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6/19/2012 7:49 AM
Work of God, Dictators and Foreign Investors
Market Commentary
By Charles Payne, CEO & Principal Analyst
All eyes diverted quickly to Spain yesterday, as the Greece situation has edged closer to being solvable. There is worry about how to stop the contagion that threatens other southern European nations. The more you hear about Spain, the more Italy becomes the next domino and of course, the more expensive and perhaps, impossible, it all becomes. What's interesting about this entire European episode is that we continue to talk about bailouts. That's the operative word, bailouts for profligate governments and reckless banks. There is no way to truly solve the problems of real growth as long as the focus is on bailouts.
For the record, the same can be said about America.
Stabilization Plan 1959
The people of Spain faced tougher economic circumstances after the end of their civil war, and surprisingly it was Dictator Franco who came up with a plan that really empowered citizenry and unlocked growth putting together a group that included Opus Dei (Work of God), whom many may know from The da Vinci Code and foreign bankers. The goal was two-pronged:
Slow growth and limit demand
Unleash foreign trade and investment
This was a plan designed to inflict initial pain in order to set the stage for legitimate growth. A point currently lost on politicians and economists that stopped crunching numbers but instead promote ideology. In the early part of Franco's plan, wages decreased and unemployment surged and half a million people fled the nation. But, then something interesting began to happen. The economy began to grow and money flocked in from all over the world.
Free market principles and self-empowerment sparked what is now known as the Spanish Miracle from 1959 to 1975 (the death of Franco). This isn't to put a dictator responsible for thousands of deaths on a pedestal but instead to show how market forces can be successful even under brutal regimes.
From 1959 to 1975 only Japan's economy grew faster than Spain's. We aren't talking phony wind mill projects or other pie-in-the-sky things that waste taxpayer money while paying off cronies. It wasn't about saving the auto industry (which is so debatable since the auto industry was going to live but unions were going to parish) but building an auto industry. In fact, the SEAT 600 car experienced amazing domestic growth becoming for many their first car. The nation morphed from heavy reliance on agriculture to industrial heavyweight.
Spain grew and investment in education took off as well. It all happened because barriers were brought down but discipline was enforced initially.
In democracies, plans have to be sold, especially those that involve pain and there is simply no guts to do the right thing. Once again leaders from around the world, including President Obama, continue to press the only politician in the world pushing for a smart, albeit, painful solution. Ironically, there is a move toward a de facto dictatorship in America with a focus on turning free markets upside down.
There is a game plan out there that needs to be dusted off and put into place again. Bailouts are temporary, that's why we continue to need them over and over again while there is something to the idea of taking a couple steps back to clean the slate, lower debt, replenish coffers and create an atmosphere of real demand and real opportunity. It's unlikely that will happen unless the masses make a stand. With only one global leader standing on the side of free markets and accountability, it's going to be a close call.
Markets understand this, which is why markets are confused second to second, rumor to rumor, summit to summit, and bailout to bailout.
| Comments |
nonsense . . .
we don't live in 1959 anymore . . .
the existential threat of the soviet union drove the pax americana which set up the system that spain benefitted from . . .
franco was a facist dicatator who ruled after the country was devestated by a decade of civil war . . .
austerity for the poor, working and lower classes ???
how about trials for high treason for officials in the government and these rapacious thieves running the banking sector . . .
with the families making restitution for aiding and abetting felons by confiscation of their stolen wealth . . .
and a few decades in the work camps picking fruits and vegetables . . .
brian on 6/19/2012 11:09:33 AM |
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