Dr. Simon Johnson
Economist

Dr Peter Boone|
Economist

The Road to Serfdom

By Dr Peter Boone and Dr Simon Johnson

May 23, 2010

According to Friedrich von Hayek, the development of welfare socialism after World War II undermined freedom, and would lead western democracies inexorably to some form of state-run serfdom.

As a result of the continuing euro crisis, European Central Bank (ECB) now finds itself buying up the debt of all the weaker eurozone governments, making it the – perhaps unwittingly – feudal boss of Europe.

The policy elite who run these structures – along with their allies in the private sector – are the new overlords.
There is no question we are seeing a sea change in the post-war system of property, power, and prosperity across Western Europe.

An overwhelming debt burden will bring down even the proudest people. The old days when member countries got nice presents from the euro zone are long gone. Now it is all instructions and austere requirements. The market is telling them that their euro rescue schemes make no sense. National market participants are selling debt of risky nations, and getting out of the euro. Debt peonage looms for a wide range of countries that were recently thought immune to serious fiscal crisis, including the United States and UK. We need to restructure debts of under water nations so that they will be able to finance themselves.

There is no leadership in Europe that can take decisive actions. Europe will only reform itself dragged kicking and screaming through successive crises. Hayek’s demise of western society will prove correct.

Welfare systems, medical care and social security will be victims in deficit countries living beyond their ability to pay the compound interest to support these systems.

Time is not on the side of countries running big deficits beyond their ability to pay the compound interest, regardless of assurances from leaders.