The PSOE-Podemos agreement is going to seriously undermine our freedom. It is paradoxical to read and hear political commentators describe the new government as a promoter of freedom, when, historically, the interference of power over private property was considered a recklessness and the maximum expression of the legitimate violence of the State against freedoom. Not to mention the desire to achieve an impossible equality, from the moment when no one is equal to anyone. Each has skills, competences, resources and expectations that make him/her very different from the other. Only formal equality (before the law) can be achieved, something that, in most (if not all) of the most advanced countries, is already a reality. The Ministry of Equality, under this thesis, would be useless in the new Executive; as well as many other Ministries and Vice-Presidencies that, notoriously, have only been created to give entry to the greatest number of people in what is already the most expensive Government in the history of Spanish democracy. And the more ministries and areas of power, the more state intervention that will make our personal development impossible.
So far from being an executive that favors freedom, it has all the cards to become one based on central planning and measures against freedom that will attack everything it supposedly wants to fight for: the welfare of workers, reducing unemployment, improving the economy, maintaining pensions, or helping the freelanced and the working classes. Even without wishing to arouse pessimism, according to what has been laid down in the government’s program, any point that is implemented from it will go against the people or groups that it pretends to benefit.
To those who question this until events prove the opposite and who label anyone who supports it as ‘fascist’, it would be good to respond with a word: praxeology [logic of action]. As Mises explains in his fantastic work La acción humana, this particular methodological approach distinguishes the Austrian School from all other currents that understand economics as an empirical science, in the manner of the natural sciences, and whose method consists in the formulation of hypotheses that must be permanently tested empirically without ever reaching a definitive degree of certainty (Kaiser, 2012). Economics is, according to Mises, a science a priori and not a posteriori. If supply decreases and demand increases, for example, we can know in advance that prices will increase under normal conditions.
Under the premises of the Austrian School, based fundamentally on individualism and methodological subjectivism, and on the importance of the concept of time and the function of business, we will analyse, according to liberal postulates and in a very synthetic way, why the programmatic measures of PSOE-Podemos are going to be disastrous for a large part of the Spanish population (and favorable, at the same time, for the Government itself and, as Bueno de Mesquita would say, for its selection). Let us discover the great deception of the new tenants of La Moncloa.
Central planning, the worst of all evils
If this new Executive stands out for anything, it is for the desire to increase government intervention and strengthen the role of the State as the governing body of society. Men are considered to possess a kind of indomitable psychological force («animal spirits», as Keynes called it), which would lead us to make irrational decisions collectively and systematically. And what is even worse, they understand that the market is plagued by failures which, if we did not act on them, would plunge us into chaos. The «dad state» therefore has the primary function of helping to overcome our irrationality and bring the market to life. Under this, the rulers are conceived as supermen, who have all the necessary information to plan the economy -and our lives-, immune to animal spirits and superior to the logic of the market. Herein lies, perhaps, the great hoax, the great lie, on which state interventionism is based, justified and sustained, which, what is worse, enjoys great popular acceptance.
Historically, socialism, which is still a system of institutional aggression against the free exercise of the business function (Huerta de Soto, 1992), has failed in its attempt to turn the State into the great central planner. Attempting to increase socialism, and with it interventionism, is a call for failure and for worsening social and, above all, economic conditions, at the expense of a substantial increase in state power and, consequently, of politicians’ own benefit.
But socialism was not thwarted by chance. Two of the most serious shortcomings of this system are:
- The miscalculation that comes from using arbitrary and artificial prices (and, in the most extreme cases of socialism, being unable to make any kind of comparison with any real price set by the market as the state monopolizes all the means of production, causing that failure to multiply until the entire economic system collapses).
- The lack of incentives beyond the need to carry out the task entrusted by the State in order to not suffer its repression, which implies the undermining of the expectations and interest of individuals in exercising the business function.
But, beyond these two failures, which should already invalidate such a system, central planning is flawed by many other issues. Firstly, because rulers are isolated from society (they live secluded in their offices and palaces), and their behavior (not being subject to competition) tends to be irresponsible. Secondly, the business knowledge generated by humans through their actions can neither be formalized nor explained, so it becomes tacit. As a result, the State does not have the necessary data to plan social and economic life correctly. Human beings cannot transmit their future actions to the Government, so any information obtained by the latter will be passed on, making proper planning impossible.
In conclusion, it is impossible to expect the governing body to gather all the information necessary to coordinate the society. Moreover, business knowledge is subjective and practical, not scientific, and therefore cannot be transferred. That omniscient State that upholds socialism, in addition to being illogical and irrational by all accounts, will not be able to translate itself into reality, and any attempt to do so will plunge the population into misery and crush the public policies it tries to implement. There is no such thing as good interventionism. It unbalances the market. It generates poverty, if not real collapses like crises. And, above all, it discourages citizens, who neither undertake nor create wealth, thus preventing the progress so longed for by those who consider themselves socialists.
Good interventionism doesn´t exist. It unbalances the market, generates poverty, and discourages citizens
For all these reasons, the measures proposed by the new Spanish Government will not have a positive effect, such as raising the minimum wage (which will generate youth unemployment, above all), repealing the labor reform (which will introduce greater rigidity in employer-worker relations and will also lead to more unemployment, as it will not stimulate hiring), limiting the price of rentals by imposing a maximum rent (which will lead to a decrease in supply and an increase in demand, thus unbalancing the real estate market) and another series of State interventions. And this constitutes an a priori knowledge; it doesn´t have to happen to know it.
