The world is changing. Globalization is here to stay. Globalization essentially got its start in America’s whole-scale subsidization of western Europe in the aftermath of the World War, not only through the Marshall Plan, but also through the opening up of American markets for western European products, in order to bind Europe closer to the US, and to forestall the appeal of communism. America went even so far as to directly subsidize, through the CIA, various social democratic parties in Europe (including that of Finland) in order to split the left. The various social welfare states which received support from these policies (expanding from earlier, but weaker, beginnings) were thus an anomaly: they were born out of the realities created by the artifice of the Cold War. They were only politically necessary; they were not economically necessary.

After the collapse of the Soviet Union, we now have an economic entity in the world which is almost as artificial as that of the Soviets, in the form of the European welfare state. It is an entity which, in its construction, cannot but hoard wealth, in order to survive. It does not act as an economic stimulus to other, less-developed parts of the world, since it is essentially an end-user: no recycling of wealth takes place, as the Europeans fritter away the wealth earned from outside trade by indulging in easy living. And it cannot survive if not for a market for its exports which, by necessity to Europeans, cannot have a welfare state in turn if the European model were to survive (i.e. the less-taxed, cash-flush market composed of the American worker-consumer).

Thus there is exploitation since, ironically, in a globalized world, the fact that some parts get taxed more than others means others get exploited, as the benefits of that taxation is not transferred to others. In fact, high taxation becomes a huge problem, as it winds up restricting global trade, and thus becomes an obstacle to the developing world.

Now, running a trade deficit is not transferring wealth, but the selling of debt instruments certainly is. A trade deficit which is financed by loans from the seller is not exploitation at all: the world is filled with business deals such as these, from car loans from manufacturers, to easy credit terms from banks and realtors. And it has been incredibly useful in helping those who need help – in this case, lifting hundreds of millions of Chinese out of poverty. FDR even had a term for it: “pump priming”, a farming term that referred to water being forced through a pump in order to get it to work. US consumption acts as the necessary pump primer for Chinese growth. The trade deficit, however, could not be financed if not for Asian purchases of US securities. Thus the Chinese and the US have a mutually beneficial relationship – no exploitation takes place. And the Chinese, it turns out, are better than the Europeans in allocating the resources earned in trade, as they don’t fritter away the wealth in easy living, thus increasing the likelihood that the US will have a better trading partner in the future.

Consumption is not a favor one does to someone else, but it is an economic tool, in addition to being an end goal. Its most effective implementation as a tool is realized not by state consumption, but by taxpayer consumption, since outsiders can respond more readily to the tangible consumption needs of consumers, rather than the intangible, untradeable benefits of a welfare state. A taxpayer whose consumption increases because of lower taxes also increases market efficiencies, since the market is always more responsive than the state in allocating resources.

Yet the welfare states refuse to acknowledge the present state of affairs, being ruled by elites who have an interest in maintaining the status quo. So the exploitation continues. However, what we do see rising is a realization that the inequitability of European freeriding cannot be permitted to go on. The justification for the elimination of the European welfare state is there. Whether the extermination process has to happen willingly, or by force, remains to be seen.