Stagnation is one of the most dangerous economic situations when people, governments and businesses avoid any changes.
It is very difficult to encourage reforms when the situation is favourable. It does not even matter if someone has or will have to pay for it in the future. The most eloquent examples are those of Greece and other reluctant to reform countries. But can we expect anything different? The majority of current laws are decreasing personal responsibility. Such situation is not only comfortable to live in, but creates passive, stagnant and irresponsible personalities.
The highest establishment of individual responsibility in policies constitutes a full protection of private property rights and freedom of choice. Do whatever you want with your legal income as long as your actions do not disturb the others.
If your choice is to invest into education of your children or yourself and save some for old age, most probably, there will be positive consequences. However, if your decision is to spend everything on unnecessary goods, you will feel different, and most likely, negative effects. Sooner or later you will have to take personal responsibility for receiving too many calories or a credit that you cannot repay.
A system in which people can personally feel the consequences of their actions does not allow them to break away from the reality. However, today’s situation is completely different. Freedom of choice and personal responsibility remain backgrounded and while allegedly seeking prosperity, authorities impose taxes on smart solutions and subsidize wrong ones.
For example, Europeans do not have a direct choice of how to dispose of at least half of their income. The tax burden on an individual working under a legal job contract in Lithuania is approximately 50 per cent. Therefore, the way we dispose of half of our income is decided by others, because they allegedly know better.
Authorities have developed countless systems that protect people from themselves. You may live without thinking about subsistence or getting old, because the state pension and social insurance systems are there to save you. What is more, you may not take care of your health, because there is a state healthcare system to treat you. Finally, taxpayers will pay for your studies just to provide you with equal opportunities in case you are not making every effort to learn and become one of the best. Therefore, such governmental systems have a very high level of redistribution: the irresponsible receive services at the expense of the others.
Paternalistic policies do not end here. The sales of goods that may have negative influence on health are restricted, borrower’s responsibility is being transferred to the creditor and even if your loan is too big to repay, there is a choice of going bankrupt. What is more, if you are working under a legal job contract, your vacation and working time is necessarily provided by the Labour Code, not to mention the minimum wage you must earn. However, the requirement to perform your duties properly is often called slavery.
It should be noted that all governmental systems usually suffer from deficit, because taxpayers’ money cannot cover all the expenses. This should decrease their appetite and make them think about cutting expenditures. However, monetary policy is designed to help in such cases. These systems are maintained by central banks and therefore, public sector always has very good or at least better borrowing opportunities. Today the European Central Bank is buying up large amounts of public sector debts and ensuring interest rates so low that the incentives to make reforms and decrease expenditures are reduced to minimum. What is the point of doing that? Borrowing is cheap and easy and not every credit is harmful, good “investment” is what matters the most.
This means that our system is becoming increasingly favourable to those who do not like to think about the consequences of their actions. Some may call it taking responsibility for the weaker and their decisions, but as personal responsibility diminishes, the result is completely opposite. This system creates the mentality of irresponsibility, because governments rather than people are responsible for solving their problems. Therefore, it is not surprising that changes are not welcome, especially in the fields of decreasing redistribution, paternalism and regulation.
Reforms are necessary no matter the resistance and it is naive to expect people’s agreement when personal responsibility is being destroyed systematically. That is why it is important that changes bring an increase in personal responsibility rather than temporary solutions to the problem.