Farewell, Welfare State

by Bill Bonner, Acting Man:

The tweet was never sent and never received:  “Lying Otto von Bismarck set us up for bankruptcy! What was he thinking? Sad!!” Instead, Mr. Trump said last weekend that, far from trying to curb the promises and cut the costs of the welfare state, he was nearly ready to unveil a plan to replace Obamacare with something better: a plan that would provide “insurance for everybody.”

The “iron chancellor” Otto von Bismarck, wearing the type of helmet one shouldn’t leave lying around on a chair. Bismarck was responsible for the unification of Germany, which he achieved by engineering several wars as prime minister and foreign minister of Prussia. Prussia waged war against Denmark, Austria and France, and defeated all of them. Bismarck then unified the independent German states, city-states, bishoprics and principalities partly by annexation and partly by negotiation. Once Germany was unified, he was appointed “chancellor of the empire”. It was as though he was finally promoted to a post beyond his competence, in line with the Peter principle. First he embarked on the so-called Kulturkampf, aiming to undermine the power of the Catholic Church. The Church fought back by entering into a powerful political alliance with the Center Party. Bismarck abandoned the effort when he realized that secularists were using it to attack religion in general and that he would need the Center Party’s cooperation. Shortly after Germany’s unification, Europe was struck by an economic depression (incidentally, the term “crash” was coined when stocks cratered on the Vienna stock exchange in 1873). Bismarck immediately ensured that the depression would get worse by introducing tariffs in order to “protect” German industry. As the economic downturn predictably intensified, the popularity of socialism increased markedly. Bismarck responded by banning all socialist organizations and literature in 1878, which utterly failed to quell the rise of the socialists. In a renewed effort to undermine support for them, Bismarck introduced the welfare state in the 1880s, which 140 years later is in the process of bankrupting all of Western civilization. Do we have anything good to say about the man? Yes, we do. In contrast to his time as Prussia’s prime minister, he eschewed war as chancellor of the empire. In fact, he did everything in his power to preserve peace in Europe – it was by far his greatest concern. One year before his death he darkly predicted: “One day a great European War will come out of some damned foolish thing in the Balkans.”

The liberal and illiberal elites are still trying to figure it out: Isn’t that what Hillary was planning? The Obama team – like the Bushes and Clintons before it – had already run up impossible bills at taxpayers’ expense and offered all manner of unaffordable benefits.

Now, explained former Fed Chairman Alan Greenspan in his private conversation with us here in Baltimore a few days ago, entitlements are out of control. The system set up by German Chancellor Otto von Bismarck in the 19^th century is going broke in the 21^st.

After the French Revolution, the elites of Europe realized they had to make peace with “the people.” This they did, with Bismarck taking the lead, by promising people more in “social welfare” benefits than they paid in taxes.

The difference between what they paid and what they got would come from two sources. First, it would come from the rich, who would pay higher rates. Second, it would come from the next generation.

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