At New Year's, Time To End Failed Policies
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Bank of Japan governor Haruhiko Kuroda gestures as he answers questions during a press conference at the BOJ headquarters in Tokyo on Nov. 19, 2014.... View Enlarged Image
Resolutions: As 2015 dawns, quite a few nations seem hellbent on doubling down on the same policies that got them in trouble in the first place. Here's an idea: How about a resolution to try ringing in the new?
In Japan, the only thing "new" about the new year is the latest economic stimulus package, put out in a bid to shore up an economy that hasn't seen Asian-style growth in more than two decades.
The country's "Lost Decade" of the 1990s is well on its way to becoming the "Lost Century," given the same-old, same-old economic solutions that government leaders have imposed to revive a stagnant economy.
And the result of this drain on the once-dynamic private sector in the name of big government is demographic decline, talent flight and 1% GDP growth.
Yet somehow, Japan doesn't learn. As in Brezhnev's USSR, they just pull down the shades and tell everyone to shake together to imagine the train is moving.
And this is the case far too often, wherever the mentality of "good intentions" trumps results.
In Chile, the refusal to learn is not from inertia but from success. Michelle Bachelet's socialist government swapped 6% GDP growth in 2013 for 1.8% growth in 2014. How? By hiking government spending 9% and financing it with a 20% rise in corporate tax rates.
This year's bid to repeal Chile's 1979 Pinochet-era labor laws will ratchet growth even lower — back, in fact, to the pre-Pinochet era, when Chile was a Third World country with a per capita GDP just 20% of today's level. Back then, as strikes engulfed the country, unions got 29,000 laws passed and crippled the economy. Property rights were nil, and the country was a shambles.
Chile learned only when it turned to free markets, due to University of Chicago economists known as The Chicago Boys. In their memoirs of the era, Jose Pinera, Hernan Buchi, Sergio de Castro and other Chicago Boys described the difficulty of changing course after decades of failure and the entrenched interests who resisted it.
The Bachelet camp is willfully clueless about them.
Moving to Europe, it's just as bad in Greece, where a far-left party called Syriza was elected, running on an "anti-austerity" platform. Greece, in fact, never experienced real austerity from its crisis. Its economic failure came from squeezing the private sector to bolster the public sector. Things will only grow worse with the election of Syriza, which falsely blames all the country's problems on business — not on its rotten government.
But countries can learn. Take France. After the government imposed a supertax on billionaires, France's richest citizens began moving away and taking their wealth with them, leaving government coffers empty. The French were warned that this would happen but did it anyway under socialist President Francois Hollande. As with most socialists, his fealty was to left-wing ideology, not real-world results.
And that's the real story here: the failures of the past should spur reforms that actually work — not an endless round of failed radical ideas repeatedly retried in the vain hope that, someday, they'll work. They won't.
For nations in distress, the resistance to ring in the new is poison for their economies. Instead of a bright, new baby for 2015, they bring back a corpse.
Read More At Investor's Business Daily: http://news.investors.com/ibd-editorials/010215-733085-at-new-years-time-to-end-failed-policies-and-ring-in-the-new.htm#ixzz3Nmjfp27y
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