It’s not the Capital Flight to worry about, It’s the People Flight

 

by John Galt
June 10, 2012 22:20 ET

 

Throughout my years of reporting on this economic disaster, the one compelling data point has not been housing, inflation, gold purchases by central banks, deflation, capital flight, nor unemployment. The truly telling figure has been the departure of the irreplaceable element from any economic structure, that being the loss of human capital, the one element which can save a nation or destroy it. For a historical example, simply look at the defeat of tyrannies of our past like Nazi Germany or the Soviet Union where numerous scientists, economists, and other brilliant souls fled in the face of persecution or economic insanity.

 

The United States lives under the perception that this can not occur here, yet for the first time in modern history citizens are emigrating at a historic pace away from our shores; and I clue you in that these are not the dregs but those with the knowledge, intelligence, and financial capacity to change the course our our society if allowed to do so. If this is happening in the U.S. where the economic situation is as stable as Jello on my belly, then what in the world is happening around the world where economies are collapsing like Obama’s economic policies?

 

Let’s review just a few sample headlines from 2009 to date:

 

Ireland’s young flee abroad as economic meltdown looms

 

The New Generation Leaving Ireland

 

Portugal’s lost generation

 

Spanish job crisis: Go north, young workers

 

Thousands of Greeks head abroad in search of work

 

The Screwed Generation: It Could Happen Here

 

The photograph from the last article by Joel Kotkin says it all….

Why is this important not just for the European PIIGS, but the Western world to consider as a whole? The larger picture requires something beyond typical sociological analysis, a critical part of political economy which the average citizen does not consider and the typical politician spits upon as a joke so as to insult the superiority of the system they have conceived and promoted.

 

The following portion from the final link above by Joel Kotkin should wake up America and Europe, but alas, I fear it will not:

 

Call them the screwed generation, the victims of expansive welfare states and the massive structural debt charged by their parents. In virtually every developed country, and increasingly in developing ones, they include not only the usual victims, the undereducated and recent immigrants, but also the college-educated.

 

Nowhere is this clearer than in the European Union’s Club Med of Spain, Greece, Portugal, and Italy, the focal point of the emerging new economic crisis. There’s a growing sense of hopelessness in these places, where debt is turning politics into an ugly choice between austerity, which reduces present opportunities, or renewed emphasis on public spending, which all but guarantees major problems in the bond market, and spending promises that can’t be kept.

 

“We don’t know what to do now,” Jaime, a Madrid waiter in his late 20s told me last week. “My wife lost her auditor’s job, and I can’t support the whole family. Maybe we have to move somewhere like Dubai or maybe Miami.”

 

Many young Greeks, Italians, Portuguese, and Spaniards already have made their moves, with a half million leaving Spain alone last year. But it’s not just Club Med youths who are contemplating greener pastures. Ireland, which in recent decades actually attracted new migrants, is exporting a thousand people a week. In recession-wracked Britain, nearly half of the population say they would like to move elsewhere.

 

Driving this exodus is a growing perception that this collapse is not cyclical but secular. Increasingly, young Europeans are deciding not to start families—the key to future growth—in reaction to the recession. The stories about divorced Spanish or Italian young fathers sleeping on the streets or in their cars are not exactly a strong advertising for parenthood.

 
Even in once-rigidly Catholic Spain, marriage and fertility rates have been falling for decades, and family structure weakening. Spaniards are having fewer children now than they did during the brutal civil war of the late 1930s. Alejandro Macarrón Larumbe, a Madrid-based management consultant, in his 2011 book, El Suicidio Demográfico de España, points out that the actual number of Spanish newborns has declined to an 18th-century level.

 
This demographic implosion makes sense given the legacy left behind by the boomers, who have held on to generous jobs and benefits but left little opportunity for their children, not to mention a high tax burden on what opportunities they do find. For a generation academics have sold higher education—the more the better—as the cure for unemployment and the great guarantor of success. Yet rising education rates in places like Spain have not created jobs for the rising generation, but only expanded unemployment and falling wages among the ranks of the educated.

 

Consider the next to last section above and this excerpt:

 

“El Suicidio Demográfico de España, points out that the actual number of Spanish newborns has declined to an 18th-century level.”

 

And they are supposed to repay a €100 billion “loan” with what type of economic growth again? They are well over 23% unemployment. The elderly are holding on to their state guaranteed jobs until the last possible moment of their lives. Spain is no longer competitive from a manufacturing stand point and their export industry consists of specialty produce and products that provide less than 30% of their net GDP. Spain, much like Italy and Greece are nothing more than socialist basket cases and the terrifying part is that is the goal of our current American administration!

 

Where does this all lead? Brazil might be faltering at this moment however their ability to initiate and consider innovative technology to lead the future of manufacturing and energy development tends to provide a distinct advantage to their future despite an upcoming worldwide recessionary period which will derail a lot of their quasi-European socialist policies. If the BRIC nations elect to forgo historic political alliances and faithfulness to archaic ideologies and begin to initiate true capitalist strategies as the U.S. and Europe falter, the expense of the flight of brains and brawn, aka “people flight,” could lead to those nations experiencing an economic renaissance while the West mires itself in the wallows of attempting geopolitical dominance and the futility of recreating a failed system based on the Euro-socialist model.

 

In the mean time, watch as the American collegiate and technically skilled youth depart where the greatest economic opportunity lies; just as financial capital flees when attempts are made to entrap it behind the Iron Curtain of bureaucracy and lies.

 

 

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