Countries such as Greece are experiencing what African countries experienced in most of the 1980s and ’90s — IMF-led structural adjustment programmes, which forced governments to cut spending by eliminating subsidies to various sectors and implementing strict fiscal retrenchment, the Daily Nation reported in a commentary. This “shock therapy” was expected to reduce government deficits and make countries economically stable. But as many African governments can attest, this therapy had mixed results at best, and disastrous consequences at worst.
Lay-offs, privatisations, salary cuts, and reduced spending made it harder for African countries to pursue long-term development agendas and resulted in more indebtedness, which caused more suffering and increased poverty in almost every African country where the IMF prescriptions were followed.
The fall of the euro is being watched with glee by countries like Britain, which abstained from converting to this currency, and to some extent, the United States, which has never been too keen on welfare statism.
The financial crisis in Europe will spell the doom of the welfare state as we know it. Countries where citizens enjoyed security of health and education, and whose ageing populations enjoyed reasonable pension benefits, will now learn what it means to live in a state that doesn’t care for its most vulnerable populations.
It is ironic that this is happening at precisely the moment when the Obama administration is pushing through healthcare reforms that will place the United States at par with Scandinavian countries. This could mean that Europe will start to look more like the US at a time when the US is trying to become more like Europe.
Welfare states are expensive to run, but there is a good reason that they exist: without them, life for ordinary citizens can be, as Thomas Hobbes noted, “nasty, brutish, and short”. If Europe can learn one lesson from Africa, it is this: be wary of lending institutions based in Washington and don’t sign a loan before reading the small print. Read more.
