There are many different opinions or rather, beliefs on whether running long term trade deficits are good or bad for the economy. There are some economists who believe that running large trade deficits do not, in the long run, hurt the economy. There are others who believe that large trade deficits mean doom.
We can all keep going back and forth...blaming free trade or protectionism or trade deficits or surpluses and what have you. But the fact of the matter is that that is all an oversimplification. The southern European countries are not in a dump because of "unfettered free trade". That may be a factor playing a role in it but it is definitely not the underlying factor.
I mean, I get it, in politics, politicians have to level blame against the other guy and paint a certain picture about him like "he is a socialist devil trying to bring the new world order" or "he is a capitalist pig, only caring for rich and he will put y'all back in chains!!!!!" Let's leave that to politicians to kick dirt around. We don't have to do that.
Again, I will use the case of Greece because that is the worst case out there and is very recent and ongoing.
Why did the Greek crisis happen? Because of a whole lotta different problems. Like:
1) Government lying through their teeth about their numbers. (Argentina does that too.)
2) Tax evasaion. (Argentina does that too.)
3) Misuse of loans. Using them to pay for government salaries and increasing government jobs. It results in a decreased rate of unemployment making all the politicians happy and getting them reelected.(Argentina does that too.) In fact, Greece had so many government employees that they didn't even know the exact number of people employed by the government.
4) Bureaucracy. Yeah. It used to take 40+ licenses from different government offices to start ONE privately owned business. Not sure if that has changed or not. (We all know about the Argentine bureaucracy).
5) Government deficit. The government spending more than they made from taxes. Spending on social programs, government salaries, unneeded government employees, etc.
6) Lax budget controls. Last year the Argentine government spent over the budget without any questions asked. This year the government is projected to spend likewise. The next year, they are expected to spend even more. There are no real numbers, no checks and balances, nothing!
7) Corruption and the culture that breeds it! There is no question whatsoever that Argentina has the exact same culture. You have corruption in every country in the world but then there are special countries where corruption happens out in the open, yet goes unnoticed/unpunished.
There are many more reasons but its the last one I want to focus on. Corruption. As long as you have corruption at the levels of Argentina and Greece (Spain, Portugal, Italy are the same), you can not even begin to concieve a plan where these countries will do well economically over long periods of time. And this isn't about liberal/neo liberal economics vs Keynesian economics. Or Capitalism vs Socialism. You just can't have a system run properly if corruption exists to these monumental levels as it does in Argentina and Greece.
And I'm not talking about just the politicians. I am talking about the whole of society. No not every single person is corrupt. But most of the society is implicit in the way things go in these countries. When people shrug at the lowest level crimes like pickpocketing, it doesn't take long when they start to shrug at high level crimes like Presidents and Vice Presidents lying through their teeth and stealing money out in the open.
On the other hand, tax evasion, whether in a largely Capitalist society or a largely Socialist society, will result in the country being run into the ground. Especially in a more Socialist society where the people and the government demand several social programs that need to be funded through taxation.
Oh if someone is going to jump up and say, "yippy the Ks have targeted tax evasion." Then you must not be a very bright individual. What the Ks have managed to do with their policies is trap the middle class in this idiotic game of theirs. You know, the middle class that largely already pays their taxes through their pay checks. People that are poor don't pay any kind of taxes anyway and the people that are rich have ways around government controls. The only ones affected by these recent changes are the middle class.
So basically the Argentine government only added more jobs in the government (more government spending) to keep tabs on the middle class who largely already pays taxes. Oh wow, not wasting money at all! The Ks have definitely changed Argentina for the better.
Now, there are countries where there is less corruption and things work the way they are supposed to, for the most part. I am referring, of course, to Scandinavian countries. Tax evasion in those countries wasn't a problem at all until the recent Arab immigration (not racism, just fact, look it up). Most Scandinavian citizens not only pay their taxes but they WANT to pay their fair share of taxes.
A friend of mine recently visited Denmark. He was surprised at how clean the streets were compared to Edinburgh (Scotland) and even Dubai (which they try to keep as clean as possible). And not only that, there were work out machines in public parks! Did you hear that? WORK OUT MACHINES! And no, no one stole them or tried to steal them. They weren't chained down either.
Of course these countries have extensive social programs where everyone takes care of everyone else through government programs. It is because the government places the tax income where it belongs (hint: not their own pockets). (Oh and I am not a Socialist, just giving an honest example).
Is that an indication that government controlled, top down economy like that is the only viable option? Is it proof that Socialism works and Capitalism doesn't? No its not. If the Scandinavian society decided that they wanted to take care of their own expenses in their own way, I can guarantee that apart from the Arabs there, the society would still take care of each other as they do and would still be as responsible as they are. The government can not and does not make people better. The government is usually a representation of the people. Sometimes a bad representation, but a representation nonetheless.
At the end of it all, it is not one economic system or another that results in economies not doing so swell. It is the government, and the people. It is the culture that is followed by these people.
Of course people are good are throwing blame around so when things go wrong, everyone is battle-ready to tell the other person that the system they believed might be better...failed them all!!
