THERE IS NOTHING FREE. Sooner or later, the piper has to be paid. Spain and Greece are paying for the dance they’ve danced. They still refuse to learn the lesson nature is teaching them. The US is still dancing, deluding themselves that there is a perpetual money tree. One doesn’t fix these problems without pain. But, the solution is easily recognized once the thought of eventually paying the piper is understood. In Spain and Greece, they’re attempting to barter with nature. They’re trying to raise taxes with little cuts to their spending. They’re trying to find a balance to keep as much government reliance as possible. In the US, we’re still raising taxes and government spending, still insisting that we can do the things nothing else in nature has ever been able to do, we’re trying to cheat nature.
It is that most of the nations in the world have the wrong consideration. Like Spain and Greece, they’re seeking a middle ground of taxes and spending. But, these are government equations. In the end, they all lead to the same place —- an over reliance on the government to provide jobs and motor the various economies. The proper view is to understand what the limitations of government are in the world of economics and hold a line there. Because there is nothing free, we must understand that each government job, each government dependent, subtracts from the general wealth of a nation. We also must acknowledge the role of the government. There isn’t anything wrong with providing a safety net for the populace. Indeed, it is our responsibility as humans to do so. It is our imperative to care for the sick, elderly, and downtrodden. But, if one simply acknowledges that the assistance provided detracts from the general wealth of a nation, then the foundation of good economics and good fiscal policy can be laid.