Why Nations Go Broke

they dare not cut the bennies

The problem with France under the Old Regime was that it was broke. And had been ever since Louis XIV’s regime and before him Louis XIII. But when Louis XV and Louis XVI tried to fix it, they failed. Why did they fail? In The Origins of Political Order Francis Fukuyama writes that Louis XV tried to reform the system of “venal offices” — offices sold by the state to raise money.

The regime attacked frontally the entire system of venal office, threatening not only the political positions of the officeholders but also their invested family savings.

But this provoked tremendous opposition, from the officeholders and from the new bourgeoisie. Hey, the resisters said that they were resisting the “extension of absolutist power.”

Then under Louis XVI Turgot abolished the regulation of the price of bread and issued edicts against trade guilds and converting the corvée — labor due from a vassal to his feudal lord — into a tax on landowners. Good idea?

But they were met with violent protest, not just by the urban poor who saw bread prices rise, but also by the guilds and other entrenched interests that lived off rents granted by the state.

People absolutely hate having their bennies taken away. Even back in the old days before the modern state.

And the point is that, while the state was strong enough to hand out bennies to its supporters or to people that would support the state in return for bennies, it was not strong enough to take them away.

Not back in the days of the absolute monarchs. And not now.

That’s why Republicans whiffed when it was time to make cuts on Obamacare.

That’s why it’s crazy for President Macron to fight the French in the streets protesting against reform of their retraites.

And remember back in the day when President Reagan wanted to cut spending and taxes, and Speaker Tip O’Neill said forget the spending cuts?

I would say that a wise ruler would resist all efforts to crate bennies for regime supporters. Because he and the subsequent rulers would never be able to take those bennies away, even if the state was going broke.

Makes you wonder about Obamacare and about all the Biden programs of the last two years. Actually why would anyone start up a benefit program knowing that they will never be able to take it away? OK, I know. It’s because first we win the next election. Then we worry about going broke.

What happens to all those programs when the US runs out of other peoples’ money?

One thing I find interesting is that there is one kind of program that governments can reduce. And that is defense spending after a war. The US spent ungodly amounts of money in World War I and World War II. But after the was over the spending went back down. And if you look at US defense spending in the 20th century, it can come down.

But not Entitlement Spending:

Except for welfare which goes up during recessions and COVIDs but then comes back down again. How come, sports fans?

These two charts show, I think, that government should not do anything except fight World Wars.

And that is final.