THE DAY OBAMA GAINED REELECTION WAS THE DAY WE WENT OVER THE FISCAL CLIFF!

Essays in Fragility: The Efficient Subsidize the Inefficient

As surpluses dwindle, borrowing money becomes the only way to prop up the Status Quo. Too bad that path inevitably leads to insolvency. Consider the consequences of the efficient subsidizing the inefficient. As long as the surplus generated by the efficient is larger than the cost of supporting the inefficient, the system can continue. But once the cost of subsidizing the inefficient exceeds the surplus generated by the efficient, the system is doomed to eventual insolvency. There is one way to fill the deficit, of course: borrow money. This is the strategy being pursued by the Status Quo in developed and developing economies alike. Identifying the efficient and inefficient sectors is not straightforward, as everyone reports they are being highly efficient. Since most of the economy is controlled by the State (a monopoly) and its favored private monopolies/cartels, the market has few opportunities to exert competition. How much competition is there in the higher education cartel or the sickcare (a.k.a. healthcare) cartels? Very little.