Consumariat: You seem to be proposing your own version of a healthcare system and then criticising it without me even having to enter the conversation.
My data comes from Nationmaster.com, for those interested.
Growth was actually slightly higher in the post war era than it was in the past 30 years.
First it’s important to point out that one of your original assertions, namely that this period ‘operated without significant problem' is blatantly false (unless you don’t consider 5 years of negative GDP growth, and banana-republic-like inflation rates and interest-rates problematic). Next, you assert that growth rates were moderately higher in this period relative to the period that proceeded it. This may or may not be true; I don’t know I’m too lazy to check the actual figures. But I would like to point out that the growth path in that period was highly volatile and, as I’ve already mentioned, came at a great cost, namely enormous inflation (and subsequently price-controls).
inflation was a significant problem particularly from 1974 onward, but this is down to the oil crisis and not the welfare state.
First, the inflation rate began to rise before 1974, though 1974 was the year where the trend really took off very dramatically (peaked with 27.3% inflation in 1975). The inflation rate rose to 5.5% in 1969, 7.28% in 1970, 9.28% in 1971 and 8.06% in 1972. So the inflation rate began to rise before the oil ‘shock.’
If you disagree on this, please explain how the welfare state suddenly caused prices to skyrocket in 1974.
Well, as is always the case, enormous welfare states require perpetual monetization of government debt, i.e., expansionary monetary policy, in order to survive, inevitably yielding (general and relative) price inflation (the public will not accept the tax rate required to fund its entitlement programs). In other words, the inflation present during this period was primarily the result of inflationary monetary policies by the FED (Burns) and the Bank of England.
Additionally, a lower supply of oil can only raise general prices insofar as it reduces total output, and I do not doubt that it did reduce output to some degree. Unfortunately, a negative two-percent growth rate cannot account for 27% inflation alone. In other words, this cannot possibly explain the levels of inflation seen in both the U.S. and U.K at that time (nor does it explain the interest rate fluctuation that was perceived).
I would also add that wages kept up with inflation throughout this time, and so the problem was not felt as harshly as it might first appear by looking at the inflation numbers only.
Well there are two effects of monetary expansion; one is primary and the other is only secondary. The primary effect is that changes in the supply of money do not affect the prices of goods and services by the same degree or even in the same direction. This is due to the fact that the monetary expansion does not manifest as a proportional increase in cash balances across the board. Rather, the newly created sums enter the economy at certain points (in our system, it first enters the financial system) and then permeates amongst the entire economy. These relative price changes yield real changes to the production structure or what Austrian’s refer to as ‘malinvestments.’ Correcting these malinvestments yields a recession, and preventing such corrections through expansionary monetary and fiscal policy yields a sort of chronic, lingering stagnation (like what we perceive now, or what we saw in Japan in the 80s-90s, or what we saw in the U.S. and U.K in the 70s) which may or may not be inflationary.
The secondary affect is more commonly understood and it’s what you’re referring to, namely a general elevation in the price level. This causes an arbitrary redistribution of wealth from creditors to debtors, higher interest rates, destroys savings, incentivizes speculation (as the return to cash as an asset is negative), and falling real wages (since wage earners receive the monetary injections last).
I have a chart showing this in a book, but could not find an online picture of it. I will scan it if you like though.
Yeah, I’d like to see it.
"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."