The two competing economic systems throughout history have been the free market system and the controlled market system. The more free economies have been, the more they have flourished with all people in the society benefiting. The more controls and limitations that are placed on economic freedoms, the more all of the society has suffered. It has always been controlled economies that have high unemployment and high poverty rates, while free economies have produced the opposite effect.
We have witnessed t extreme controlled economies recently in the Communist controlled countries. Communists chose to have socialist economies and not one communist country with a socialist economy flourished. As the controls on the economy were lifted, we witnessed wealth growth. Many free societies had free economies and wealth flourished like in the United States. As these free societies started to place more and more controls on the economies, the growth of wealth slowed, GDP’s became sluggish , true unemployment rose and poverty rates rose.
The United States began the movement toward a controlled economy during the 1930’s and these controls not only extended the recession but many believed deepened the downturn as witnessed by the recession of 1937. During the last perhaps 50 or so years, governments have placed more and more controls on their economies and instituted more and more programs of redistribution. This includes the United States.
Here are the results of these controls that have brought much of the world closer and closer to socialism.
Sluggish global growth threatens to keep governments around the world from being able to pay pensions and bondholders, the chief economist of the Organization for Economic Cooperation and Development said Wednesday.
The OECD, representing mostly advanced economies, has lowered its forecast for worldwide economic growth to 3 percent this year from the 3.3 percent it estimated in November. When growth is weak, governments collect less revenue and struggle to pay pensioners and meet all their debt payments.
"These kinds of numbers mean we are not going to make good on these commitments," Catherine Mann, the group's chief economist, told reporters.
She said that to jump-start growth, countries need continued stimulus from central banks, government spending and tax policies that encourage expansion and economic reforms, such as making regulations more consistent from country to country.
Since the financial crisis, the World Bank, International Monetary Fund and OECD have repeatedly overestimated the strength of the global economic recovery. Mann suggested that the economy no longer works the way most economists were taught: Low unemployment in the United States and other countries has not triggered strong pay growth, for example.
Low interest rates have not encouraged businesses to invest. And easy-money policies by the world's central banks have not ignited inflation.
In order to avoid economic disaster throughout the world, two things need to happen. Firstly, the governments will have to start to start to move toward economies with fewer controls and less redistribution. Taxes will have to be lowered and programs to redistribute will have to be minimized and eliminated.
Secondly, the central banks will have to allow interest rates to float based on the market and not artificially. The central banks will also have to discontinue their destructive programs of stimulation. Artificial stimulation of economies has never been successful but has always created disastrous bubbles.
Centrally controlled economies have been failures from the beginning of time. The socialist minded and the academics have always said the “new way” will work. It never has and the world is facing another financial crisis because of the latest “new way.” The way that works and produces wealth for all is the “free” way. Let us bring back individual freedom and economic freedom so all can participate in the “pursuit of happiness” granted to us by the Creator as stated in the “Declaration of Independence.”