The accounts do not add up and will be balanced by increasing indirect taxes
As several economists have conscientiously explained, the accounts proposed by the PSOE and Podemos do not add up. And as in the private sector, you can’t spend more than you earn. It is expected that approximately 35,000-40,000 million Euros will be spent and it is estimated that 5,000 million will be received. The only way to make up for this difference, which has been systematically tried to hide, is to increase indirect taxes, for example, VAT. Thus, the tax increase will affect all social classes and not only the highest (as they have become tired of saying). But even if this were true, it should be a cause for concern, as the government is sending a clear message that the more wealth it has, the more it will bleed the taxpayer, so it does not pay to undertake. The increase in taxes on the higher classes, which ultimately generate more employment, also discourages savings, breaking with the important concept of time (understood as a repression of the satisfaction of current needs in the interest of investing, in the future, in a capital good or in other realities that create wealth).
Pensions
Pensioners and citizens in general must understand this: without money, there are no rights. No matter how much these are established on paper, whether it is a decent pension or housing, if we do not have the resources to pay for them, no one will be able to enjoy such a state offer. And it is well known that resources are not unlimited; when they are used for something, they cannot be used for something else.
Pensions are the main expenditure of the Spanish State, and the current pay-as-you-go system will prove unsustainable in a few years, with a negative return. It was set up by Franco with a worker-pensioner ratio that even allowed for some benefit. At that time, there were around 18 million people employed to support one million pensioners. Today, with increasing life expectancy and late access to the labor market, this ratio has fallen (in 2019 it was 2.31 workers to every pensioner), and is expected to continue to fall until the system becomes unworkable. In the future, either no pensions can be paid, or they are too low. No matter how much the pensioners take to the streets, they will not be able to get the money box filled. Bread for today and hunger for tomorrow. If pensions are raised (as the government is doing), there will be less left for later. The solution? The taboos on private pension plans. That is, to promote a system of capitalization, by which the enormous amount of money that each worker pays to the Social Security will go to his private pension plan (money that will be invested in financing entrepreneurial projects -which will generate wealth- and, through interest, will allow the holder of such a plan to increase his savings). And, yes, if we do not pay for Social Security, we will not be able to «enjoy» an inefficient and expensive public health or education that, if subjected to free competition, would lower prices (making it accessible to society) and substantially improve quality. Let’s look at the example of dentists in Spain, or the almost completely private health care system in Singapore (which surpasses the sacrosanct Spanish public health care system in terms of quality).
Equality and solidarity
This issue has already been introduced at the beginning of the article, but it never hurts to repeat it: equality, with the exception of formal equality, does not exist. Everyone has certain qualities, skills, expectations… that make them more or less suitable for the labour market. Undoubtedly, some will find work before others. What is more, some will earn more – even much more – than those who have not succeeded with the opportunities offered by the market. But nothing justifies the state’s coercion of taxation, or in other words, the violent (legitimate) theft of our money and even wealth (which is not the same, as Keynesians maintain) to give to others. This is not what solidarity is all about. This is called servitude. Solidarity would mean that, within the framework of your freedom, and under your moral code, you would like to donate part of your private resources to help people in need. Moreover, under a free market and competitive economic system (without much state intervention), the unemployed would be reduced to the minimum, and could be helped, as in the past, by their family or, failing that, by the Church or other charitable institutions.
Under this thesis of the impossible of equality, the famous «Pink Tax», which aims to avoid increasing the price of the same product when it is its «female version», is ridiculous, as well as going against all business logic. If, for example, we have a perfectly affordable blade that can be used by both men and women, but others appear on the market with thinner blades for women, why should the price be lowered for them? The «women’s» blades are not more expensive per se (entrepreneurs are not misogynists), but because this product is in less demand. If women want these «special» blades they have two solutions: to pay a higher price, or look for a good to replace it. Trying to vary this market logic will cause an imbalance that will reduce either supply or demand (depending on the public policy applied).
Related to this, with the new Government has come a new Ministry, which has caused great controversy: the Ministry of Equality (leaded by Irene Montero). We still do not know what kind of measures it will take, but it is foreseeable that they will be to the detriment of women. If, for example, the dismissal of women is made more inflexible or their recruitment is made more conditional, they will be employed less. The more the State intervenes to supposedly favor them, the more it will harm them. If the wage gap existed, any measures to combat it would only make the situation worse. If a businessman does not hire a woman more efficiently than a man simply because of her sex, he will not only be immoral, but also inefficient, and his business will be doomed to failure and, sooner rather than later, the competition will end up displacing him. The market itself is relentless in the face of the inefficient. There is no need for the «father state» to get its dirty hands on it, because it will only make the problem it wants to solve worse.
As can be seen from the above, there is no reason to believe in the improvement that the progressive government is predicting. Rather, after reading the agreement between the PSOE and Podemos, the opposite is true. It will be one of the worst executives that Spain has ever had, as it will attack our freedom and put the economic, political and social situation on the line. Let us hope they betray what they have promised. Let them be real politicians and not fulfil their program.
