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article imageOp-Ed: Socialism chills world financial markets

By Larry Clifton     May 7, 2012 in Politics
Socialism is fine until you run out of other people’s money to spend,” or so goes the metaphor.
Francois Hollande, the newly-elected President of France, will have an opportunity to prove such right-of-center prophesying false.
But to do so, he will need to grow France’s private sector while keeping government workers happy and satiating the never-ending demands of that country’s powerful union bosses. Many economists agree that raising taxes while doing little to control government spending will result in further economic decline in France and across Europe.
The problem with socialism has always been as glaring as it is today. Once enough people work for government or enjoy union wages that are not competitive in the global marketplace, the economic scales collapse on the left leading to things like austerity and unemployment. The U.S. and Europe are caught in the grip of big government and treacherous unions, entities that lack the skills to compete in global economies. Unions create inflated wages and inflated pensions and excessive government spending slowly absorbs national economies. These are two primary examples of why emerging economies are set to replace more traditional financial brokers in Europe and, eventually, the U.S.
Hollande’s win reflects the rejection of fragile austerity measures desperately weaved together by European leaders like Nicolas Sarkozy and his European counterpart, Angela Merkel, the German chancellor. While Hollander ran on taxing the rich, there is no consensus on how the 75-percent tax he is set to impose will do much more than dent growth. Hollande’s socialist notion that an enormous tax hike aimed at higher income earners - many of whom would have used their capital to grow their businesses - will somehow translate into a stronger economy is already under fire.
While the French people may be temporarily enamored by the diminutive Hollande, he risks appearing to be an economic caricature of U.S. Governor Michael Dukakis in an M1 Abrams tank should tax hikes and Austerity-light reduce French productivity and further strain foreign relations.
Monday, financial markets balked at Hollande’s election as Asian markets plummeted over uncertainty about Europe’s ability to dig its way out of massive government debt and crippling economic stagnation.
To many economists, Hollande’s election and the gridlocked aftermath of Greek elections represent a double threat to a fragile political consensus that has pulled Europe's currency bloc through several years of perpetual melt downs.
"The issue is that in Greek elections, the outcome raises the level of uncertainty a lot, because it's not clear who can form the government or in fact how long they will last, and what their attitude to the current agreements that the Greek government had reached would be," said Richard Yetsenga, head of global markets at ANZ Research.
While Hollande struggles to turn his campaign promises of higher taxes and restructured Austerity into economic growth, Germany will likely focus heavily on sustainable growth and getting a handle on realistic austerity measures that can prevent economic collapse in much of Europe.
At the same time, recent anemic jobs reports in the US under left-of-center President Barack Obama’s administration added to economic chaos Monday as oil slid below $97 a barrel and Japan's Nikkei 225 index plunged 2.6% to 9,134.26 and Hong Kong's Hang Seng fell 2.4% to 20,582.24.
Under Mr. Obama, the U.S. deficit has increased by nearly $6 trillion dollars to a total national debt nearing $16 trillion while unemployment strayed upward to double digits before settling over 8 percent for Obama’s entire term to date.
Meanwhile the Australian dollar slipped to a four-month low near $1.0111 against the US dollar on and the euro fell to its lowest level since January 25.
Jeff Sica, president of SICA Wealth Management, said: "Austerity will not work to solve Europe's debt crisis. However, shifting austerity to higher earners and business will accelerate the debt crisis."
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
More about francois hollande, greek debt crisis, Socialism, Marxism
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