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6/19/2012 7:49 AM
Work of God, Dictators and Foreign Investors
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.
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